Senate Committee Hears Testimony on Asbestos Legislation

On Wednesday, June 7, the Senate Judiciary Committee held a hearing on S. 3274, the Fairness in Asbestos Injury Resolution (FAIR) Act of 2006. At the conclusion of the hearing, Chairman Arlen Specter, R-Pa., said that he was willing to address all concerns raised by the witnesses and will continue to work on the legislation.

The committee heard testimony from the following witnesses:

Gov. John Engler, President, National Association of Manufacturers

Gov. Engler testified that the asbestos bills being enacted in the states do not end the "lottery" nor end the friendly forum shopping for asbestos cases. By keeping claims in the tort system, it costs U.S. businesses $2.38 to provide $1.00 of compensation to asbestos victims. S. 3274 is a major advance over previous versions of the FAIR Act and will ensure fair, fast compensation to victims.

Peter Ganz, Executive Vice and General Counsel, Foster-Wheeler

Mr. Ganz stated that Foster-Wheeler has resolved 300,000 asbestos claims and paid $700 million to asbestos victims. There are 165,000 asbestos claims pending. Although Foster-Wheeler supports legislation to address the asbestos litigation crisis, it did not support S. 852 because the allocation formula was unfair and was in far excess of the amount of what was truly owed into the trust fund. According to Mr. Ganz, S. 852 would penalize the company for properly managing their assets and asbestos liabilities. Foster-Wheeler believes that the provisions in S. 3274, although not perfect, are much more acceptable. Well insured small and medium sized companies can adjust their share of what is owed to the trust fund to more adequately reflect their current asbestos liabilities. Mr. Ganz testified that this is a fair compromise and is a more manageable and predictable for companies to determine their amount owed into the fund.

Eric Green, Founder-Principal Resolutions, LLC., and Professor, Boston University

Prof. Green is the court-appointed legal representative for future asbestos claimants but has never represented a plaintiff or defendant in an asbestos case. According to Prof. Green, the problems with S. 852 have not been corrected in the new asbestos legislation, S. 3274. In fact, S. 3274 has exacerbated the problem regarding the adequacy of the trust fund and created greater certainty about the sources of the funds. Also, there will not be enough money in the trust to pay claims and the provisions in S. 3274 are very vague as to the certainty of the fund. Prof. Green asked that if there is not enough money the trust to fund claims, will victims be forced to accept smaller payments or will the taxpayers be forced to pick up the tab? Also, there are provisions in S. 3274 that allow some well-insured companies to pay less into fund but others will be faced with paying more into the fund to make up for the shortfall.

Flora Greene, National Spokesperson, Seniors Coalition

Ms. Greene testified that many of today's asbestos victims are senior citizens. The courts are overwhelmed by asbestos claims and victims are not being compensated in a timely manner. The Seniors Coalition applauded the improvements found in S. 3274 and urge lawmakers to pass the legislation.

Jim Grogan, General President, International Assoc. of Heat and Frost Insulators and Asbestos Workers

Mr. Grogan said that companies and the government suppressed information regarding the dangers of asbestos and must take responsibility for their conduct. Mr. Grogan believes that the current tort system address asbestos claims is broken. A national legislative solution that is fair and equitable is needed and Mr. Grogan testified that S. 3274 provides just that for the asbestos victims.

Douglas Holtz-Eakin, Director, Council on Foreign Relations

Mr. Holtz-Eakin discussed that the asbestos claims filed under the trust fund would exceed the resources available and a future Congress and administration would be forced to turn to the taxpayers to address the funding shortfalls. S. 3274 would relieve companies of tort liabilities but would not provide certainty on payments by companies because the assessments are unknown and the legislation's provision of a sunset would result in companies again facing court settlements. S. 3274 provides a schedule of claimant compensation, but the same sunset provisions would make the ultimate receipt of compensation uncertain. The legislation establishes medical criteria for and damage caps for specific awards, which are policies that could be directly addressed in the context of the current tort system without exposing the taxpayers to the risk of meeting the shortfalls created by an under-funded trust fund.

Edmund F. Kelly, Chairman, Liberty Mutual Insurance Company

Mr. Kelly focused on four questions to answer whether or not the trust fund, as proposed by S. 3274, would work: 1) Is the Trust Fund fair and equitable?; 2) Does it provide an exclusive remedy for all asbestos claims?; 3) Is the trust fund viable and sustainable?; and 4) Is there a better alternative to the trust fund?

As originally contemplated, each participant (defendant or insurer) would contribute to the trust fund based upon its relative share of liability in the tort system. However, under S. 3274, there are carve-outs for well-insured defendant companies and bankruptcy settlements that will lower their payments into the trust fund while causing those remaining companies to pay the difference owed to the fund. Also, the legislation mandates that the insurers' aggregate contribution "shall be equal to" $46.025 billion whereas the defendants' aggregate contribution "shall not exceed" $90 billion. Insurers are expected to pay every penny of the $46.025 billion owed while there is not requirement that the defendants actually pay $90 billion - only that they not pay more than $90 billion.

In regards to exclusivity, S. 3274 allows for a claimant to recover an award from the trust fund and collect benefits under state workers' compensation programs. Therefore, causing wokers' compensation insurers to pay twice for one claim. The National Council on Compensation Insurance, Inc. (NCCI), using projections by the Congressional Budge Office (CBO), has estimated $39 billion to $88 billion in additional costs to the state-based workers' compensation system. Also, claims may continue in the tort system after enactment of S. 3274. Therefore, the legislation violates the exclusive remedy for all asbestos claims.

It is critical that the trust fund be able to sustain itself. Solvency is threatened by a diluted medical and exposure criteria that would not weed out the unimpaired. Also, expanding the pool of claimants to victims of September 11, 2001, World Trade Center attacks and Hurricanes Katrina and Rita would cause too much money being paid out of the trust fund.

As for a viable alternative, Mr. Kelly's spoke about progress at the state level addressing asbestos reform. Texas, Georgia, Ohio, Florida, Kansas, and South Carolina have passed legislation that imposes medical criteria to guarantee that physical impairment is a predicate to filing an asbestos claim. The state-driven indicatives are working and should not be negated but replicated at the federal level.

Bob Wallace, Executive Director, Veterans of Foreign Wars

According to Mr. Wallace, veterans with asbestos-related diseases and their families desperately need relief from the current system. Because veterans were employed by the federal government during their military service, veterans are restricted in their ability to recover from the government. Also, many companies that supplied asbestos products to the federal government either do not exist today or have gone into bankruptcy. Therefore, causing a fraction of the compensation that should be paid to the asbestos victims. The VFW testified that S. 3274 is the only fair solution that will effectively address their needs and provide the relief veterans deserve.

Source: NAMIC

Posted: Thursday, June 08, 2006 12:00:00 AM. Modified: Wednesday, June 28, 2006 3:26:14 PM.

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