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Published: May, 2005; Vol 1, Num 12

 

Victims, AFL-CIO Withhold Support:

Stakeholders Pick Apart Asbestos Compensation Bill

It’s crunch time for national legislation that would establish a $140 billion asbestos victims compensation trust fund.

On Tuesday, April 26, in the hallowed halls of the Senate Conference Room, the behemoths of America's economy – the National Association of Manufacturers (NAM), the American Insurance Association (AIA) and the American Federation of Labor (AFL-CIO) – testified before the Senate Judiciary Committee in a showdown over how the nation’s greatest industrial horror should be handled.

Around the room, in various guises, the other key players – the victims’ rights organizations, the trial lawyers, the veterans of foreign wars, the medical professionals and the politicians – waited their turn to present their views.

Speaking first, however, was Arlen Specter (R – PA), the new chairman of the Judiciary Committee. In the last two Congressional sessions, despite feverish efforts, this committee was unable to agree on an asbestos bill. Specter – whose committee also is at the center of the mushrooming political crisis over the President’s controversial judicial nominations – wants so desperately to get the asbestos crisis behind him that in January he promised a bill by the end of that month. Now, three months later, with only three Democrats and four Republicans as co-sponsors, S-852 was finally introduced. It still has a long way to go.

Fateful Compromise?

Attempting to circumscribe debate, Specter said the bill’s “core provisions” would not be changed, and only “consistent modifications” would be considered. Democratic Co-Chairman Patrick Leahy (VT) then added that the creation of this compromise was “off the chart in terms of legislative difficulty.”

Indeed, there is no practical solution to the asbestos crisis that also will do justice for all asbestos victims. Tens of thousands are already dead, killed by exposures that might have been prevented, while billions of dollars in profits were earned and dispersed at their expense. Over the past 50 years, 19 million Americans endured high levels of asbestos exposure, and hundreds of thousands of them have or will file claims against American businesses, businesses which, by rights, demand proof of their liability through their day in court. Already, the courts are so clogged, that victims can no longer expect verdicts before they die. Sadly, justice has ground to a halt.

Victims – and defendants, too – are left only with the possibility of legislatively-imposed compromise. The fighting, now, is over the legislative details, over where which lines will be drawn.

That political struggle, as unsatisfactory for all as it is likely to be, is simply the last act of the epic American asbestos catastrophe.

Profit Trumps Safety

The asbestos industry first developed in the late 1800s to supply fire-proof insulation during the vast urban build-up that created our modern cities. At first, no one fully appreciated its danger, but throughout the early 1900s, the anecdotal evidence mounted. As early as the 1930s, American insurance companies initiated investigations into the apparent association of asbestos with lung disease. The evidence proved convincing, but because of potential legal liability and threats to manufacturer profits, the results were kept secret. Despite some leaks, the pattern of obfuscation continued through the 1950s. Finally, in 1964, in an article in the Journal of the American Medical Association (JAMA), an industry-independent, academic researcher, Dr. Irving Selikoff, offered an explanation and proof of the connection between asbestos and the lung disease that was so apparent among asbestos insulators.

Selikoff’s study set the stage for a full exposure of the long cover-up. A trickle of law suits became a torrent. As the principal manufacturer of asbestos products at the time, the Johns-Manville Company was quickly implicated and forced to take cover in bankruptcy proceedings. Overwhelmed by legal claims, the court system encouraged the creation of a trust fund to compensate the Johns-Manville workforce. Channeled into the trust, these workers eventually received only pennies on the dollar when the company’s entire assets proved inadequate to meet their substantiated claims.

Meanwhile, throughout the 1970s, more and more companies were sued, and the jury awards – expressing the public’s outrage at the cover-up, the unbearable suffering of the victims and skill of the trial bar that, also, made small fortunes through the litigation – frequently were huge. The cases grew into the hundreds of thousands, and the court system was overwhelmed. The most culpable manufacturers faced so many claims that they, too, went into bankruptcy protection where, today, 80 remain, awaiting action by the clogged bankruptcy courts. Unable to collect against these defendants, trail lawyers turned against an array of secondary asbestos manufacturers and users. Today, more than 8,000 companies face legal action.

With so many cases and so many bankruptcies, the court system is jammed, and few cases can proceed to trial. Thus, the plight of victims worsens, and many die without their day in court and the opportunity to recover for their suffering and loss. Each year, thousands more former asbestos-exposed workers discover the first signs of asbestos disease.

The scale and weight of this massive injustice is beyond the functional capacity of the American court system. The Supreme Court asked several times that a legislative solution be found, so now the Congress has been drawn in to find another remedy.

Yet, that remedy is illusive because, from the point of view of Congress, it is not simply a matter of justice for the victims. Rather, it is a practical matter of expediting the claims adjudication process so that victims get “fair” compensation while the deck is cleared for the nation’s court, insurance and manufacturing systems to get back to work.

At Tuesday’s hearing, the politicians made much of the fact that S-852 is a compromise that will satisfy no one except the system itself. Yet, they said, because of the scale and gravity of the crisis, a compromise must be found.

Stakeholder Viewpoints

Due to the failure of the Johns-Manville trust fund, all parties approach the idea of setting up a national asbestos trust fund with reservation. The basic idea of S-852 is to require all asbestos disease claimants to seek compensation only from the fund (thus, banning their right to sue in any court) and to settle their claims by administrative procedures that review their individual medical status and allocate relief based on a predetermined formula.

In response, victims divide into a number of groups. Those that worked at Navy shipyards and other federal facilities – and who face very significant legal obstacles in crafting suits against the government, especially if they were in the military at the time of their exposure – relish the trust because it provides a clear, definite avenue of recovery. At the hearing, the Veterans of Foreign Wars spoke in their behalf.

Members of the asbestos workers union, who were broadly and intensely exposed to asbestos and now are among its worst sufferers, have much to gain by the establishment of the trust. Without it, and with the court system jammed, many are dying without any compensation at all. Because they have the most serious disease and the shortest life expectancy, they would receive the first and greatest consideration by the trust. However, because the union also wants justice for all working people, not just its own members, it is supporting the AFL-CIO stance.

The AFL-CIO represents workers in a broad range of industries that worked with asbestos in a host of different conditions. Among these are Laborers who worked for asbestos removal contractors or at a dam construction project downwind from W.R. Grace’s disgraced vermiculite mine near Libby, Montana (see LIFELINES ONLINE, May, 2004). While some AFL-CIO union members suffer the gravest disease, mesothelioma, others have various forms of asbestosis or less developed pulmonary disease that may or may not worsen as the years pass. Thus, the AFL-CIO, while supporting the general concept of the trust fund, is focused on its details to be sure that its criteria and procedures, as Peg Seminario testified, “deal fairly and ensure just and timely compensation” for all victims. The AFL-CIO’s assessment is that the “defendant companies and insurers have succeeded in blocking almost every change to the draft bill that would have removed unfair and unnecessary barriers to valid claims,” so it is opposed to the bill in its present form. LIUNA shares the AFL-CIO perspective.

A wide range of asbestos victims are organized under the umbrella of the Asbestos Disease Awareness Organization (ADAO). Most of these have suits pending but stalled in the courts. While it supports the general idea of a trust fund, the ADAO opposes S-852 because it requires all victims to pursue their claims through the trust, thus eliminating the option to continue their suits. The ADAO supports the right of any victim to pursue court action in lieu of an administrative claim through a trust fund.

The ADAO’s position is mirrored by the American Trial Lawyers Association (ATLA) which is urging caution for Senators that might sign on as bill co-sponsors. Without clear evidence that the fund will be adequately funded and properly administered so that all victims can get appropriate compensation, the ATLA is opposed to the bill’s abrogation of victims’ rights to sue in court.

In contrast to victims and the many organizations with which they are involved, the National Association of Manufacturers (NAM) strongly supports the proposed trust fund because it would reduce the administrative and legal costs of providing compensation to victims, finalize the extent of manufacturers’ liability, drop the cases against the 8,000 companies that are operating under a cloud of suspicion and potential liability, allow the resolution of present bankruptcy proceedings and improve the stock market valuation of most of the companies that are now tainted by the crisis. This, said NAM President John Engler, would eliminate billions of dollars of potential waste in the U.S. economy while assisting millions of stockholders in these companies who had nothing to do with the asbestos crisis and speeding relief to victims.

Unlike the companies that it insured, the American Insurance Association (AIA) is opposing the bill “as currently drafted,” according to its President, Craig Barrington. While victims worry that the bill cuts off their avenues to court, the AIA asserts that the bill still allows the possibility of too much “seepage” back into the court system. Like the AFL-CIO, but from the opposite perspective, the AIA sees the devil in the details.

Details

The issues in the details are now focused on three interrelated points:  the medical criteria, the start-up provisions and the sunset provisions.

The draft bill eliminates from automatic compensation a category of disease victims (known as Category 7) who were long exposed to asbestos and have lung cancer but do not have x-ray evidence of lung scarring (fibrosis), caused by the fibers lodging in the pulmonary tissue, that is often a signature of asbestos. The insurers and manufacturers assert that these lung cancers could have been caused by smoking (many, if not most, victims also are smokers or former smokers) or other exposures.

Medical testimony from the institute created by Selikoff, the Mt. Sinai Center for Occupational and Environmental Medicine, asserted that fibrosis is not a necessary precursor to asbestosis and, thus, that S-852’s elimination of Category 7 victims is an unjustified exclusion of up to 40,000 potential victims. However, other medical professionals, citing the well-known connection of smoking to lung disease, offered justification for the Category 7 elimination. In rebuttal, Dr. Phillip Landrigan of Mt. Sinai noted that 10 to 11 percent of smokers have lung disease, but non-smokers who were exposed to asbestos are five times more likely to have lung disease. Smokers exposed to asbestos are 55 times more likely.

Attempting to find a compromise it can support on this point, the AFL-CIO urged the committee to amend the draft legislation to allow CAT scan evidence of lung scarring, in addition to x-ray evidence. CAT scans are far more sensitive and, according to the AFL-CIO, would provide the evidence of scarring that x-rays would not, allowing approximately half of the 40,000 excluded victims to come in under Category 8 (lung cancer with markers of asbestos exposure).

Another key detail is start-up funding. The bill would assess manufacturers and insurers for the $140 billion, but that is to cover all claims, past and future. The money would not be available immediately; indeed, how fast it would come in is an open question. Thus, the bill authorizes the fund to borrow from the U.S. government to cover initial costs.  It also allows current exigent claims (those of victims who are likely soon to die) to proceed in court until the fund is operational, at which time they would take first priority for fund compensation. All other court claims would be halted as soon as the bill is signed by the President. However, if the fund is not operational and able to pay on claims within two years, all claimants could renew their cases in court.

Opponents noted that, if the trust becomes operational, the interest payments to the government on the start-up loan could eventually consume up to half of the trust’s total funding. Further, if the fund fails to become operational, the U.S. taxpayers, not the responsible companies, will end up paying for the failed endeavor. The AIA cited this possible return to court as evidence of unacceptable leakage.  The AFL-CIO asks why cvictims who are sick with cases currently pending in the courts laimants should be required to abandon their court claims before the fund proves its capacity to get up and running.

Sunset provisions are included in the bill in recognition that the trust could fail to get started or, after starting, could run out of money before all the claims, including hundreds of thousands of yet-to-be-known claims, are paid. In these contingencies, claimants would be entitled to return to the courts, and manufacturers and insurers would again become legally liable.  Thus, say the insurers, they could end up paying twice, once to a trust that fails and again through jury awards down the road.

Prospects

If it were not for the absolute necessity of relief for the nation’s jammed court system – which now prevents meaningful compensation for most asbestos victims – it is doubtful that S-852 or any asbestos compensation trust fund would be adopted by Congress. The competing interests – manufacturers, labor, insurers and trial lawyers – are among the nation’s most powerful lobbyists, all normally capable of blocking any bill they dislike.

Yet, crunch time has come.  No one wants to go back to the courts. This may be one of those rare times when the politicians can rise about the lobbyists and say, simply, “We have no choice. This is the way it’s going to be.”

Or not.

In the meantime, the battle over the tweaking goes on. Two additional senators have joined as co-sponsors, but a mark-up session on April 28 exposed huge fault lines in the Judiciary committee. More than 80 amendments were offered by committee members, and two hours of debate disposed only one of them. The committee then adjourned. Now, the senate is now recessed until May 12. After that, Specter will renew his effort.

[Steve Clark]