# 467  

June 2003




Striking a Deal on Asbestos

 

by Amy Ridenour

 

Among conservatives, there is perhaps no senior figure in Washington more associated with compromise than Senator Orrin Hatch (R-UT).

Considered a strong conservative by liberals, Hatch frustrates conservatives. He's supported federal health care, anti-gun measures and the legal destruction of healthy human embryos for stem-cell research.1 When he briefly ran for president against George W. Bush, he told the Washington Post "I think it is time to have someone who is not beholden to the Republican establishment."2

In a 1998 cover story, National Review magazine said of him that "His politics are almost always reactive and within the narrowly defined bounds of what's possible this year."3

But Hatch's always dignified but frustrating penchant for pragmatism is playing a key role in the developing federal solution to one of the most intransigent, and undercovered, issues of recent decades: the asbestos liability crisis.

Despite tens of thousands left unemployed, its negative effect on the stock market, the bankruptcy of 60-plus firms and a price tag likely to exceed the cost of the Iraq war, this crisis has attracted little notice outside of those directly affected.

Asbestos, a mineral, was once considered an industrial godsend. Because certain varieties do not burn or conduct heat and are resistant to chemicals, they were widely used for making fireproof materials, electrical insulation, roofing and filtering devices.

Users included the Big Three auto makers (asbestos was once the mainstay of brake linings), most electric utilities, shipbuilders, oil refineries, construction firms, textile mills and even such far removed companies as Gerber,4 Campbell Soup,5 Dow Jones,6 Sears,7 Viacom8 and Gallo.9

If directly inhaled over long periods, asbestos can be lethal. During the first six decades of the 20th century, hundreds of thousands of workers in mines, shipyards and factories worked largely unprotected from clouds of asbestos dust. Many developed debilitating diseases such as asbestosis and mesothelioma, and those affected died premature and painful deaths.

The Environmental Protection Agency then took a zero-tolerance line against asbestos, falsely stating that even infinitesimal amounts of this mineral that most of us breathe daily poses a health hazard. Numerous independent studies subsequently concluded that asbestos, when sealed into products, is harmless.

But personal injury lawyers had entered the fray. The first of many big name bankruptcies occurred in the 1980s. Huge awards stirred attorneys to file more lawsuits, even as defendants' links to asbestos became weaker. By 2002, the Rand Institute of Civil Justice estimated a whopping 85 percent of America's major corporations were targets of asbestos lawsuits, as were tens of thousands of smaller businesses. Most had only a peripheral connection to asbestos, or simply purchased a firm that once had some connection to the mineral.

Shockingly, evidence revealed that little of the billions awarded were reaching sick plaintiffs. Huge legal expenses were taking 60 percent of the awards, and 65 percent of the funds left over were going to persons who had no asbestos-related illness and probably never would.

Meanwhile, bankruptcies mounted and efforts at a universal settlement hit a brick wall when the U.S. Supreme Court declared in July 1999 that because of irreconcilable interests of sick victims versus healthy persons exposed to asbestos who might someday become ill, Congress, not the judicial system, would have to be involved in any permanent solution.10

The personal injury lawyers continued their attacks as the debate became mired in politics: Democrats, heedful of the interests of lawyers who donate generously to their campaigns, had reason to delay. Republicans lacked the 60 votes necessary to get a bill through the Senate, and in any case were divided between two competing solutions: a so-called medical standards solution and a trust fund for paying claims.

But the compromise engineered by Hatch is now giving the first hope in years that the crisis may soon be solved. If so, victims will benefit and so will the economy. One Morgan Stanley analyst likens the positive benefit of successful tort reform to the full impact of President Bush's proposed dividend tax cut.

Working with key liberal Senators Patrick Leahy (D-VT), Chris Dodd (D-CT) and others, and giving labor unions a place at the table, Hatch has managed to broker a compromise that will have defendant corporations and insurance companies finance a $108 billion asbestos trust fund.

The lawsuits will end. Genuinely ill plaintiffs will get benefits without legal fees, lengthy court cases or the need to prove a single defendant caused their illness. A chest X-ray showing asbestos-related disease presented before a special asbestos court of five judges will be enough to trigger compensation at levels related to the seriousness of the disease.11 And although corporations will fund the proceedings and the payouts, asbestos-related bankruptcies should cease, as companies will know the extent of their liabilities and be able to plan for them.

The labor unions aren't yet signed on, but they want to tweak the Hatch solution, not kill it. It's their members, after all, who often are plaintiffs, and trial attorneys, for all their value to liberal causes, are rarely members of labor unions. And Hatch's quarter-century of compromise on Capitol Hill has given him, by GOP standards, the trust of Democrats.

But thanks to behind-the-scenes maneuvering by a Senator often maligned by conservatives for his eagerness to compromise, it is just possible that a permanent end to this crisis is on the horizon.

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Amy Ridenour is president of The National Center for Public Policy Research, a Washington, D.C. think tank. Comments may be sent to [email protected].


Footnotes:

1 Wesley J. Smith, "Smoke-and-Mirrors Awards: Brave New World Recognitions," National Review Online, March 11, 2002, available at http://www.nationalreview.com/comment/comment-smith031102.shtml as of May 21, 2002.

2 J. Jennings Moss, ABCNews.com, "A (Relatively) Late Start: Healing Partisan Divide May Motivate Hatch Campaign," available at http://abcnews.go.com/sections/politics/DailyNews/wh2000_profile_hatch.html as of 5/21/03.

3 Ibid.

4 Eric Roston, "The Asbestos Pit: An Old Issue is Back, and the Lawsuits are Killing Shares," Time, March 3, 2002, available at http://www.time.com/time/business/printout/0,8816,214107,00.html as of May 21, 2003.

5 California Manufacturers and Technology Association Legislative Weekly, April 19, 2002, available at http://www.cmta.net/legweekly/041902.php as of May 21, 2003.

6 Ibid.

7 Ibid.

8 Roston.

9 Ibid.

10 "Thinking About Asbestos," Lehman Brothers' Global Equity Research, New York, New York, March 20, 2002, p. 12.

11 "Asbestos Bill to Propose Companies Finance $100 Bln Trust Fund," Bloomberg.com, May 20, 2003, available at http://quote.bloomberg.com/apps/news?pid=10000103&sid=arbU0NQr2khU&refer=us as of May 21, 2003.


 

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