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Published: August, 2004; Vol 1, Num 3

Push for Asbestos Compensation
Reveals Immense Interests at Stake

With most of its major spending bills in limbo and only a short, contentious session left before the elections, it seemed doubtful last month that Congress would pass asbestos compensation legislation this year.

But the fact that Senate leaders Bill Frist (R – TN) and Tom Daschle (D – SD) kept trying is ample testimony to the huge stakes involved.

Now, as we go to press, a deal seems possible.

The dollar gap between the demands of victim advocates and the funds offered by asbestos manufacturers and insurers has narrowed to less than $10 billion – still a large sum but much closer than the $52 billion that separated the two sides a year ago when compensation legislation was first introduced.

Quoted by Reuters, Daschle said, “It’s true in some respects we’re closer…I think we have to continue to express hopeful optimism even though the clock is ticking. I don’t want to give up.”

As of August 1, the Senate is adjourned for a six-week recess. When it returns, the political season will be in full swing. During elections, compromise is notoriously hard to come by. Thus, Senate staffers have a short window of opportunity to get the deal done.

The original legislation failed last year, and a similar bill, introduced this spring, fell flat. Most observers thought that was it, no more discussion until the elections clarified the political realities that would govern future legislation. Yet, working behind the scenes in late July, Frist again tried to find suitable grounds for immediate compromise.

The pressure comes from a variety of sources. American courts are clogged with asbestos-related lawsuits against the asbestos mining and processing industry, industrial users (Ford, GM, IBM and Halliburton are defendants) and their insurers. Because of these claims, many companies are in bankruptcy. Insurers are waiting for legal resolutions. Meanwhile, the victims are unable to get the benefits they need. Nothing is moving, and no one is happy.

The proposed legislation would establish an asbestos victims compensation trust fund. The fund would bar further lawsuits and set payout limits for victims, thus, saving money for the mining and manufacturing companies and their insurers. Though the fund’s victim compensation will be only a fraction of what might be won in a lawsuit, it would accelerate compensation to dying victims whose court actions, otherwise, face years of delay and might never be paid by a bankrupt company.

Because many LIUNA members and retirees suffer with asbestos-related disease, yet have been unable to secure compensation, LIUNA has been active in AFL-CIO efforts to find an effective compromise that would break the logjam. “However,” says LIUNA General President Terence M. O’Sullivan, “the trust must have the right criteria and adequate resources. The record shows that the industry and its insurers consistently belittle the extent of the hardships they imposed on their workforce. The trust must ensure that every asbestos worker who is suffering receives appropriate care and compensation.”

Until the mid 1960s, asbestos was mined and processed for use in a variety of manufacturing processes and as insulation in homes. Another common insulating material, vermiculite, came heavily contaminated with asbestos as well.

A microscopic mineral, asbestos becomes airborne in mining and processing and was widely inhaled by workers. It lodged in their lungs and, some 20 to 30 years later, caused various debilitating and eventually fatal lung diseases. Those ailments began appearing widely in the 70s and mushroomed through the 80s and 90s. According to the Centers for Disease Control, 1500 people died from asbestosis in 2000, compared to only 77 in 1968.

For the asbestos mining companies and manufacturers, their awareness of asbestos dangers and their failure to take protective action makes them liable. That was proven in the early cases, decided before the onrush of the lawsuits as the epidemic worsened over the last two decades. Already, litigation has cost the industry more than $54 billion, and nearly 70 companies have sought bankruptcy protection.

So far, the efforts at compromise have broken down over three issues: (1) the appropriate level of total compensation; (2) the medical criteria, evidentiary burdens and compensation levels for claimants; and (3) who would pay if initial compensation claims estimates turn out to be too low (the so-called “evergreen” issue).

On the second point of contention, the legislation’s chief sponsor, Senator Orin Hatch (R – UT), asserts that his bill relies on the same standards and rules as the Manville Trust (a trust set up many years ago to handle claims that overwhelmed the first asbestos company to come under fire – the Johns-Manville Company and its affiliates). However, the AFL-CIO’s Peg Seminario detailed a number of the bill’s criteria that are substantially more restrictive than Manville. These would have prevented many workers from filing claims or reduced awards for many who did.

The question of who should cover any shortfall is important because utilization projections in other compensation trusts have been far too low. According to Seminario, “Every projection made by Manville and other trusts has been exceeded, with insufficient funds available to pay victims. Manville now only pays five cents on the dollar of scheduled values due to the number of claims filed.”

An obvious option, one that could close the remaining gap, would be for the U.S. government to agree to cover any shortfall. “A substantial number of the victims,” says LHSFNA Occupational Safety and Health Division Director Scott Schneider, a longtime asbestos victim advocate, “were federal employees working in Navy shipyards where asbestos was commonly used. The government knew of the dangers, but did nothing.”

However, after recent tax cuts and the explosion of costs associated with the Bush administration’s “war on terrorism,” Congress is reluctant to accept any responsibility for asbestos compensation.

How much money will be required to honor all claims is a matter of dispute. According to a report last year in the Engineering News Record, some actuarial sources placed the estimate at $200 billion. When Hatch’s first bill (in 2003) planned for only $100 billion, alarm was raised, and the legislation failed. This past spring, he introduced a new version that bumped coverage to $114 billion, but that, too, was heavily opposed. The AFL-CIO, speaking for the opposition, set $152 billion as the minimum acceptable funding level. When Hatch and Frist could not muster the votes to block debate on the issue, they were forced to withdraw the bill.

In the July talks between Frist and Daschle, a figure of $136 billion reopened discussion. Apparently, the industry was prepared to put up $90 billion and the insurers $46 billion. Seminario of the AFL-CIO, who is not involved in the discussions, said that $136 billion is “insufficient.” By the end of July, the contribution level proposed by the industry had risen to $140 billion.

If agreement can be reached on the level of total compensation, the other issues concerning eligibility criteria and shortfall protection will come into play.

One thing is certain. Eventual legislative action is inevitable because the court system, the insurance industry and a great number of manufacturing companies remain bogged down without it, plus thousands of victims are without adequate compensation and care. The situation is untenable.

What happens next, and when, appears solely a function of the political perceptions of the Congressional leadership. Each side is asking itself and its constituencies whether the better deal can be struck now, before the elections, or after, when the new balance of political power is revealed.

[Steve Clark]