01 May 2005 End the Asbestos Nightmare

Even before he took the oath of office for his second term, President Bush pledged to work with Congress to reform the nation’s costly asbestos-litigation system. Noting the loss of jobs and the wave of bankruptcies brought on by asbestos lawsuits, Bush urged Congress to “get the job done,” adding that he wants to sign legislation this year.1

For a nation mired in the muck of asbestos lawsuits for over three decades, reform will not come a minute too soon. A Rand Institute for Civil Justice study released last year found that companies have paid out over $70 billion for asbestos claims in the past 30 years.2 According to the American Tort Reform Association, at least 74 companies have filed for bankruptcy protection in the face of a never-ending flood of asbestos lawsuits.3

In 2003 alone, over 100,000 new cases were filed, further clogging a court system that is already bursting at the seams. Currently, over 600,000 asbestos cases are pending, according to Rand and Tillinghast-Towers Perrin, a consulting firm.4 The economic carnage brought on by the litigation has cost 130,000 U.S. workers their jobs.5 And those companies still left standing are forced to divert substantial funds from investment to litigation, with no end in sight.

Asbestos was once widely used as fireproofing in homes, buildings, and ships, as well as in brake linings and chemical filters. Heavy exposure to the tiny fibers that comprise asbestos can result in the substance becoming embedded in lung tissue where it can cause various respiratory ailments, including a rare form of cancer.

The current litigation system, however, does not adequately distinguish between those with ailments directly attributable to asbestos exposure, and those claiming illness from exposure to only a few fibers. Indeed, many making claims today are not now and may never become ill as result of exposure to asbestos. As economists Joseph Stiglitz, Jonathan Orszag and Peter Orszag point out, “the share of total new claimants who are unimpaired” has soared from about 4 percent to around 75 percent in the last two decades.6

Unless today’s lawsuit-ridden asbestos mess is fixed, people with legitimate claims will never be compensated, and companies straddled with eternal asbestos liability will never see the light of day. Unfortunately, a draft bill recently floated by Senate Judiciary Chairman Arlen Specter (R-Penn.) falls well short of offering the kind of asbestos relief the nation desperately needs. Among other things, the Specter plan envisions the creation of a trust fund administered by the Labor Department into which companies with asbestos liability would contribute billions of dollars to cover the claims of people with asbestos-related illnesses. But the Specter proposal does not have a price tag for the trust fund, and, in a bizarre twist, it would allow some people alleging injury to return to the courts if their claims are not met to their satisfaction.7

It’s no wonder that some companies have already concluded that they would be better off with the current tort system, warts and all, than with a trust fund that leaves the door open to additional costly litigation. Wily trial lawyers have already located friendly venues for boarding the asbestos gravy train. Madison County, Ill., for example, has become the nation’s magnet for asbestos lawsuits, with 411 cases filed in 2000, 884 in 2001 and 953 cases in 2003. In another Illinois county, St. Clair, the number of class-action lawsuits has increased by 1,100 percent in the past two years.8 The Specter plan, by failing to cap companies’ liability, will do little to stem this relentless tide of what are, in many cases, frivolous lawsuits.

What’s more, the Specter plan would impose what is known as “joint and several liability” on all companies entangled in the asbestos-litigation web. This means that businesses with sound balance sheets (regardless of their existing liability) will be held liable for the payments of companies unable to meet their obligations because they are insolvent or have been granted hardship or equity adjustments by the administrators of the trust fund.9

Asbestos lawsuits have been a boon to trial lawyers, but they have been a bust to most Americans who have seen untold billions of dollars in public and private funds devoured by a dysfunctional litigation system. It’s time for Congress and the White House to put an end to this senseless waste.

Bonner Cohen is a senior fellow at the National Center for Public Policy Research. Comments may be sent to [email protected].

Footnotes:

1. Klaus Marre and Kari Lundgren, “Industry Wary of Spector’s Asbestos Reform Bill,” The Hill 12 Jan. 2005: 3.

2. Albert B. Crenshaw, “Asbestos Claims Solution Sought,” Washington Post 4 Jan. 2005: E10.

3. Joseph Curl, “Bush Pushes Legislation on Class-Action Lawsuits,” Washington Times 7 Jan. 2005: A4.

4. Crenshaw, “Asabestos Claims,”: E1.

5. Doug Bandow,”Fighting the Asbestos Fire,” Washington Times22 13 Jan. 2005: A16.

6. Bandow, “Fighting,”: A16.

7. Crenshaw, “Asbestos Claims,”: E1.

8. Curl, “Bush Pushes,”: A4.

9. Joint Letter to the Honorable Arlen Specter, United States Senate, 3 Jan. 2005 E. I. du Pont de Nemeors and Company, Exxon Mobile Corporation, Federal Mogul Corporation and the Official Committee of Unsecured Creditors of Federal Mogul Corp., Foster Wheeler Ltd., Hopeman Brothers, Inc., IU North America, Inc., National Service Industries, Inc., and Oglebay Norton Company.