One issue has caused the bankruptcy of
over 60 companies and threatens the financial health of hundreds
more. It has inspired 600,000 pending lawsuits and is likely
to cost Americans well over $200 billion dollars - possibly much
No, the decades-long asbestos litigation crisis.
Most people have heard of asbestos, that miracle insulation that was discovered to be dangerous, even lethal, if inhaled over long periods. What most people know less about is the out-of-control lawsuits that asbestos has spawned, or the tens of thousands who have lost their jobs because of the lawsuits, or the fact that the lawsuits are bringing scant compensation to those who are genuinely ill.
Thousands became sick over the last seven decades after they inhaled asbestos and developed a deadly cancer known as mesothelioma.
Others developed less serious, nonmalignant conditions, such as a thickening of the wall around the abdominal cavity. Many of these individuals are functionally unimpaired.1
Victims of asbestos poisoning - particularly those with cancer or disabilities - deserve to be compensated.
If only it were that simple.
Unfortunately, where some see misery, others see profit potential.
Entrepreneurial trial lawyers literally trolled for victims to serve as plaintiffs against the deepest pockets around. Law firms set up rolling "health screenings" where they examined past and present employees of large companies, then signed up anyone with a real or potential health problem, regardless of asbestos exposure.2
One potential plaintiff at a lawyer-arranged screenings talked about the possible $10,000-$12,000 payout the lawyers dangled in front of him if he was lucky enough to be chosen as a plaintiff. "I know just the fishing boat I'd buy with that," he said, although he admitted he had never worked around asbestos, "but lawyers say it's all over the place, so I was probably exposed to it."3
If lawyers using healthy people to pad their own bank accounts are not bad enough, workers who show some signs of illness have been herded into settlements of a few thousand dollars now in exchange for forfeiting their right to sue should they become sick. "We're gambling that we never get sick," said one man.4 These people do not have to look far to learn what it would like to be really sick and not receive compensation. Every day, these frivolous suits gobble up enormous resources that should be going to genuine victims.
The bottom line: 60 percent of the awards in asbestos lawsuits have gone to lawyers and court costs, not plaintiffs.5 65 percent of the money that does reach plaintiffs goes to people who don't have a serious asbestos-related disease or disability.6
Seeing a situation in which victims are being ill-treated while corporations that never manufactured asbestos are being ravaged (some companies innocently used asbestos; others bought companies that once used asbestos), efforts were made to make a universal settlement. But efforts failed when the U.S. Supreme Court ruled in 1999 that for such a settlement to be legal, Congress would have to be involved. Because of politics, however, Congress did nothing for years.
Happily, Congress is now the closest it has ever been to ending the asbestos litigation crisis. Thanks to very hard work by Senate Judiciary Committee Chairman Orrin Hatch (R-UT), and several senators of both parties, a bill to establish a privately-funded trust fund to pay victims of asbestos related illnesses has cleared the Senate Judiciary Committee and is awaiting floor action.
The Fairness in Asbestos Injury Resolution (FAIR) Act assures a minimum of $108 billion in private funding to pay claims, with additional private funding mechanisms set to kick in if needed. The bill sets medical criteria standards so that truly sick people and their families are compensated according to the seriousness of the impairment. It also provides some sense of predictability for companies - most of which never produced asbestos - under siege from the trial lawyers.
The bill is a good start, but some of the compromises necessary made in the Judiciary Committee is making final approval of some kind of asbestos-settlement legislation difficult.
Cost is a key factor. The original plan was the establishment of a $108 billion trust fund, the costs for which would be paid by corporations being sued and by insurance companies. Although expensive - $108 billion is a lot of money - corporations and insurance companies were willing to pony up in order to have a set price tag on the asbestos liability monster.
By the time the bill got out of committee, the price tag had ballooned from $108 billion to $153 billion. The insurance industry promptly dropped out, saying the cost had grown so high, it was better off with the status quo.
Some compromise should be possible here. A trust fund is truly better for victims than a lawsuit lottery. Under a trust fund, victims can be compensated quickly and fairly without high legal fees or the "crap-shoot" that has a few victims winning big settlements and others much less. Stockholders and workers, too, can be protected from the economic consequences of endless litigation.
One possible way to breach the divide has been suggested by Michelle White in the summer 2003 edition of Regulation magazine.7 White suggests that trust fund compensation be made in the form of annuities. Should the $108 billion be depleted while claims are still being made (which may never happen) the annuities can be adjusted accordingly.
That way, no one need ever fear that the trust fund will run out before all claimants are identified - yet those who are funding the trust will know how much money to budget to keep the entire compensation system afloat.
One way or another, it is time put the breaks on a system that fails to help the injured and kills jobs yet rewards healthy folks who sue because, in the words of one potential plaintiff, "it's better than the lottery."8
Amy Ridenour is President of The National Center for Public Policy Research, a Washington, D.C. think tank. Comments may be sent to firstname.lastname@example.org.
1 "Asbestos Litigation Costs and Compensation,"
Rand Institute for Civil Justice, Santa Monica, California, 2002,