39-010
1st Session
109-97
--THE FAIRNESS IN ASBESTOS INJURY RESOLUTION ACT OF 2005
[To accompany S. 852]
The Committee on the Judiciary, to which was referred the bill (S. 852) to create a fair and efficient system to resolve claims of victims for bodily injury caused by asbestos exposure, and for other purposes, report favorably thereon with amendments, and recommend that the bill, as amended, do pass.
| CONTENTS | Page | |
| I. | Purposes | 1 |
| II. | Legislative History | 4 |
| III. | Votes of the Committee | 7 |
| IV. | Background and Need for Legislation | 12 |
| V. | How S. 852 Works | 21 |
| VI. | Section-by-Section Analysis and Discussion | 32 |
| VII. | Critic's Contentions and Rebuttals | 79 |
| VIII. | Cost Estimate | 89 |
| IX. | Regulatory Impact Statement | 90 |
| X. | Additional Views | 91 |
| XI. | Minority Views | 187 |
| XII. | Changes in Existing Law | 227 |
I. PURPOSES
S. 852, the Fairness in Asbestos Injury Resolution Act of 2005, is important legislation that responds to a badly broken system that lacks the capacity to resolve the claims of asbestos victims. The bill will create an alternative compensation system within the Department of Labor to better resolve the claims of these victims and is intended to bring uniformity and rationality to the system of asbestos claims resolution so that resources are directed toward those who are impaired by their exposure. It is also intended to provide economic stability for businesses faced with asbestos liability by stemming the rising tide of asbestos litigation. The Committee believes that it is imperative to address the current asbestos crisis, which has diverted resources from the truly sick, clogged our federal and state courts, bankrupted companies, and endangered the jobs and pensions of employees.
S. 852 has five (5) key components:
First--S. 852 compensates legitimate asbestos victims faster and on a `no-fault' basis. Under the FAIR Act, asbestos victims' claims are resolved under specific time limits that enable claims to be processed expeditiously.
Victims currently face delay and unpredictable results.
There is widespread agreement that the current tort system does not fairly compensate asbestos victims. Most unfair are the situations where victims receive little or no compensation because the defendant company is bankrupt, the source of the asbestos can't be identified, the workers compensation system prevents them from suing their employer, or where their employer was the Government and is immune from any liability. In addition, there are often years of delay before victims receive any compensation. Awards to victims are highly unpredictable, with similarly afflicted individuals receiving vastly different amounts. Transaction costs, including attorney's fees, are extremely high and reduce the amounts actually received by victims. 1
[Footnote]
[Footnote 1: Hearing on a Bill to Create a Fair and Efficient System to Resolve Claims of Victims for Bodily Injury Caused by Asbestos Exposure, and for Other Purposes, Before the Senate Committee on the Judiciary, 109th Congress (April 26, 2005) (testimony of Mr. Alan Reuther).]
Under the tort system, victims bear the burden of identifying a specific product, proving that the specific product caused their illness, and showing culpability of a particular defendant. Moreover, suits by unimpaired claimants have bankrupted companies and diminished the funds available for the truly ill. As a result, victims often face insurmountable obstacles in recovering for their injuries because many times there is no identifiable party for a claimant to sue, either because the culpable party has gone into bankruptcy or because it is impossible to identify the cause of the claimant's exposure. Furthermore, under the current system, there is a lag of several years between the filing and resolution of a suit; and, even then, there is no assurance that the claimant will receive compensation for their injuries.
Under S. 852, victims will receive timely and certain compensation on a `no fault' basis. They will not need to establish the culpability of a particular solvent party in order to be compensated. Rather, they will only need to satisfy the eligibility requirements in the Act to receive medical monitoring or monetary compensation. S. 852 establishes an unprecedented $140 billion privately funded trust fund, identified in the bill as the Asbestos Injury Claims Resolution Fund (the `Fund'), for the purpose of directing compensation to individuals suffering identifiable injuries as a result of asbestos exposure. In order to receive compensation from the Fund, claimants must prove that they meet the eligibility criteria outlined in the Act.
The FAIR Act also provides for an expedited claims processing and payment system for the most seriously ill individuals. Further, the Act provides special exceptions for claimants suffering from asbestos-related injuries, but who cannot meet the employment exposure requirements of the Act. Medical monitoring will be available for those who have been exposed to asbestos, but who are not suffering from an identifiable asbestos-related illness. Finally, the streamlined administrative process diminishes the need for large attorney fees, which currently deplete that amount that a claimant receives by as much as forty (40%) percent.
Second--S. 852 provides certainty to asbestos victims. Claimants currently filing asbestos-related claims face a series of problems preventing them from being assured compensation for their injuries. While some may receive high awards, others receive nothing at all depending on their ability to prove culpability of harm that occurred decades in the past. S. 852 establishes a $140 billion fund that is projected to be more than adequate to compensate all present and future eligible claims. The compensation for victims as provided under the bill is based on disease categories and corresponding awards as follows:
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Level Condition/disease Award
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I Asbestosis/Pleural Disease A Medical Monitoring
II Mixed Disease with Impairment $25,000
III Asbestosis/Pleural Disease B $100,000
IV Severe Asbestosis $400,000
V Disabling Asbestosis $850,000
VI Other Cancer $200,000
VII Lung Cancer with Pleural Disease smokers: $300,000 ex-smokers: $725,000 non-smokers: $800,000
VIII Lung Cancer with Asbestosis smokers: $600,000 ex-smokers: $975,000 non-smokers: $1,100,000
IX Mesothelioma $1,100,000
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Third--S. 852 provides economic stability and preserves jobs and pensions by offering certainty to defendants and insurers. The FAIR Act ensures that the allocation of payments into the Fund will be fair, rational, and predictable.
Currently, companies are unable to plan for asbestos litigation costs because of the unpredictability of the current tort system. Since most of the original asbestos manufacturers have gone into bankruptcy, companies with little relationship to asbestos are targeted with massive suits. As a result, these tangential companies have begun to feel the crushing weight of asbestos litigation. Insurers and reinsurers are affected as well. In sum, the current system has driven many companies to, or on the brink of bankruptcy. This hurts not only employees, but also investors.
S. 852 provides defendant companies and insurers with a means to plan for future asbestos liabilities. By requiring the participants to contribute set amounts of money into the Fund on a predetermined time table, defendant companies and insurers will be able to move forward and plan for the future. By establishing an administrative system that provides for fair, balanced, reasonable, and predictable allocation of payments by defendant companies and their insurers, the Act will preserve the jobs and pensions of companies that might otherwise be forced into bankruptcy.
Fourth--S. 852 ensures that the fund will be administered simply, fairly, and efficiently. The current tort system is backlogged and unfair to many of the sickest victims. The flood of lawsuits in the tort system, moreover, has led to unacceptable delays. Some seriously ill plaintiffs even die before their suits are resolved. 2
[Footnote] One such victim was Texas resident Ronald Bailey who died of mesothelioma in June of 2000, about two months before his scheduled trial date. 3
[Footnote]
[Footnote 2: See Stephen J. Carroll, et al., Rand Institute for Civil Justice, `Asbestos Litigation Costs and Compensation: An interim Report,' 35 (2002). [Hereinafter RAND 2002].]
[Footnote 3: Thomas Korosec, Enough to Make You Sick: In the struggle for a shrinking pot of money from asbestos litigation, the sickest victims are getting nickels and dimes while lawyers get their millions, Dallas Observer, Sept. 26, 2002.]
Under S. 852, claims will be processed efficiently and fairly by the Office of Asbestos Disease Compensation within the Department of Labor pursuant to clear standards and statutory timelines. Under this system, the Administrator will determine a claimant's eligibility and compensation award based on fair and balanced criteria, including a sound medical basis for all claims. The awards will be paid out to eligible claimants over a period not to exceed four (4) years from the Fund that will be run by the Administrator solely for the benefit of asbestos victims.
Finally--S. 852 bans harmful asbestos to help prevent future illnesses. Although the use of asbestos has largely been reduced by federal regulations it has not been eliminated. The FAIR Act seeks to eliminate the risks of future injuries from asbestos use by prohibiting any further manufacture, processing, and distribution in commerce of harmful asbestos-containing products, subject to certain exceptions. S. 852 would also require that prohibited asbestos-containing products be disposed of pursuant to federal, state and local requirements within three years of the date of enactment to ensure that such products are no longer in the stream of American commerce.
Above all, the purposes of this legislation are to ensure that people who become sick as a result of exposure to asbestos are compensated surely, fairly, and quickly, while protecting the economic viability of defendants, and the employees, investors, and the communities that depend on them.
II. LEGISLATIVE HISTORY
The asbestos crisis has been considered by the Congress for decades. The issue has been evaluated through several hearings and addressed by numerous legislative proposals.
In the 107th Congress, then Chairman Leahy held a hearing on September 25, 2002, entitled `Asbestos Litigation.' At that time, the Committee heard testimony from Senator Max Baucus (D-MT) and Senator Ben Nelson (D-NE), as well as witnesses Fred Barron, Steven Kazan, Jonathan Hiatt (General Counsel of the AFL-CIO), David Austern (General Counsel of the Manville Personal Injury Settlement Trust), and former Solicitor General Walter Dellinger, III.
During the 108th Congress, then Chairman Hatch followed up with another hearing on March 5, 2003, entitled `The Asbestos Litigation Crisis: It is Time for Congress to Act.' The Committee heard testimony from Senator Max Baucus (D-MT) and Senator George Voinovich (R-OH) and witnesses Melvin McCandless, Brian Harvey, David Austern, President-elect of the American Bar Association Dennis Archer, Steven Kazan, and Jonathan Hiatt.
On May 22, 2003, Chairman Hatch introduced S. 1125, the Fairness in Asbestos Injury Resolution Act of 2003 (FAIR Act)--legislation co-sponsored by Senator Ben Nelson (D-NE), Senator Mike DeWine (R-OH), Senator Zell Miller (D-GA), Senator George Voinovich (R-OH), Senator George Allen (R-VA), Senator Saxby Chambliss (R-GA) and Senator Chuck Hagel (R-NE). After its introduction, Chairman Hatch held another hearing on S. 1125 on June 4, 2003, entitled `Solving the Asbestos Litigation Crisis: S. 1125, the Fairness in Asbestos Injury Claims Resolution Act of 2003.' The Committee heard testimony from Senator Patty Murray (D-WA), Senator Chuck Hagel (R-NE) and from witnesses Professor Laurence H. Tribe, Dr. James Crapo, Dr. Laura Stewart Welch, Dr. John E. Parker, Jennifer L. Biggs (FCAS, MAAA), Dr. Mark A. Peterson, Prof. Frederick C. Dunbar, Prof. Eric D. Green and Dr. Robert Hartwig.
The Committee then considered S.1125 during Executive Business meetings held on June 19, 24, 26, 2003 and on July 10, 2003 discharged S. 1125 by a roll call vote of 10 yeas, 8 nays and 1 pass.
In August of 2003, Senator Specter convened a series of meetings that were moderated by Third Circuit Senior Judge Edward Becker with the key stakeholders, including representatives of the defendant companies, insurance and reinsurance companies, the AFL-CIO, and the American Trial Lawyers Association (ATLA). The purpose of these meetings was to provide stakeholders a forum to express their views on the legislation and resolve contentious issues that the Committee identified during markup on S.1125.
On April 7, 2004, Senator Hatch introduced S. 2290, the Fairness in Asbestos Injury Resolution Act of 2004, with Majority Leader Bill Frist (R-TN), Senator Zell Miller (D-GA), Senator Mike DeWine (R-OH), Senator Saxby Chambliss (R-GA), Senator George Voinovich (R-OH), Senator George Allen (R-VA), Senator Chuck Hagel (R-NE), and Senator Pete Domenici (R-NM). On April 20, 2004, the Majority Leader moved to proceed to the consideration of S.2290. That motion, however, drew objections whereby a Cloture Motion was filed on April 20, 2004. The Senate failed to invoke cloture on April 22, 2004, by a vote of 50-47.
After the unsuccessful cloture vote, Senator Specter reconvened the stakeholder meetings again under the stewardship of Judge Becker and in an effort to encourage progress on the bill. During these meetings, which were also attended by Republican and Democratic staff, the stakeholders expressed their concerns on a litany of issues involving many of the bill's core provisions. Between August of 2003 and January of 2005, Senator Specter convened a total of thirty-six (36) meetings with Judge Edward Becker and the stakeholders.
During the 109th Congress, Chairman Specter held a hearing on January 11, 2005, entitled `The Fairness in Asbestos Injury Resolution Act.' In the hearing, the Committee heard testimony from the Honorable Judge Edward R. Becker (U.S. Court of Appeals for the Third Circuit), the Honorable John Engler (President and CEO of National Association of Manufacturers), Peg Seminario (Director of Occupational Safety and Health, AFL-CIO), Craig Berrington (Senior Vice President and General Counsel of American Insurance Association), Mike Forscey (American Trial Lawyers Association), Mary Lou Keener, Billie Speicher, and Jeff Robinson (Partner, Baach, Robinson, and Lewis).
A little over a week later, on January 19, 2005, Chairman Specter circulated a discussion draft of the bill. In an effort to flush out outstanding concerns on the bill, Chairman Specter held a hearing entitled `Asbestos: Mixed Dust and FELA Issues' on February 2, 2005. At the hearing, the Committee heard testimony from Dr. Laura Welch (Medical Director, Center to Protect Worker Rights), Michael B. Martin (Partner, Maloney, Martin and Mitchell, L.L.P.), Dr. David Weill (Associate Professor of Medicine, Division of Pulmonary and Critical Care Sciences, Lung Transplant Program at the University of Colorado Health Sciences Center), Professor Lester Brickman (Professor of Law, Cardozo Law School of the Yeshiva University), Dr. Theodore Rodman (Retired Professor of Medicine, Temple University), Dr. Paul Epstein (Clinical Professor of Medicine and Chief of Pulmonary and Critical Care Medicine, Penn Medicine at Radnor), Paul R. Hoeferer (Vice President & General Counsel of BNSF Railway Co.), and Donald F. Griffin (Director of Strategic Coordination and Research, BMWED-Teamsters). Thereafter, Chairman Specter circulated another discussion draft on February 7, 2005, to reflect agreements reached in negotiations and to encourage further progress on the bill.
On April 19, 2005, S. 852, Chairman Specter introduced the Fairness in Asbestos Injury Resolution Act of 2005, with Ranking Member Patrick Leahy (D-VT), Senator Orrin Hatch (R-UT), Senator DeWine (R-OH), Senator Dianne Feinstein (D-CA), Senator Max Baucus (D-MT), Senator Charles Grassley (R-IA), and Senator George Voinovich (R-OH). On April 26, 2005, and at the specific request of Senator Durbin, Chairman Specter held yet another hearing entitled, `A Bill to Create a Fair and Efficient System to Resolve Claims of Victims for Bodily Injury Cause by Asbestos Exposure, and for Other Purposes.' The Committee heard testimony from Judge Becker, the Honorable John Engler (President and CEO of National Association of Manufacturers), Craig Berrington (General Counsel of the American Insurance Association), Peg Seminario (Director of Occupational Safety and Health, AFL-CIO), Dr. James Crapo (Chairman of the Department of Medicine, National Jewish Medical Research Center), Carol Morgan (President and General Counsel, National Services Industry, Inc.), Hershel Gober (Military Order of the Purple Heart), Dr. Fran Rabinovitz, Mark Peterson, Prof. Eric Green (Boston University Law School), Dr. Philip Landrigan, (the Mount Sinai Irving J. Selikoff Center for Occupational and Environmental Medicine), and Alan Reuther (United Automobile, Aerospace and Agricultural Implement Workers of America).
The Committee considered S. 852 during Executive Business meetings held on April 28, 2005, and May 11, 12, 19, 25 and 26, 2005. On May 26, 2005, the Committee discharged S. 852 favorably by a roll call vote of 13 yeas and 5 nays.
III. VOTES OF THE COMMITTEE
Pursuant to paragraph 7 of rule XXVI of the Standing Rules of the Senate, each Committee is to announce the results of roll call votes taken in any meeting of the Committee on any measure or amendment. The Senate Judiciary Committee, with a quorum present, met on April 28, 2005, and May 11, 12, 19, 25 and 26, 2005 at 9:30 am to markup S. 852. The following votes occurred on S. 852:
A Kennedy Amendment offered on May 11, 2005, to restore Level VII cases relating to lung cancer. Defeated 5-12, 1 pass.
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---------------------------
Kennedy Hatch Schumer
Biden Grassley
Kohl Kyl
Feingold DeWine
Durbin Sessions
Graham
Cornyn
Brownback
Coburn
Leahy
Feinstein
Specter
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A Manager's Package offered on April 28, 2005, by Chairman Specter (R-PA) and Ranking Member Patrick Leahy (D-VT). Accepted by voice vote.
A Feinstein Amendment offered on April 28, 2005, to clarify that expedited judicial review of constitutional challenges shall be modeled after the McCain-Feingold campaign finance law. Accepted by voice vote.
A Durbin Amendment offered on April 28, 2005, to provide for equal treatment of spouses and children of deceased exigent claimants. Accepted by voice vote.
A Feinstein Amendment offered on May 11, 2005, to modify the processing of claims and procedures relating to the stay of claims and return to the tort system, to establish timely payments for asbestos claimants, and for other purposes. Accepted by voice vote.
A Specter/Leahy Amendment offered on May 11, 2005, to provide for the expedited resolution of claims brought by the spouses and children of deceased exigent claimants. Accepted by voice vote.
A Coburn Amendment offered on May 11, 2005, to provide guidance to the Institute of Medicine in their study of Level VI cancers. Defeated 7-9, 2 pass.
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----------------------------
Hatch DeWine Schumer
Grassley Graham
Kyl Leahy
essions Kennedy
Cornyn Biden
Brownback Kohl
Coburn Feinstein
Feingold
Durbin
Specter
----------------------------
A Feingold Amendment offered on May 11, 2005, to eliminate the limitation on the amount of certain exigent health claims. Defeated 5-12, 1 pass.
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---------------------------
Kennedy Hatch Schumer
Biden Grassley
Kohl Kyl
Feingold DeWine
Durbin Sessions
Graham
Cornyn
Brownback
Coburn
Leahy
Feinstein
Specter
---------------------------
A Manager's Package offered on May 11, 2005, by Chairman Specter (R-PA) and Ranking Member Patrick Leahy (D-VT). Accepted by voice vote.
A Kennedy Amendment offered on May 19, 2005, to provide for an Institute of Medicine Study to determine whether there is a causal link between asbestos exposure and lung cancer for individuals who have had substantial occupational exposure to asbestos but have no evidence of pleural disease or asbestosis. Defeated 5-12, 1 pass.
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---------------------------
Kennedy Hatch Schumer
Biden Grassley
Kohl Kyl
Feingold DeWine
Durbin Sessions
Graham
Cornyn
Brownback
Coburn
Leahy
Feinstein
Specter
---------------------------
A Manager's Package offered on May 19, 2005, by Chairman Specter (R-PA) and Ranking Member Patrick Leahy (D-VT). Accepted by voice vote.
A Kennedy Amendment offered on May 25, 2005, to allow persons with lung cancer who had substantial exposure to asbestos but are not eligible for compensation from the Fund to pursue their asbestos claims in Federal or State court. Defeated 5-12, 1 pass.
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---------------------------
Kennedy Hatch Schumer
Biden Grassley
Kohl Kyl
Feingold DeWine
Durbin Sessions
Graham
Cornyn
Brownback
Coburn
Leahy
Feinstein
Specter
---------------------------
A Biden Amendment offered on May 26, 2005, to ensure that asbestos claims are not stayed until the Administrator has met its public notice requirements, defendant participants have made their initial payments, and the Administrator has certified that defendant participants have made sufficient minimum annual payments to the Fund. Defeated 5-12, 1 pass.
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---------------------------
Kennedy Hatch Schumer
Biden Grassley
Kohl Kyl
Feingold DeWine
Durbin Sessions
Graham
Cornyn
Brownback
Coburn
Leahy
Feinstein
Specter
---------------------------
A Biden Amendment offered on May 26, 2005, to provide that if the Act is stayed that asbestos claims shall continue in the court system. Defeated 5-12, 1 pass.
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---------------------------
Kennedy Hatch Schumer
Biden Grassley
Kohl Kyl
Feingold DeWine
Durbin Sessions
Graham
Cornyn
Brownback
Coburn
Leahy
Feinstein
Specter
---------------------------
A Biden Amendment offered on May 26, 2005, to provide that settlement agreements between plaintiffs and defendants are not abrogated, if the settlement agreement was authorized by the settling defendant, and confirmed by, or with, counsel for the settling defendant, and to clarify the rules for settlement agreements dealing with 1 or more asbestos claims. Defeated without a quorum, by rule of the Chairman and consent of Senator Biden, 5-12, 1 pass.
----------------------------
----------------------------
Kennedy Hatch Schumer
Biden Grassley
Feinstein Kyl
Feingold DeWine
Durbin Sessions
Graham
Cornyn
Brownback
Coburn
Leahy
Kohl
Specter
----------------------------
A Manager's Package offered on May 26, 2005, by Chairman Specter (R-PA) and Ranking Member Patrick Leahy (D-VT). Accepted by voice vote.
A Kennedy Amendment offered on May 26, 2005, to extend benefits for claimants of Libby, Montana to certain other residents subject to community exposure to asbestos. Effectively vitiated by acceptance of substitute amendment presented by Senator Specter and Senator Leahy.
A Graham Second Degree Amendment to the Kennedy Amendment offered on May 26, 2005, to create provide for Libby, Montana recovery model for future sites of community-wide contamination. Defeated 6-11, 1 pass.
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---------------------------
Graham Hatch Schumer
Kennedy Grassley
Biden Kyle
Kohl DeWine
Feingold Sessions
Durbin Cornyn
Brownback
Coburn
Leahy
Feinstein
Specter
---------------------------
A Specter/Leahy Substitute Amendment to the Kennedy Amendment offered on May 26, 2005, to create a Libby, Montana recovery model for future sites of community-wide contamination. Accepted 11-6, 1 pass.
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---------------------------
Hatch Graham Schumer
Grassley Kennedy
Kyl Biden
DeWine Kohl
Sessions Feingold
Cornyn Durbin
Brownback
Coburn
Leahy
Feinstein
Specter
---------------------------
A Kennedy Amendment offered on May 26, 2005, to provide that certain exposure presumptions shall be based on asbestos exposure being a contributing factor and not a substantial contributing factor, and for other purposes. Defeated 5-12, 1 pass.
---------------------------
---------------------------
Kennedy Hatch Schumer
Biden Grassley
Kohl Kyl
Feingold DeWine
Durbin Sessions
Graham
Cornyn
Brownback
Coburn
Leahy
Feinstein
Specter
---------------------------
A Kennedy Amendment offered on May 26, 2005, to provide for exigent health claims to continue in court until the Fund is operational, and for other purposes. Defeated 5-12, 1 pass.
---------------------------
---------------------------
Kennedy Hatch Schumer
Biden Grassley
Kohl Kyl
Feingold DeWine
Durbin Sessions
Graham
Cornyn
Brownback
Coburn
Leahy
Feinstein
Specter
---------------------------
A Biden Amendment offered on May 26, 2005, to revise and strengthen the sunset provisions. Defeated 4-12, 2 pass.
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---------------------------
Kennedy Hatch Kohl
Biden Grassley Schumer
Feingold Kyl
Durbin DeWine
Sessions
Graham
Cornyn
Brownback
Coburn
Leahy
Feinstein
Specter
---------------------------
A Motion to Report Favorable S. 852 offered on May 26, 2005. Accepted 13-5.
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-------------------
Hatch Kennedy
Grassley Biden
Kyl Feingold
DeWine Schumer
Sessions Durbin
Graham
Cornyn
Brownback
Coburn
Leahy
Kohl
Feinstein
Specter
-------------------
IV. BACKGROUND AND NEED FOR LEGISLATION
I first saw the asbestos issue back in 1984, more than 20 years ago, when then-Senator Gary Hart of Colorado brought in Johns-Manville. And this very tough issue has been very elusive for more than two decades, and it has mounted in problems, reaching a situation where we now have some 74 companies which have gone into bankruptcy, thousands of individuals who have been exposed to asbestos, with deadly diseases--mesothelioma and cancer--and who are not being compensated. And about two-thirds of the claims, oddly enough, are being filed by people who are unimpaired.
The number of asbestos defendants has risen sharply from about 300 in the 1980s to more than 8,400 today, and most are users of the product. It spans some 85 percent of the U.S. economy. Some 60,000 workers have lost their jobs. Employees' retirement funds are said to have shrunken by some 25 percent. And beyond any question, the issue is one of catastrophic proportions- Chairman Arlen Specter, at a January 11, 2005, Senate Judiciary Committee Hearing.
We have tried to protect the ultimate goal of fair compensation to the victims. That is the lodestar of our efforts. * * * This is the most lethal substance ever to be widely used in the workplace. Between 1940 and 1980, more than 27.5 million workers were exposed to asbestos on the job. Nearly 19 million of them had high exposure over long periods of time. We even know of family members who have suffered asbestos-related diseases just because they lived with the person, because they washed the clothes of loved ones. The economic harm caused by asbestos is real. The bankruptcies that resulted are a different kind of tragedy for everyone, for workers and retirees, for the shareholders, and for families who built these companies- Ranking Member Patrick Leahy, at a April 26, 2005, Senate Judiciary Committee Hearing.
Each year, 10,000 victims will die of mesothelioma as a result of occupational asbestos exposure and tens of thousands of victims will suffer from lung conditions which make breathing so difficult that they cannot engage in the routine activities of daily life. Many have become unemployable due to their medical condition. These are the real victims of the asbestos nightmare and must be the first and foremost focus of our concern. And, because of the long latency period of these diseases, not only will the damage done by asbestos continue for decades but many of the exposed live in fear of a premature death due to asbestos-induced disease.
Not only do the victims of asbestos exposure continue to suffer, and their numbers to grow, but the businesses involved in the litigation, along with their employees and retirees, are suffering from the economic uncertainty created by this litigation. More than 70 companies have filed for bankruptcy because of their asbestos-related liabilities. As Senator Leahy observed at the Committee's March 5, 2003, hearing on asbestos litigation: `These bankruptcies created a lose-lose situation. Asbestos victims deserving fair compensation do not receive it and bankrupt companies do not create new jobs nor invest in our economy.'
The testimony presented at multiple hearings on the asbestos issue and studies written by independent research organizations confirm the fact that the asbestos crisis in the United States is real. It has failed the victims of occupational exposure. The current system forces claimants to wait years for their claims to be resolved. Even when their claims are resolved, many of these claimants are faced with the ultimate denial of compensation because the defendant responsible for their injuries has become bankrupted by previous lawsuits brought by unimpaired claimants. In the event that claimants do receive compensation, that compensation is often arbitrary and inequitable. For example, compensation can be dependant on a matter as arbitrary as the jurisdiction in which the suit is filed. People who bring their claims in certain jurisdictions can receive huge awards, even when they are not sick--while people fatally injured by asbestos exposure may receive far less and often nothing. Further, only a small percentage of the amount of money defendants and insurers spend on asbestos litigation actually reaches the claimants suffering from the ill effects of exposure to asbestos. In fact, statistics from the 2005 RAND report reveal that only forty-two (42›) cents of every dollar spent on asbestos litigation actually go to asbestos victims. The rest of the money is split between plaintiff and defense attorneys fees. Specifically, thirty-one (31›) cents of every dollar goes to defense costs and twenty-seven (27›) cents to plaintiff attorneys. 4
[Footnote]
[Footnote 4: RAND Institute for Civil Justice, `Asbestos Litigation' May 2005, at 109 (RAND 2005).]
The current asbestos litigation system does not serve the public interest. According to the 2005 RAND Institute Study, asbestos litigation has driven 73 asbestos defendant corporations into bankruptcy between 1982 and 2004. 5
[Footnote] This number is expected to grow exponentially, especially considering the fact that more asbestos litigation pushed more asbestos defendant corporations into bankruptcy between the years of 2000 and 2004 than in all of the 1970s, 1980s, and 1990s. 6
[Footnote] These bankruptcies have had tragic consequences for employees, who have lost their jobs and often their savings, and for the communities that depended on the bankrupt firms. Moreover, this litigation is no longer confined to a few asbestos manufacturers. Asbestos litigation today touches thousands of companies in almost every sector of the American economy.
[Footnote 5: Id.]
[Footnote 6: Id. (citing statistics that only one asbestos defendant entered bankruptcy in 1976, twenty in the 1980s, and fifteen in the 1990s--for a total of thirty-six bankruptcies between the years of 1976 and 1999--while thirty-seven were filed between 2000 and 2004).]
Our nation's state and federal courts simply cannot adequately manage the problems in the current asbestos litigation system. As the United States Supreme Court stated in Ortiz v. Fibreboard Corporation, 527 U.S. 815, 821 (1999), `the elephantine mass of asbestos cases * * * defies customary judicial administration and calls for national legislation.' The Court has called upon the Congress three times since 1997 to address this issue: in Amchem Products Inc., v. Windsor, 521 U.S. 591 (1977), in Ortiz, and most recently in Norfolk & Western Railway. Co. v. Ayers, 123 S. Ct. 1210 (2003). It is time to answer this call.
Today, asbestos is seldom used in comparison to its widespread use in the early 1970s. Nonetheless, the Committee believes that continued asbestos use, however limited it may be, should be banned except in those instances where it presents no reasonable risk to health and it has no reasonably safe substitute, or where it is among others necessary to critical functions.
A. HISTORY OF ASBESTOS LITIGATION
Asbestos is a fibrous mineral used in many products due to its resistance to fire, corrosion, and acid. In the early part of the 20th Century, asbestos was regarded as a miracle fiber because it was versatile enough to weave into textiles, integrate into insulation, line the brakes of automobiles, and construct flame-retardant hulls for naval and merchant ships. Annual asbestos production climaxed approximately thirty (30) years ago, and was incorporated into thousands of products by that time.
This Committee received testimony from a number of witnesses regarding the scope and effects of asbestos exposure. 7
[Footnote] Asbestos is ubiquitous in the environment. Although practically all Americans are exposed to asbestos to some degree, such everyday exposures do not usually result in health problems. However, substantial occupational exposure to asbestos can lead to a variety of medical conditions. The diseases caused by asbestos can have long latency periods, sometimes up to thirty (30) or forty (40) years.
[Footnote 7: See, e.g., Hearing on A Bill to Create a Fair and Efficient System to Resolve Claims of Victims for Bodily Injury Caused by Asbestos Exposure, and for Other Purposes, Before the Senate Committee on the Judiciary, 109th Congress (April 26, 2005) (prepared testimony of the Honorable Judge Edward Becker and prepared statement of Dr. Francine Rabinovitz); Hearing on Solving the Asbestos Litigation Crisis: S. 1125, the Fairness in Asbestos Injury Resolution Act of 2003, Before the Senate Committee on the Judiciary, 108th Cong. (June 4, 2003) (prepared testimony of Dr. James D. Crapo and prepared testimony of Dr. John E. Parker).]
The first wave of lawsuits began in the late 1960s, when victims brought actions against asbestos manufacturers and suppliers. These lawsuits increased significantly in 1973 when the 5th Circuit Court of Appeals decided the Borel case, which applied strict liability in asbestos lawsuits. Borel v. Fibreboard Paper Prods. Corp., 493 F.2d 1076 (5th Cir. 1973). By the early 1980s, the principal asbestos defendant, Johns-Manville filed for chapter 11 bankruptcy in 1982. Six years later, the Manville bankruptcy resulted in the formation of a trust to pay asbestos claims, but after a rush of claims on the trust in 1988-89, the trust was forced to reorganize and reduce benefits to claimants to ten (10›) cents on the dollar in 1995 and then was forced to reduce the amount again in 2001 to five (5›) cents on the dollar. 8
[Footnote] Today, the Manville Trust has had to pay claims on a sliding scale--with payments to less seriously injured claimants reduced more than payments to more seriously injured claimants. 9
[Footnote]
[Footnote 8: http://www.mantrust.org/history.htm.]
[Footnote 9: RAND 2005 at 114.]
Experts estimate that over seventy (70) more companies have followed Manville into bankruptcy in the last twenty (20) years--with more than a third of them filing in the last three years alone. 10
[Footnote] Some of these bankruptcies have resulted in trusts for the payment of victims, and some have not. None of the existing trusts pay claims at their full value. By now, practically all of the former asbestos industry is bankrupt. As a result, asbestos litigation today affects companies that never made asbestos.
[Footnote 10: RAND 2005 at 109 (citing statistics that seventy-three defendant corporations have declared bankruptcy since 1976).]
The heaviest asbestos exposures occurred decades ago. After the federal government began regulating the use of asbestos in the early 1970s, and with the sharp decline in asbestos use towards the end of that decade, occupational exposure to asbestos has been drastically reduced in recent years. This has greatly reduced the incidence of significant non-malignant disease, especially asbestosis. A leading pathologist of asbestos diseases stated that the `progressive lowering of standards for permitted occupational exposure to asbestos has markedly decreased the incidence and severity of asbestosis.' 11
[Footnote] Although serious asbestosis cases, which still occurred in the early 1990s, have now become exceedingly rare, because of the long latency period, there will be significant numbers of mesothelioma and lung cancer claims for many years to come.
[Footnote 11: Neoplastic Asbestos-Induced Disease, in Pathology of Occupational Lung Disease (Churg & Green, ed., 2nd 1998) at 339, cited in `Babcock & Wilcox Company Report to the Court Regarding Asbestos Developments Generally and The Proofs of Claims Filed Here,' In re: The Babcock & Wilcox Company, et al., Civil Action No. 00-0558, 2000 U.S. Dist. Lexis 5626, Eastern Dist. Louisiana, decided April 17, 2000.]
Asbestos claims steadily increased during the 1990s, and then exploded during the end of the decade. The vast majority of those claims, however, were filed by people who claimed non-malignant diseases such as asbestosis--the very diseases that had become less and less common during the 1990s. Many of these non-cancer claims were brought by people with no impairment. Such a trend threatens to deplete the amount of funds available to compensate future, legitimately impaired asbestos victims. This is exacerbated by the fact that parties involved and the courts have yet to reach a comprehensive agreement regarding the settlement and treatment of asbestos claims. Rather, `litigation has not only persisted over a long period of time but also continually reshaped itself, in the process presenting new challenges to parties and courts.' 12
[Footnote]
[Footnote 12: RAND 2005 at Summary xx.]
B. COURTS UNABLE TO HANDLE VOLUME OF ASBESTOS LITIGATION
The tens of thousands of asbestos claims filed every year have overwhelmed the ability of the courts to provide fair, individualized justice in a timely manner. The result has been disastrous for deserving claimants and defendants alike. For claimants, the flood of cases has meant delay, inequitable compensation, and increasing uncertainty that the defendants responsible for their injury will remain solvent and able to compensate their claims. For defendants, the overwhelmed tort system has caused companies who never manufactured asbestos to face the possibility of devastating liabilities against which they have little practical defense. Asbestos litigation has touched almost every sector of American industry, and no company can be sure it is not at risk.
Defendants' rights are further compromised when courts lack the resources to monitor the medical evidence submitted by plaintiffs. A study by neutral academics showed that forty-one (41%) percent of audited claims of alleged asbestosis or pleural disease were found by trust physicians to have either no disease or a less severe disease than alleged by the plaintiffs' experts (for example, pleural disease rather than asbestosis). 13
[Footnote]
[Footnote 13: Bell, at 18.]
The current asbestos litigation system is failing all of the parties involved. It is slow, expensive, and inequitable for both plaintiffs and defendants alike. The courts have used a variety of judicial management techniques to cope with the influx of asbestos cases and none have succeeded. Furthermore, all of the attempts to solve the problem within the present tort system have been rejected by the Supreme Court. In one case, the Supreme Court rejected a class action settlement that was agreed to by the parties that would have provided an alternative dispute resolution mechanism for asbestos claims against all defendants. Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997). The Supreme Court also rejected a class action settlement that would have required all claimants against the defendant company to seek compensation from a fund established by the defendant's insurer. Ortiz v. Fibreboard, 527 U.S. 815 (1999). And in 2003, the Supreme Court rejected an attempt to limit damages in asbestos cases under Federal law. Norfolk & Western Railway Co. v. Ayers, 123 S. Ct. 1210 (2003). The Supreme Court held that a defendant that played only a small part in the victim's total exposure could be held liable for the entire damage where the firms primarily responsible were bankrupt or otherwise unreachable, and that a person with only mild impairment due to asbestosis could receive a very large award based only on fear of developing cancer at some future date. Id.
The Supreme Court has continually recognized that the asbestos problem `defies customary judicial administration and calls for national legislation.' Norfolk & Western, 123 S. Ct. at 1228, quoting Ortiz, 527 U.S. at 821. As far back as 1997, Justice Ruth Bader Ginsburg wrote for the Court that `[t]he argument is sensibly made that a nationwide administrative claims processing regime would provide the most secure, fair, and efficient means of compensating victims of asbestos exposure.' Amchem, 521 U.S. at 628. Specifically, the Court has endorsed the Judicial Conference's recommendation that `[r]eal reform * * * require[s] federal legislation creating a national asbestos dispute-resolution scheme.' Id. at 598. The FAIR Act is the `real reform' called for by the Supreme Court.
C. VICTIMS FACE LONG DELAYS, UNCERTAIN OUTCOMES
On April 26, 2005, a representative of the AFL-CIO testified that `many victims are not being well served by the current system and that hundreds of thousands of victims who will develop asbestos disease in the future could be better served by an alternative system that provides compensation to sick individuals in a more efficient and equitable manner.' 14
[Footnote] A flood of asbestos cases is overwhelming the courts, causing delays for victims. An estimated 300,000 cases are currently pending. 15
[Footnote] More than 600,000 individuals have brought claims. Some experts estimate that as many as 2.7 million additional claims will be filed by people who were exposed to asbestos. 16
[Footnote]
[Footnote 14: Hearing on A Bill to Create a Fair and Efficient System to Resolve Claims of Victims for Bodily Injury Cause by Asbestos Exposure, and for Other Purposes, Before the Senate Comm. on the Judiciary, 109th Cong. (April 26, 2005) (prepared statement of Peg Seminario, AFL-CIO) (Seminario April 26, 2005).]
[Footnote 15: Hearing on Solving the Asbestos Litigation Crisis: S. 852, the Fairness in Asbestos Injury Resolution Act of 2003, Before the Senate Comm. on the Judiciary, 108th Cong. (June 4, 2003) (prepared testimony of Jennifer Biggs, at 5) (Biggs June 4, 2003).]
[Footnote 16: Austern Sept. 25, 2002, at 4.]
Some fatally ill victims die before their claims are resolved. As discussed above, one worker whose claim against Avondale shipyard in a consolidated case involving more than 1,000 plaintiffs, died of mesothelioma before the Louisiana trial involving his claim even got underway. 17
[Footnote] While some courts give priority to plaintiffs with mesothelioma, elsewhere plaintiffs with mesothelioma may die before they get to trial. 18
[Footnote] Senator Kohl noted at our September 25, 2002, hearing that, `[s]imply put, some of the most seriously injured are just not getting their day in court quickly enough.'
[Footnote 17: 16-7 Mealey's Litig. Rep. Asb. 2 (May 4, 2001) at 1.]
[Footnote 18: RAND 2002, at 35.]
The flood of asbestos litigation has resulted in seventy-three (73) bankruptcies, which further diminish the prospect that truly ill victims will be timely and adequately compensated. The average amount of time between filing a bankruptcy petition and approval of a reorganization plan is about six years, during which time victims are not paid. 19
[Footnote]
[Footnote 19: Austern March 5, 2003, at 2.]
Too many seriously ill victims do not fare so well, and many find that the defendants have filed for bankruptcy and will only pay pennies on the dollar, if anything. Senator DeWine noted at our September 25, 2002 hearing that `[t]he status quo is just not fair. It is grossly unfair to the victims. What you find is an inconsistency in how victims are treated--a horrible inconsistency that I don't think you'll find anyplace else in our country or our judicial system.'
Asbestos-related bankruptcies severely diminish the prospects that sick victims will be adequately compensated. Overwhelmed by the enormous number of claims by the unimpaired in recent years, the Johns-Manville bankruptcy trust now pays claims on a sliding scale--with less severely injured claimants having their payments reduced more than claimants with severe injuries. 20
[Footnote] Moreover, sixty-three (63%) percent of the funds paid out by the Manville trust have gone toward claims by those with non-malignant conditions. 21
[Footnote] The General Counsel of the Manville Personal Injury Trust, David Austern, testified before this Committee that none of the existing asbestos trusts, nor any of the 20 trusts pending in bankruptcy court, will pay any more than a fraction of the value of claims submitted to them. 22
[Footnote]
[Footnote 20: RAND 2005 at 114.]
[Footnote 21: Claims Resolution Management Corporation, Hearing Exhibit No. 8 at 5, In re: Asbestos Litigation, (E.D.N.Y., Hearing on Dec. 13, 2001) (Nos. CV-91-875, CV-90-3973).]
[Footnote 22: RAND 2005 at 114.]
According to New York Senior District Judge Jack B. Weinstein, the flood of new claims, the reduction in amounts paid pro rata by the Johns-Manville bankruptcy trust on claims, and the increasing number of bankruptcy filings `suggests that there may be a misallocation of available funds, inequitably favoring those who are less needy over those with more pressing asbestos-related injuries.' 23
[Footnote]
[Footnote 23: Order of Judge Jack B. Weinstein, Senior District Judge, E.D.N.Y., In re: Johns-Manville Corporation et al., Nov. 7, 2001, Brooklyn, New York.]
Even for those sick victims who are able to recover monies, those awards are diminished by high transaction costs. As stated before, awards can be broken down in the following manner--amounts are the number of cents per dollar: forty-two (42›) cents to victims, thirty-one (31›) in defense costs and twenty-seven (27›) in plaintiff costs. Today's system is very costly. An alternative system would provide victims with a more efficient means of compensation. The current tort system will only provide victims with $61 billion in compensation. Taking these numbers into account, it is apparent that S. 852 is the far superior option.
D. ECONOMY, JOBS SUFFER UNDER CURRENT SYSTEM
The growth in litigation against this expanding list of defendants threatens jobs, workers' 401(k) and retirement accounts, and the American economy. As Senator Leahy noted at the Committee's April 26, 2005, hearing, `The economic harm caused by asbestos is real. The bankruptcies that resulted are a different kind of tragedy for everyone, for workers and retirees, for the shareholders, and for families who built these companies. In my own State of Vermont, the Rutland Fire Clay Company is among more than 70 companies nationwide to have declared bankruptcy.' 24
[Footnote]
[Footnote 24: Hearing on A Bill to Create a Fair and Efficient System to resolve Claims of Victims for Bodily Injury Cause by Asbestos Exposure, and for Other Purposes, Before the Senate Comm. on the Judiciary, 109th Cong. (April 26, 2005) (prepared statement of Senator Patrick Leahy (D-VT)) (Leahy April 26, 2005).]
Given that seventy-three (73) defendant corporations have filed for bankruptcy related to asbestos litigation, and as many as 2.7 million asbestos claims still may be filed, bankruptcies are likely to continue. More than thirty-seven (37) of the seventy-three bankruptcies have been filed since 2000; as many asbestos-related bankruptcies have been declared in the last two years as in either of the past two decades. 25
[Footnote] Bankruptcies occurring within the last five years include Armstrong World Industries, Owens Corning, Pittsburgh Corning, G-I Holdings Inc. (the successor to GAF Corp.), W.R. Grace & Co., U.S. Gypsum Co., Federal Mogul, Babcock & Wilcox, and Kaiser Aluminum. 26
[Footnote] Asbestos liabilities accounted for eighty-four (84%) percent of total contingent liabilities for Owens Corning, sixty-seven (67%) percent for W.R. Grace, and ninety-three (93%) percent for USG. 27
[Footnote]
[Footnote 25: RAND 2005 at 109.]
[Footnote 26: Keith M. Buckley, Asbestos: Impact on the U.S. Insurance Industry, Fitch Ratings, July 25, 2002, at 13.]
[Footnote 27: Joseph E. Stiglitz, The Impact of Asbestos Liabilities on Workers in Bankrupt Firms, Sebago Associates, Dec. 2002, at 10 (Stiglitz).]
As the first wave of asbestos defendants filed for bankruptcy and their resources dried up, the number of companies named as defendants in asbestos suits began to rise. Increasingly, companies with a limited link to asbestos liability are being targeted. Senator Hatch noted at the Committee's September 25, 2002, hearing that `[b]ecause of this surge in litigation, companies--many of whom never manufactured asbestos nor marketed it--are going bankrupt paying people who are not sick and may never be sick, and who, therefore, may not need immediate compensation.' Approximately 8,400 firms have been named defendants in asbestos suits, 28
[Footnote] up from the 300 listed in 1983. 29
[Footnote]
[Footnote 28: Hearing on Solving the Asbestos Litigation Crises: S.852, the Fairness in Asbestos Injury Resolution Act of 2003, Before the Senate Committee on the Judiciary, 108th Cong. (June 4, 2003) (prepared testimony of Robert P. Hartwig, Insurance Information Institute, at 2).]
[Footnote 29: RAND 2002, at 49.]
The negative impact of asbestos liability is so serious that the mere specter of it has the effect of chilling or even halting transactions. Goldman Sachs Managing Director Scott Kapnick testified before the Committee that `the large uncertainty surrounding asbestos liabilities has impeded transactions that, if completed, would have benefited companies, their stockholders and employees, and the economy as a whole.' 30
[Footnote] The asbestos problem also has serious consequences for insurers, who now pay about fifty-seven (57%) percent of the cost of asbestos liability.
[Footnote 30: Hearing on Solving the Asbestos Litigation Crises; S. 1125, the Fairness in Asbestos Injury Resolution Act of 2003, Before the Senate Committee on the Judiciary, 108th Cong. (June 4, 2003) (prepared testimony of Scott Kapnick, at 2).]
A national economic research specialist testified before this Committee on the economic effects caused by asbestos litigation: `Asbestos-related bankruptcies and the associated layoffs will have ripple effects that harm many groups beyond company stockholders. Workers will suffer in many ways, including temporary or long-term unemployment, lower long-term earnings, and inadequate and/or more expensive interim health coverage.' 31
[Footnote]
[Footnote 31: Hearing on Solving the Asbestos Crisis: S. 1125, the Fairness in Asbestos Injury Resolution Act of 2003, Before the Senate Committee On the Judiciary, 108th Cong. (June 4, 2003) (prepared testimony of Frederick C. Dunbar, of the National Economic Research Associates, at 1).]
Asbestos-related bankruptcies have a devastating impact on workers' jobs and their economic security. Companies that have declared bankruptcy related to asbestos litigation employed more than 200,000 workers before their bankruptcies. Asbestos-related bankruptcies led to the direct loss of as many as 60,000 jobs. Each displaced worker will lose an average of $25,000 to $50,000 in wages over his or her career. 32
[Footnote] The need for congressional intervention is clear, testified former U.S. Solicitor General Walter Dellinger: `We need to stop the hemorrhaging of hundreds of millions of dollars going to those who are not sick, to protect American jobs, pensions and shareholders.' 33
[Footnote]
[Footnote 32: Stiglitz, at 3.]
[Footnote 33: Dellinger Sept. 25, 2002.]
When asbestos defendant Federal-Mogul declared bankruptcy in 2001, employees reportedly lost more than $800 million in their 401(k)s. 34
[Footnote] For example, one 82-year-old Federal-Mogul employee saw his $1 million retirement nest egg shrivel to $20,000. 35
[Footnote] Bankrupt Owens Corning saw its shares lose ninety-seven (97%) percent of their value in the two years before its filing. Approximately fourteen (14%) of those shares were held by employees. 36
[Footnote]
[Footnote 34: Hearing on Asbestos Litigation, Before the Senate Committee on the Judiciary, 107th Cong. (Sept. 25, 2002) (FNS Unofficial Transcript of oral testimony of The Honorable Senator Benjamin Nelson, United States Senator, Nebraska) (Nelson Testimony).]
[Footnote 35: Mark Truby, Asbestos Ruined Federal-Mogul, The Detroit News, Mar. 31, 2002.]
[Footnote 36: Hearing on Asbestos Litigation, Before the Senate Committee on the Judiciary, 107th Congress, September 25, 2002. The Honorable Benjamin Nelson, United States Senator, Nebraska.]
The AFL-CIO has told Congress that `[u]ncertainty for workers and their families is growing as they lose health insurance and see their companies file for bankruptcy protection.' 37
[Footnote] Many companies had high unionization rates when they filed for bankruptcy: Johns-Manville, 42%; Eagle-Picher, 33%; Federal-Mogul, 33%; Armstrong, 57%; and Todd Shipyards, 75%. 38
[Footnote]
[Footnote 37: Hearing on Asbestos Litigation Crisis: S. 852, the Fairness in Asbestos Injury Resolution Act of 2003, Before the Senate Committee on the Judiciary, September 25, 2002, Jonathan Hiatt at 2.]
[Footnote 38: Stiglitz, at 22.]
There is no question that the escalating numbers of claims and costs is a threat to workers' jobs and retirement savings.
Six years ago, the Supreme Court endorsed a `national dispute resolution scheme' to remedy this crisis, and the FAIR Act is the vehicle to implement this mechanism.
E. ASBESTOS BAN AND NATURALLY OCCURRING ASBESTOS
Dangers associated with exposure to asbestos fibers are well known, and have prompted efforts to reduce and in some cases ban asbestos use. EPA and OSHA have severely restricted the use of asbestos since 1986. In 1989, EPA attempted to finalize a ban on asbestos use in the United States; however, that ban was subsequently overturned on non-substantive grounds, by the United States Court of Appeals for the Fifth Circuit in 1991. A number of products and processes still use asbestos. Today, asbestos may be present in such products as brake pads and linings, roofing materials, ceiling tiles, garden materials containing vermiculite, and cement products. According to the United States Geologic Survey, approximately 13,000 to 15,000 metric tons of asbestos are consumed in the United States every year. Numerous countries have banned, or are working to ban, the manufacture and importation of asbestos. Despite its continued (albeit limited) use in the United States, some types of asbestos remain a dangerous substance. Therefore, a ban on the import and manufacture of harmful forms of asbestos and asbestos containing products is needed to prevent the well known risks associated with these products, and to reduce the number of future victims of asbestos-related diseases. The only exceptions are for uses that present no unreasonable risks to health (e.g., diaphragms in chlorine solvent) and for national security (e.g., use in missile liners).
Exposure to naturally occurring asbestos can occur when asbestos contained in rock or soil is released into the air by human activities, such as construction, or by normal erosion. The risks associated with exposure to naturally occurring asbestos have not been quantified.
The potential for exposure to naturally occurring asbestos is a result of the rapid development and growth in areas where veins of asbestos exist in the natural rock. In the case of California, it is present in the ultramafic and serpentine rock found in many of the Sierra foothill counties. Naturally occurring asbestos has been reported at over 780 sites, including in 44 of California's 58 counties, in parts of Oregon, Washington, Montana, Wyoming, Arizona and along the Appalachian Mountain range in the eastern United States.
Left undisturbed, naturally occurring asbestos is believed to pose little threat to human health. The reality of growing development in areas where asbestos is present in the rock and soil, however, warrants the development of precautionary measures to limit the potential for asbestos exposure and to protect public health. This section provides that where naturally occurring asbestos has been detected at levels of potential concern in schools and public areas, the affected communities should receive financial assistance in the form of Federal matching grants, in order to remediate the asbestos contamination.
In certain circumstances, environmental exposure to naturally occurring asbestos may pose health risks. This section focuses on efforts to assess the risks of exposure to naturally occurring asbestos; to standardize methods of sampling and measuring naturally occurring asbestos; to develop dust management guidelines for new construction in areas containing naturally occurring asbestos in order to minimize asbestos exposure; to understand where asbestos is naturally occurring; and to provide funds to communities for asbestos cleanup and for the development, implementation, and enforcement of State and local dust management regulations that States and localities may choose to adopt.
F. CONCLUSION
It is evident that the current system is fundamentally flawed. Victims and defendants alike face inequity and uncertainty, which will only get worse. The Supreme Court has concluded that only federal legislation can create a fair and efficient asbestos resolution system. The FAIR Act offers just such a resolution.
V. HOW S. 852 WORKS
S. 852 takes asbestos claims out of the existing system and processes them through a federally administered trust fund that compensates current and future asbestos claimants on a no-fault basis according to standardized medical criteria and corresponding claims awards. Reduced to its essence, and as discussed further below, the trust fund operates on two fronts: (i) through the collection and management of contributions received from defendant and insurer participants and existing asbestos compensation trusts; and (ii) through the payment of such funds to compensate claimants who can show eligibility based on standardized medical criteria.
The Committee believes that a national trust fund is the best answer to the current asbestos litigation crisis. By funneling existing asbestos tort claims into an administrative funding system, claimants should see quicker compensation while defendants and insurers benefit from increased economic certainty and stability--an outcome that the current tort system is ill-suited to provide.
Claimants would benefit because the FAIR Act eliminates expensive and time consuming litigation. A claimant can recover from the trust fund if that person can meet the Act's standardized medical criteria, which is categorized in various funding levels based on the severity of the asbestos-related disease. Unlike the current tort system, claimants would not be required to prove causation with respect to a pool of defendants or show that their claim was somehow not caused by their own negligence.
Defendants and insurers would also benefit from a trust fund because their future asbestos liabilities become more predictable. The trust fund will be financed through a structured payment scheme involving defendants and insurers with asbestos liabilities.
A. THE FAIR ACT'S FUNDING MECHANISMS
1. Mandatory payments from defendants and insurers
The Fund will be financed through allocated mandatory and guaranteed contributions of $90 billion from defendant participants and $46 billion from insurer participants that have been exposed to asbestos claims in the tort system. Although insurers and defendants have specific aggregate sums earmarked towards the Fund, the mechanics of how these amounts will be assessed towards each contributing group differ.
For defendants
With respect to the defendants, the Administrator, after receiving company specific data as required by the Act, must first designate companies into tiers that are defined by prior company expenditures incurred defending asbestos claims in the tort system. These expenditures include defense, indemnity, judgment and settlement costs. In addition, the FAIR Act establishes separate tiers for debtor companies currently in bankruptcy and companies subject to claims under the Federal Employer's Liability Act.
Once companies have been designated to tiers, the Administrator's next step is to designate companies into subtiers based on revenue levels--amounts calculated by each company's reported earnings for the most recent fiscal year ending before December 31, 2002. After a company is assigned to a subtier, the Administrator can then identify a corresponding annual contribution amount that the assigned company is obligated to pay into the Fund. In other words, each subtier identifies the annual contribution amount into the Fund.
In the event a tiering assignment unduly burdens a contributing company, the FAIR Act gives the Administrator the authority to adjust a defendant participant's payment based on financial hardship or exceptional cases of demonstrated inequity. These adjustments in the aggregate can be made up to $300 million annually through a Guaranteed Payment Account, which the defendant participants guarantee in addition to the $3 billion mandatory annual funding figure. The Administrator is authorized to exceed the $300 million cap on hardship and inequity adjustments (and assuming that this cap is exhausted) in the event a defendant participant is faced with insolvency as a result of their payment obligations to the Fund.
For insurers
Unlike the assessment formula for defendants, the FAIR Act takes a different approach with respect to the asbestos insurers. Rather than establish an allocation formula, the FAIR Act creates a separate Asbestos Insurers Commission, which holds responsibility to determine the amount that each insurer is obligated to pay into the Fund. The Committee believes that delegating such a task to a separately commissioned entity makes sense given the necessary technical expertise that is required in developing a fair and appropriate allocation formula. The FAIR Act requires the Commission to determine contributions based on several factors, including premiums from asbestos policies, losses paid, reserve levels, and future liability. However, if the insurers agree on a fair division of contributions among themselves, such an agreement may be used to determine the insurer allocation. This agreement is subject to approval by the Commission after a finding that the agreed upon allocation formula meets all of the requirements of the Act.
2. The $4 billion contribution from existing bankruptcy trusts
In addition to the aggregate $136 billion collected from defendant and insurer participants, the Administrator is authorized to collect roughly $4 billion from existing asbestos compensation trusts that have been established to compensate asbestos claims, including but not limited to those established under section 524(g) of the Bankruptcy Code. The Committee understands that the total amount of all existing bankruptcy and other asbestos compensation trusts is valued to be at least $4 billion. Because the FAIR Act requires that all trust assets be transferred to the Fund within months of the date of enactment pursuant to the provisions of the Act, these trusts represent an immediate source of funding for the Administrator to begin processing claims.
In the unlikely event that the transfer of these trust fund amounts are held up through litigation or otherwise, the bill obligates defendant and insurer participants to guarantee an additional payment to the Fund equivalent to the amount of the declared assets of any non-paying bankruptcy trust.
3. The administrator's borrowing authority
The FAIR Act gives the Administrator the authority to borrow from commercial lending sources and the Federal Financing Bank. The Committee deems such authority necessary especially during the start-up of the Fund. S. 852 also expressly obligates defendant and insurer participants to repay any amounts borrowed by the Administrator.
B. FAIR ACT CLAIMS PROCESS
S. 852 creates a no-fault system to compensate those who meet sound, fair and balanced eligibility criteria to establish the existence of a legitimate asbestos-related disease. The eligibility criteria include diagnostic, latency, medical and exposure requirements. Flexibility is built into the system, providing for exceptional claims and special cases. The FAIR Act then provides fair and equitable claim values to eligible claimants. To ensure the integrity of the system, however, auditing procedures and independent reviews by objective, experienced physicians are also provided.
S. 852's nationalized, streamlined claims processing system provides compensation to eligible claimants promptly without creating a new or large bureaucracy. It works as follows:
1. Office of asbestos disease resolution
Victims of asbestos exposure with pending cases in the tort system that are preempted by the FAIR Act and those with new claims arising after enactment will file their claims with the Office of Asbestos Disease Compensation (`the Office').
The Department of Labor was selected to house the Office because of its institutional experience with administering compensation programs and for its ability to utilize its existing technology, claims templates, and infrastructure to effectuate a quick start up period. The Department currently administers programs that involve the supervision of outside contractors who process claims for compensation. The Department has experience in establishing administrative appeals procedures and auditing programs for these compensation programs. It is the Committee's belief that such experience will greatly assist the Department in quickly resolving asbestos claims in the early months after enactment.
The Committee designed the administrative claims procedure in S. 852 to ensure a truly `no-fault', non-adversarial system with minimized transaction costs. The Office will assist claimants to receive the compensation to which they are entitled regardless of whether the claimant has outside representation. The Office should produce and post on-line `user-friendly' claims forms and filing guidelines to assist in prompt compensation for asbestos victims.
Deadline to file claims with the Office--Victims of asbestos exposure with new asbestos claims have five (5) years from the date of a medical diagnosis and medical test results sufficient to satisfy the relevant criteria to file an asbestos claim with the Office. Victims with pending court claims that are preempted by this Act have five (5) years from the date of enactment to file an asbestos claim with the Office.
Claims Processing--The Administrator shall promulgate regulations to establish the contents of claims filed with the Office. The intent of the Committee is that the claims process be streamlined and efficient. The enumerated information in the FAIR Act is sufficient to establish qualification under the medical criteria and exposure criteria. It was not the intent of the Committee to require claimants to bear the same evidentiary burdens they currently have in the tort system when seeking recovery within the Fund.
If a claim filed with the Office is found to be incomplete, the Administrator will explain to the claimant the additional information necessary to complete the claim and will see that the claimant receives help completing the claim so it can be processed.
The Administrator may request the submission of medical evidence in addition to the minimum requirements of the medical criteria if necessary or appropriate. This discretion should not be exercised to intentionally delay or to place unreasonable burdens on claimants. Audits of claims submitted by victims and claims processing conducted by outside contractors and other quality control measures should be conducted by the Administrator by reviewing a statistically significant sampling of claims submitted and claims determinations.
Once a claim is completed, a claims processor will review the claim to determine if it satisfies the medical criteria and other requirements for eligibility for an award and, if so, the value of the award. Within ninety (90) days of the filing of a complete claim, the Administrator or the Administrator's designee will issue a proposed decision accepting or rejecting the claim in whole or in part and specifying the amount of the proposed award. This written decision will contain findings of fact and conclusions of law. It will also explain to the claimant how to appeal the decision. If the claimant waives appeal or 90 days passes and no appeal is filed, it will become the final decision and the claimant will be eligible to receive the relevant award.
If the Administrator fails to issue a proposed decision within one hundred and eighty (180) days of a claimant's filing with the Office, that claim shall be deemed to be accepted for the award level requested. Claimant will then be entitled to payment in accordance with the payment installments contained in the FAIR Act. This provision is incorporated as a safeguard so that claims do not languish for years without any processing or determination of eligibility.
Administrative Review Process--If a claimant is not satisfied with the proposed decision, there are two possible avenues for administrative appeal. Both must be requested in writing within ninety (90) days of the proposed decision. The claimant may request a hearing or a review of the written record before a representative of the Administrator. The Committee envisions this representative to play the role of an administrative law judge and therefore the representative will be someone different than the person who initially reviewed the claim and issued the proposed decision.
If a hearing is requested, the representative will receive the claimant's oral evidence and written testimony to ascertain the claimant's right to receive an award from the Fund and issue a final decision on the record as a whole within one hundred and eighty (180) days from the date of the hearing request. Alternatively, if a review of the written record is requested, the representative will receive any additional evidence or arguments that the claimant chooses to submit and issue a final decision on the record as a whole within ninety (90) days from the date of the request for review on the record. All final decisions by representatives will be in writing and will contain findings of fact and conclusions of law.
Judicial Review of Final Decisions--Claimants may appeal final decisions of the Administrator with the U.S. Court of Appeals located in the state where they currently reside. Appeals must be filed within ninety (90) days of the issuance of a final decision. The Court shall review the administrative record as a whole and determine whether the final decision is not supported by substantial evidence, is contrary to law, or is not in accordance with procedures required by law.
2. Prompt payment of claims
Unlike the current system, in which results can be inequitable and unpredictable, S. 852 ensures rapid, fair, and predictable payments, while still maintaining the stability of the Fund. Once a final decision is rendered, payments are to be made by the Fund over a period of 3 years but in no case longer than 4 years. If no proposed decision is issued within 180 days of submitting a completed claim, that claim is deemed accepted and claimants are also entitled to begin receiving payments.
An expedited payment schedule is available for exigent health claims. Living mesothelioma claimants are entitled to begin receiving accelerated payments within thirty (30) days, and other exigent claimants are entitled to receive their full recovery in less than a year. In addition, during Fund start-up there are special procedures in place to ensure that if the Fund or claims facility is unable to pay in these specified time periods the terminal individual may return to court. This is outlined in greater detail below.
3. Disease levels
A claimant filing with the Fund must satisfy the eligibility requirements for one of the following nine (9) disease levels:
Level I (Asbestosis/Pleural Disease A)--These individuals clearly have asbestos-related pleural disease or asbestosis, but their pulmonary function tests are within the normal range. Asbestos-related pleural conditions include discrete plaques on the pleura (the lining of the chest wall) or pleural thickening. Asbestosis involves scarring of the interstitial tissue within the lungs.
Level II (Mixed Disease With Impairment)--Individuals in this group have significant respiratory impairment, as defined by the American Medical Association. They are impaired due to a combination of asbestosis and other causes, typically chronic obstructive pulmonary disease. The requirement for a 1/1 ILO reading on a chest x-ray helps ensure that asbestos exposure is a substantial contributing factor to the lung diseases and impairment.
Level III (Asbestosis/Pleural Disease B)--These individuals have impairment that is primarily due to asbestosis. They develop asbestos-related respiratory disease with increasing losses of pulmonary function, with lung function decreasing to as low as 60 percent of predicted average.
Level IV (Severe Asbestosis)--These individuals have impairment that is primarily due to asbestosis. They experience significant loss of pulmonary function, with lung function between 50 percent and 60 percent of predicted average. Victims with this level of impairment are often disabled and cannot perform some activities of daily living.
Level V (Disabling Asbestosis)--These individuals have impairment that is primarily due to asbestosis. They experience severe loss of pulmonary function, experiencing loss of more than 50 percent of predicted average lung capacity. Victims with this level of impairment will not be able to perform most activities of daily living. Impairment at this level can be fatal.
Level VI (Other Cancers)--Individuals in this group have cancers of the colon, larynx, pharynx, or stomach, the risk of which may be increased by asbestos exposure. The bill commissions the Institute of Medicine to conduct a study on whether these cancers are caused by exposure to asbestos.
Level VII (Lung Cancer With Pleural Disease)--Individuals in this category suffer from lung cancer. Asbestos-relatedness is demonstrated by substantial exposure requirements and the existence of asbestos-related pleural disease.
Level VIII (Lung Cancer With Asbestosis)--These individuals suffer from lung cancer with asbestosis. Asbestos-relatedness is shown by the existence of substantial exposure and asbestosis (scarring within the lung).
Level IX (Mesothelioma)--These individuals suffer from a rare and fatal cancer of the chest lining (the pleura) and abdomen lining. This cancer is usually fatal within 18 months of diagnosis although some victims can survive for years. Mesothelioma is a particularly debilitating disease whose victims typically endure great suffering.
4. Diagnostic and latency criteria
Asbestos claimants must meet diagnostic and latency criteria to be compensated by the Fund. The diagnostic criteria should reflect the typical components of a true medical diagnosis by a claimant's doctor, including an in-person physical examination (or pathology in the case where the injured person is deceased) and a review of the claimant's medical, smoking and exposure history by the doctor diagnosing an asbestos-related disease. These requirements ensure that the claimant will be given a meaningful diagnosis related to the claimant's condition. The diagnosis must also include consideration of other more likely causes of the condition to ensure that asbestos exposure was the cause of any claimed nonmalignant disease (as opposed to other industrial dust exposure) or a substantial contributing factor in causing a malignant disease.
Because asbestos-related diseases have a long latency period before symptoms begin to manifest, S. 852 requires that the claimant demonstrate that his or her first exposure to asbestos occurred at least ten years prior to the diagnosis.
5. Medical criteria
Claimants must meet medical criteria to ensure that resources are protected for those who are currently suffering from asbestos-related disease. The medical criteria establishes requirements for 9 disease levels, 5 of which relate to nonmalignant asbestos-related diseases, such as asbestosis, and 4 of which relate to malignant diseases, such as lung cancer and mesothelioma. The medical criteria for three of the nonmalignant categories are based on increasing severity of the claimant's impairment. Because these impairments may have other causes, such as other airborne contaminants including cotton dust, medical evidence is required to establish that asbestos exposure is the cause of the claimant's impairment. The medical criteria for the malignant categories similarly reflect the need to have medical evidence to support a finding that the claimant's exposure to asbestos is a substantial contributing factor in causing the claimant's asbestos-related disease.
6. Exposure criteria
Claimants must meet exposure criteria to be compensated. Because the risk of developing an asbestos-related disease increases with the amount and intensity of exposure to asbestos, the Committee has set exposure requirements for each disease level to ensure that S. 852 compensates only asbestos-related diseases. The number of years of occupational exposure is weighted based on industry and occupations and by the dates of exposure, so as to serve as a proxy for approximating the dose of exposure associated with various types of occupational exposures typically associated with asbestos-related diseases. The intensity and regularity of asbestos exposures associated with certain industries and occupations were significantly greater prior to the 1970's, at which time federal regulations limiting its use and for the protection of workers were first implemented. Such exposures often occurred in the manufacture of asbestos. The criteria were drafted to ensure that only diseases caused by asbestos exposures are compensated by the Fund.
7. Exceptional cases
S. 852 provides exceptions to the above standards for compensation. Exceptional cases where the medical criteria under the Act cannot be met but the claimant has comparable and reliable medical evidence are eligible for review by a Physicians Panel, made up of objective, experienced physicians, to determine whether the claimant is eligible.
Special provisions are established for review by a Physicians Panel in other unique circumstances, including those related to `take home' exposures where asbestos was brought into the home by an occupationally exposed person, exposures due to naturally-occurring asbestos, and those related to the high levels of environmental exposures of residents and workers in Libby, Montana.
8. Claim values
S. 852 provides for carefully constructed, rational, and fair claims values. Many of the illnesses that are compensated under the Act could be caused or contributed to by factors other than asbestos exposure, such as smoking and other airborne contaminants. Therefore, claims values have been carefully constructed to provide increased compensation in those cases where there is greater confidence that the asbestos exposure was the cause of the claimant's injury. To those ends, mesothelioma and lung cancer claims where the claimant has been diagnosed with underlying asbestosis and is a nonsmoker have been given the highest values. Claims values for claimants with severe asbestosis and other lung cancer claims where the causal connection between the asbestos exposure and the injury is more substantiated similarly reflect the purpose of the Act to direct monies to the most serious injuries caused by exposure to asbestos.
The FAIR Act recognizes that claimants with significant occupational exposure to asbestos may be at risk of developing a serious asbestos-related illness. As such, claimants meeting the minimum exposure criteria will be reimbursed reasonable costs for medical monitoring. In the event these claimants develop into a compensable illness, they may then seek compensation from the Fund.
C. THE FUND START-UP AND PAYMENT OF EXIGENT CLAIMS
S. 852 creates a streamlined process to ensure that exigent health claims are resolved and paid upon enactment of the Act. The Committee strongly believes that individuals with mesothelioma or a diagnosis of less than 1 year to live should have their claims addressed as quickly as possible. Therefore provisions were put in place so that exigent health claims can immediately be filed after enactment with the Fund or the claims facility and then be paid in a timely manner.
S. 852 allows exigent health claims that arise before or after the date of enactment to be resolved through the following process:
1. File
Each exigent individual will file a claim or a notice of intent to seek a settlement with the Administrator (or claims facility). Notice shall be provided to all named or potential defendants.
2. Submit information
Once the notice of intent has been submitted, each exigent individual has 60 days to provide all necessary information to support her claim, including who the relevant possible defendants would be if the claim arose after enactment. If the individual fails to provide all the information required, she will have 30 days to perfect her claim.
3. Certification of claim
Upon receiving all of the required information, the Administrator has 60 days to certify the claim--to certify the Administrator must evaluate if claim is exigent, and what disease level they qualify for. Upon certification, the Administrator must immediately notify defendants of approval of claim
4. Payment
Mesothelioma victims receive 50 percent of their award in 30 days, and 50 percent in 6 months. Other terminal victims receive 50 percent of their award in 6 months, and 50 percent in 11 months. The Administrator has discretion to extend payment if time schedule would severely harm the solvency of the Fund. Once a claim has been paid in full the claimant shall release any outstanding asbestos claims.
5. Failure to certify
If Administrator fails to act on the claim for any reason, the Administrator must notify the claimant and the defendants within 10 days. If the Administrator fails to make such notification the claimant may notify the defendants. Defendants then have 30 days to make a settlement offer for 100 percent of what the claimant would receive under the fund.
6. Failure to pay
If the Administrator certifies the claim, but fails to make the full payment within the payment schedule defendants have 30 days to make a settlement offer for 100 percent of what the claimant would receive under the fund.
7. Appeal
The claimant may appeal any decision of the Administrator in accordance with the appeals procedures provided for in the Act.
8. Acceptance or rejection
The claimant must accept a settlement offer if it equals 100 percent of what they are entitled to under the fund. If it is not, they may reject it. This decision must be made in 20 days in writing.
9. Opportunity to cure
If the claim was not certified by the Administrator or the defendant settlement offer was rejected; defendants have 10 business days to amend the offer. If it is still is not accepted, the individual would be entitled to a settlement of 150 percent of what they would receive under the fund.
10. Failure to make offer
If the defendants fail to make a settlement offer then the individual is entitled to a settlement of 150 percent of what they would receive under the Fund.
11. Failure to pay
If the defendants or Administrator fails to make the payments within the required payment schedule then the individual is entitled to a settlement of 150 percent of what they would receive under the Fund.
12. Return to court
If 9 months after the claim is filed, the Administrator has not certified or paid the claim, or if the defendants have not paid the claim, and the Fund has not been certified as operational then the individual may pursue their claim in court where the case was pending or in the appropriate state or federal court if the claim arose after enactment.
13. Recovery of costs
Defendants, who pay the claim either through the settlement procedure or in a court action, would receive a credit with the fund up to 100 percent of what the fund would have paid the claimant, unless the Administrator finds that the defendant's settlement offer was not in good faith.
This streamlined process is fair to both victims and defendants. It ensures that claims for terminal individuals are handled in an expedited manner, and it provides businesses with the opportunity to resolve claims that the Administrator or claims facility cannot.
VI. SECTION-BY-SECTION ANALYSIS AND DISCUSSION
Sec. 1. Short title; table of contents.
Sec. 2. Findings and purpose.
Sec. 3. Definitions.
TITLE I- ASBESTOS CLAIMS RESOLUTION
SUBTITLE A- OFFICE OF ASBESTOS DISEASE COMPENSATION
Sec. 101. Establishment of Office of Asbestos Disease Compensation
The FAIR Act establishes the Office of Asbestos Disease Compensation (the Office) within the Department of Labor for the purpose of providing timely and fair compensation to individuals with asbestos-related injuries in a no-fault, non-adversarial manner. If the Office does not sunset early (see sunset provisions in Title IV), then it shall terminate automatically no later than twelve (12) months after the Administrator certifies that the Asbestos Injury Claims Resolution Fund (the Fund) has not paid out claims in twelve (12) months and does not have any debt obligations to pay.
An Administrator, appointed by the President with the advice and consent of the Senate, will head the Office for a term of five (5) years and report directly to the Assistant Secretary of Labor for the Employment Standards Administration. The Administrator is charged with the following responsibilities: (1) paying all administrative expenses out of the Fund; (2) promulgating rules, regulations, and procedures necessary to implement the Act, including rules expediting the consideration and payment of claims for exigent claims as soon as possible after date of enactment; (3) contracting and appointing of services and personnel; (4) selecting Deputy Administrators, one to handle the claims administration and resolution process and one to handle the fiscal management of the Fund; and (5) managing the assets to ensure the financial integrity of the Fund.
The Freedom of Information Act (FOIA) shall apply to the Office and Asbestos Insurers Commission. The Act provides a process by which a participant or claimant may seek an exemption from disclosing their confidential records under FOIA. The Act charges the Administrator and Chairman of the Asbestos Insurers Commission with establishing: (1) procedures for handling the commercial and financial records of participants marked confidential; (2) a pre-submission process determine the confidential nature of information pertaining to insurer reserves and asbestos-related liabilities of participants; and (3) procedures for determining the confidential nature of personnel and medical files of claimants.
Sec. 102. Advisory Committee on Asbestos Disease Compensation
The Administrator shall establish an Advisory Committee on Asbestos Disease Compensation (the Advisory Committee) no later than one hundred twenty (120) days after the date of enactment to advise the Administrator on all matters related to the functioning, maintenance, and administration of the Fund. The Advisory Committee shall be composed of twenty (20) members appointed for three (3) year terms, except that of the first members appointed, an equal number shall be appointed for one (1), two (2), and three (3) year terms. Of the members appointed, the Administrator shall designate a Chairperson and a Vice Chairperson.
The Majority and Minority Leaders of the Senate, the Speaker of the House, and Minority Leader of the House shall each appoint four (4) members. Of the four, two (2) shall represent the interests of the claimants, at least one of whom having been recommended by national labor federations. The other two (2) shall represent the interests of the participants, one of whom shall represent the interests of the insurer participants and the other the interests of the defendant participants. The Administrator shall appoint four (4) members with qualifications and expertise in fields relevant to the administration of the Fund. None of the members may have earned more than fifteen (15 percent) of their income by serving in matters related to asbestos litigation as consultants or expert witnesses for each of the five (5) years before their appointments.
The Advisory Committee shall meet at the call of the Chairperson, or the majority of its members, at least four (4) times per year during the first five (5) years of the asbestos compensation program and at least two (2) times per year thereafter. The Administrator shall provide such information and administrative support to the Advisory Committee as reasonably necessary to enable it to carry out its responsibilities.
Sec. 103. Medical Advisory Committee
The Administrator shall establish a Medical Advisory Committee to provide expert advice regarding medical issues. None of the members may have earned more than fifteen (15 percent) of their income by serving in matters related to asbestos litigation as consultants or expert witnesses for each of the five (5) years before their appointments.
Sec. 104. Claimant Assistance
The Administrator shall establish a comprehensive claimant assistance program no later than one hundred eighty (180) days after the date of enactment to aid claimants in the claims process. The program shall provide for the establishment of resource centers. To the extent possible, the program shall locate the centers in areas within the Department of Labor, or other Federal agencies, in areas with large concentrations of potential claimants. The Administrator may enter into contracts with outside organizations that do not have a financial interest in the outcome of claims for the purpose of providing services to potential claimants.
Legal Assistance: The Administrator shall establish a legal assistance program to aid claimants in legal representation issues. As part of the program, the Administrator will maintain a list of attorneys who are willing to provide their services on a pro bono basis. The Administrator shall provide claimants notice of and information relating to available pro bono legal services and any limitations on attorneys fees. Further, an attorney shall provide an individual notice of pro bono services for legal services available before the individual becomes a client with regard to an asbestos claim.
An attorney may not receive in attorney's fee awards any more than five (5 percent) of a final award made under the Fund. If a representative violates these provisions, that attorney will be fined the greater of five thousand ($5000.00) dollars or twice the amount received by the representative for services rendered in connection with the violation.
Sec. 105. Physicians Panels
The Administrator shall establish Physicians Panels for the purpose of making medical determinations and performing other such functions that are necessary to carry out the Act. The Administrator shall establish enough Panels to ensure the efficient conduct of the medical review and exceptional medical claims process. The Administrator may periodically adjust the number of Physicians Panels on the basis of a mandatory periodic review.
To serve on a Physicians Panel, a person shall be a licensed physician in any State, board-certified in pulmonary medicine, occupational medicine, internal medicine, oncology, or pathology, and has earned no more than fifteen (15 percent) of their income as an employee of a participating defendant or insurer or law firm representing any party in asbestos litigation or as a consultant or expert witness for each of the five (5) years before appointment. Each panel shall be composed of three (3) physicians. The Administrator shall designate two (2) of the physicians on each panel to participate in each claim submitted to the Panel. The third physician shall only participate in the event of a disagreement.
Sec. 106. Program Startup
Interim Regulations: The Administrator shall promulgate interim regulations and procedures for the processing of claims and the operation of the Fund no later than ninety (90) days after the date of enactment.
Interim Personnel: This subsection grants the Secretary of Labor, the Assistant Secretary of Labor for the Employment Standards Administration, and the Administrator permissive authority to engage in certain activities that will ensure the swift start up of the Act. Specifically, the Secretary of Labor and the Assistant Secretary of Labor for the Employment Standards Administration may make such personnel and resources available to the Administrator. Further, the Administrator is authorized to contract with individuals and entities with experience handling financial matters and reviewing workers' compensation, occupational disease, or similar claims.
Exigent Health Claims: The Administrator shall develop procedures for the expedited categorization, review, and payment of exigent health claims. To qualify for treatment as an exigent health claim: (1) a claimant must provide a diagnosis of mesothelioma meeting the requirements of the Act 39
[Footnote] or documentation of diagnosis in the form of a declaration or affidavit by an examining physician of a terminal asbestos-related disease with the life expectancy of less than one year 40
[Footnote] ; or (2) if the spouse or child of a exigent claimant who was living when the claim was filed (or who was living on the date of enactment if the claim is filed before the implementation of interim regulations) but has since died of an asbestos-related disease, the spouse or child must provide information establishing that the claimant was eligible to receive compensation and has not already received compensation from the Fund. The Administrator may designate additional categories of claims that qualify as exigent health claims in final regulations.
[Footnote 39: Pursuant to 121(d)(9), the claimant must submit a diagnosis of mesothelioma completed by a board certified pathologist and evidence that the claimant was exposed to asbestos while working, brought home by an individual exposed to asbestos at work, living in the vicinity of a operation that regularly released asbestos fibers in the air, or in some other manner.]
[Footnote 40: The physician must have examined the claimant within one hundred twenty (120) days of the date of completing the diagnosing document.]
The Act authorizes the Administrator to contract with a claims facility to enter into settlements with claimants. The processing and payment of such claims shall be subject to the rules and regulations enacted under the Act.
Extreme Financial Hardship Claims: The Act grants the Administrator permissive authority to give expedited treatment to additional categories of claim on the basis of extreme financial hardship.
Interim Administrator: The Assistant Secretary of Labor for the Employment Standards Administration shall serve as the Interim Administrator until the Administrator is appointed and confirmed. The Interim Administrator shall perform the responsibilities and have the authority conferred on the Administrator by the Act. Prior to the promulgation of final regulations relating to claims processing, the Interim Administrator shall issue interim regulations and may prioritize claims processing based on the severity of illness and likelihood that exposure to asbestos was a substantial contributing factor to causing the illness.
Stay of Claims; Return to the Tort System: As of the date of enactment, any asbestos claim pending in State or Federal court shall be subject to a stay unless: (1) the presentation of evidence has begun before an impaneled jury or judge, as trier of fact, or (2) a verdict, final order, or final judgment has been entered by a trial court. 41
[Footnote]
[Footnote 41: See Section 403(d)(2).]
Exigent Health Claims- This section provides for the settling of exigent health claims filed before and after the date of enactment.
Procedures for Settlement of Exigent Health Claims- A claimant with an exigent health claim wishing to settle the claim may file a claim or a notice of intent to seek a settlement with the Administrator at any time prior to certification of an operational Fund or claims facility. If the individual files a notice of intent, the claimant then has sixty (60) days to provide the Administrator with the information necessary to file a claim. Filing a claim shall require submission of the following information: (1) the amount received or entitled to be received as a result of collateral source settlements and copies of all such settlements; (2) any information that the claimant would be required to submit in support of a claim against the Fund; (3) certification by the claimant that the information provided is true and complete; and (4) for exigent claims arising after the date of enactment, a good faith identification of every defendant that the claimant could have appropriately brought an action against in a civil action for the asbestos injury.
If the claimant submits all of the required information on time, the Administrator then has sixty (60) days to determine whether the claim is an approved exigent claim. If so, then the Administrator shall issue a certification to all parties that the claim is an approved exigent health claim valued at a set amount (based on the award value under the Act subtracted by the amount of collateral source compensation) and pay the claimant in that amount.
If the claimant fails to submit all of the required information on time or there is a deficiency in the application, then the claimant shall have thirty (30) days to perfect the claim.
If the claimant fails to perfect the claim or is determined not to be eligible as an exigent health claim, then the claimant will not be allowed to proceed.
The Administrator or claims facility must provide notice to the claimant within ten (10) days of failure to act if unable to process and certify the claim and must immediately refer the claim to affected defendants. If the Administrator or claims facility fails to provide such notice, then the claimant may provide notice to defendants to prompt a settlement.
Within thirty (30) days of receiving such a notice from the plaintiff of failure to process or from the Administrator of failure to process or to pay, the defendant may serve a good faith offer. This amount--or the aggregate, if multiple offers are made--may not exceed the amount that the claimant would be entitled to under the Fund.
The claimant must accept or reject the offer within twenty (20) days of receiving an offer. If the claimant accepts the offer, the settlement is subject to court approval, which must be given within twenty (20) days of the acceptance. The court may only reject an offer upon a finding of bad faith or fraud.
If the offer is rejected, then the defendant has ten (10) days to amend the offer. If the offer is the same of the amount that the claimant would receive under the Fund, then the claimant must accept the offer. If the claimant rejects the offer again (for example, because the offer was less than what the claimant is entitled to receive under the fund) or the defendant fails to amend the offer, then the amount the claimant is entitled to receive through the settlement is increased to one hundred fifty (150 percent) percent of the Fund award. If the claimant fails to make an offer at all, then the amount the claimant is entitled to receive through the settlement is increased to one hundred fifty (150 percent) percent of the Fund award.
Payment Schedule- The Administrator has the discretion to extend these time periods if paying out the claims on the protracted time table would severely harm the solvency of the Fund. The amount the claimant is entitled to receive through the settlement is increased to one hundred fifty (150 percent) percent of the Fund award if there is a failure to pay according to this section.
Mesothelioma Claimants- Initial payment of fifty (50 percent) percent of the award in thirty (30) days of acceptance and payment of the remaining fifty (50 percent) percent in six (6) months of acceptance. Administrator's discretion allows for payments to be extended to 50 percent in six (6) months and 50 percent eleven (11) months after acceptance;
Other Terminal Claims- Initial payment of fifty (50 percent) percent of the award in six (6) months of acceptance and payment of the remaining fifty (50 percent) percent in eleven (11) months of acceptance. Administrator's discretion allows for payments to be extended to 50 percent in first year and 50 percent second year after acceptance;
Recovery of Costs- A defendant who pays out a claim in accordance with this section may recover the cost of settling by deducting it from future payments to the Fund.
Continuation of Health Claims- After 9 months an exigent claimant may pursue their claim in the court where the case was stayed or in the appropriate state or federal court for claims arising post enactment so long as the Fund is not operational, and if the claim has not been settled or if the claim has not been paid in full.
The continuation of an exigent claim in the tort system shall not be subject to capped damages or attorney's fees caps, and shall not be cut off by a certification that the fund has become operational.
Asbestos Claims- Pursual of Asbestos Claims in Federal or State Court--If the Administrator cannot certify to Congress that the Fund is fully operational and handling all asbestos claims within twenty-four (24) months of the date of enactment, then persons with asbestos claims, except for those with Level I claims, may pursue their claims in the State or Federal court located within the State where the claimant resides or where the asbestos exposure arose. If the defendant cannot be found in one of these forums, then the claimant may pursue the claim in the Federal or State court in the State where the defendant may be found. If the plaintiff alleges that asbestos exposure occurred in more than one county or Federal district, the trial court will determine the most appropriate forum for the claim. If the court determines that another forum is most appropriate, then the court shall dismiss the claim. Any relevant statute of limitations shall be tolled during this time.
This section does not preempt or supersede State venue requirements that are more restrictive.
Credit of Claim and Effect of Operational or NonOperational Fund- If the claimant receives any compensation as a result of pursuing a claim in the court system, then such recovery shall count as collateral source compensation for purposes of handling the claim under the Fund. Any participant who pays a claimant through a court proceeding may recover the cost of the payment by deducting an amount from subsequent payments into the Fund up to the amount that the claimant would have received from the Fund.
Operational Preconditions and Certification- The Administrator may not certify that the Fund is operational and paying out claims at a reasonable rate until sixty (60) days after the Administrator has published in the Federal Register information pertaining to the funding allocation of defendant participants and the funding methodology of insurer participants (to be done within thirty (30) days of the date of enactment). Upon certification, the Administrator shall publish a notice in the Federal Register that the Fund is operational and paying out claims at a reasonable rate.
Effect of Certification on Claims- Any non-exigent claim in Federal or State court that has not begun the presentation of evidence before a judge or impaneled jury or is the subject of a verdict, final order, or final judgment by a trial court shall be null and void and reinstated as a claim against the Fund upon the Administrator's certification that the Fund is operational. Claimants may pursue all asbestos-related claims in court upon the Administrator's certification that the Fund cannot become operational.
Non-Operational Certification- Claimants may pursue all asbestos-related claims in court upon the Administrator's certification that the Fund cannot become operational.
Sec. 107. Authority of the administrator
This section grants the Administrator the authority to issue subpoenas for and compel the attendance of witnesses within a 200 mile radius, administer oaths, examine witnesses, require the production of books, papers, documents and other evidence, and request the assistance from other Federal agencies with the performance of the duties of the Administrator.
SUBTITLE B- ASBESTOS DISEASE COMPENSATION PROCEDURES
Sec. 111. Essential elements of eligible claim
Claimants must timely file a claim with the Fund and prove by a preponderance of the evidence that they have an eligible disease or condition as demonstrated by evidence that meets the requirements established in the claims procedures.
Sec. 112. General rule concerning no-fault compensation
It is the intent of the FAIR Act to provide a process to compensate victims in a faster and more certain manner than provided by the current system. The FAIR Act, therefore, removes the burden that a claimant would ordinarily bear to establish that the injury was the fault of a particular party. Further, under the FAIR Act, claimants do not have to prove that an injury resulted from the negligence or other fault of any other person.
Sec. 113. Filing of claims
A claimant, or the personal representative of a deceased or incompetent claimant, must file claims with the Office within five (5) years from the time the claimant received a medical diagnosis and medical test results sufficient to satisfy the criteria for the disease level for which the claimant is seeking compensation. If the Act preempts a timely filed pending asbestos claim, then the asbestos claimant has five (5) years from the date of enactment to file with the Fund. Failure to file with the Office within the prescribed time period has the effect of extinguishing the claim and prohibiting recovery. This section specifically provides that the Act shall not treat a claim against a bankruptcy trust that has received initial payments and due to receive future payment from such a trust as a pending claim for purposes of filing against the Fund.
The Act does not bar a claimant who receives an award for an eligible disease level from receiving additional awards for higher disease levels. Further, the Act does not impose a statute of limitations on the claimant for filing claims for additional awards relating to the progression of a non-malignant disease. However, any malignant disease level claim must be filed with the Fund within five (5) years of receiving a medical diagnosis and medical test results sufficient to satisfy the disease level.
The Act contains provisions addressing the effect of multiple injuries for Libby, Montana claimants. Pursuant to this section, if the nonmalignant condition of a Libby, Montana claimant progresses and can prove that the condition has progressed by providing pulmonary function tests, the claimant will qualify for an additional award from the Fund. The Administrator shall offset any previous awards from the Fund against an award granted to a Libby, Montana claimant for the progression of a nonmalignant claim. A Libby, Montana claimant shall qualify for treatment as a Level IV claim if the claimant: (1) provides a diagnosis of a bilateral asbestos-related disease; (2) evidence of TLC or FVC less than eighty (80%) percent; and (3) medical documentation establishing exposure to asbestos as a substantial contributing factor to causing the condition in question to the exclusion of other more likely causes. A Libby, Montana claimant shall qualify for treatment as a Level V claim if the claimant: (1) provides a diagnosis of a bilateral asbestos-related disease; (2) evidence of TLC or FVC less than sixty (60%) percent; and (3) medical documentation establishing exposure to asbestos as a substantial contributing factor to causing the condition in question to the exclusion of other more likely causes. The provisions outlined above regarding the effect of multiple injuries on asbestos claims shall apply if a Libby, Montana claimant develops a malignant level disease.
A claimant must include at a minimum the following information with the claim: (1) name and information pertaining to the identity of the claimant; (2) information pertaining to the identity of any dependants and beneficiaries; (3) relevant employment history, (4) the asbestos exposure of the claimant, (5) the tobacco use of the claimant; (6) medical records identifying the asbestos-related disease; (7) any prior asbestos-related claims, including information pertaining to any collateral sources of compensation, and (8) evidence of non-smoker or ex-smoker status if the claimant asserts such status and seeks compensation under a malignant level.
If the claimant files an incomplete claim, the Administrator shall notify the claimant that the incomplete status of the claim and shall indicate information missing from the claim. Further, the Administrator shall also notify the claimant of assistance services available through the Claimant Assistance Program. The claimant then has a year to supply the missing information. However, failure to provide the information within this timeline will result in the dismissal of the claim.
Sec. 114. Eligibility determinations and claim awards
This section lays out the time period for considering and paying a claim.
When evaluating and determining the eligibility of a claim against the Fund, the Administrator shall consider: (1) the factual and medical evidence presented by the claimant; (2) the medical determinations of the Physicians Panel; and (3) the results of any investigation conducted determining whether the claim satisfies the eligibility criteria.
The Administrator has ninety (90) days after the filing of the claim to provide the claimant with a proposed decision on the claim. If the Administrator fails to provide the claimant with a proposed decision within one hundred eighty (180) days after filing the claim, then the claim shall be deemed accepted and the claimant entitled to payment. However, if the Administrator subsequently rejects the claim in whole, then the claimant shall receive no further payments. Alternatively, if the Administrator subsequently rejects the claim in part, then future payments shall be adjusted accordingly.
A claimant has ninety (90) days from the date of issuance of a proposed decision: (1) to submit a written request for a hearing on the decision; or (2) to make a written request for a review of the written record. A representative of the Administrator shall conduct the hearing in a manner as to best ascertain the rights of the claimant. It is within the discretion of the Administrator's representative to grant a subpoena requested by the claimant. The Administrator shall issue a final decision no later than: (1) one hundred eighty (180) days after receiving the request for a hearing on the decision; or (2) ninety (90) days after receiving the request for review on the written record. If the claimant does not make a request for obtaining a review either on the written record or in a hearing, then the Administrator shall issue a final decision. If the final decision materially differs from the proposed decision, then the claimant is entitled to review of the final decision.
A claimant may authorize an attorney or other individual to represent the claimant in any proceeding under this Act.
Sec. 115. Medical evidence and auditing procedures
This section authorizes the Administrator to establish procedures to ensure that accuracy of medical evidence submitted in support of a claim against the Fund.
The Administrator will establish procedures: (1) to audit medical evidence submitted as part of claims ensuring the accuracy of x-ray readings and pulmonary function tests; (2) to consider the appeal by a provider of a finding of non-compliance with medical standards; (3) to evaluate x-rays submitted in support of a claim; (4) to maintain a list of at least fifty (50) certified B readers that may participate in independent reviews of x-rays; and (5) to audit pulmonary function test results submitted as part of claim. The Office shall pay for the cost of all additional evaluations and tests required under this section.
The Administrator has the authority to find the x-ray readings of certain providers inadmissible if the Administrator determines that the provider fails to comply with prevailing medical practices. A non-compliant provider may appeal the Administrator's determination pursuant to procedures established by the Administrator.
Pursuant to procedures established by the Administrator, independent certified B readers shall evaluate x-rays submitted in support of a claim on a random basis. If the independent B reader disagrees with the grading of the submitted x-ray, then a second independent certified B reader shall review the x-ray. The Administrator shall take into account the findings of the two independent B readers when considering the submitted claim.
When assessing the smoking status of Malignant Level VI-IX claimants, the Administrator shall have the authority to obtain records of past medical treatment and evaluation, affidavits of appropriate individuals, applications for insurance and supporting materials, and employer records of medical examinations. Further, the Administrator may require the performance of blood tests--including the performance of a required serum cotinine screening--or other appropriate medical tests on Malignant Level VI-VIII claimants who assert that they are non-smokers or ex-smokers.
Any false information submitted under this section shall be subject to criminal or civil penalties.
SUBTITLE C- MEDICAL CRITERIA
Sec. 121. Medical criteria requirements
This section establishes the latency, diagnostic, exposure and medical criteria required of an asbestos claim for each of the nine (9) disease levels. Levels I through V include nonmalignant asbestos-related disease or conditions and levels VI through IX include malignant diseases.
Latency: Claimants must provide a statement from a doctor or a history of exposure stating that at least ten (10) years elapsed from the date of the initial exposure to the date of the initial diagnosis of any asbestos-related injury.
Diagnostic Criteria: This section sets forth diagnostic criteria that track the typical elements of a medical diagnosis, such as an in-person physical examination by the claimant's doctor, a thorough review of the claimant's medical, smoking and exposure history by the claimant's doctor, and a review of other potential causes of the claimant's illness.
For levels I through V, the claimant must provide a diagnosis based on an in-person physical examination by the claimant's doctor providing the diagnosis, an evaluation of smoking history and exposure history before making a diagnosis, an x-ray reading by a certified B-reader. Level III through V claims must also include a pulmonary function test. For deceased Level I through V claimants, the claim must include a physician's report based on pathological evidence or an x-ray reading by a certified B-reader. For levels VI through IX, the claimant must provide a diagnosis based on a physical examination or on findings by a board-certified pathologist. For deceased Level VI through IX claimants, the claim must include a diagnosis of the disease by a board-certified pathologist and a physician's report based upon a review of the claimant's medical records.
Exposure Criteria: A claimant must demonstrate meaningful and credible evidence of exposure to asbestos in the United States, its territories or possessions, or while a United States citizen, while an employee of an entity organized under any Federal or State law regardless of location, or while a United States citizen while serving on any United States flagged or owned ship, provided the exposure results from such employment or service.
Proof of Exposure--The claimant may demonstrate exposure to asbestos by affidavit of the claimant (or, if deceased, a co-worker or family member of the claimant) or by alternative documentation, such as invoices, construction or similar records, or other reliable evidence.
`Take-Home' Exposure--Alternatively, the claimant may satisfy the exposure criteria by demonstrating that the claimant was exposed to asbestos brought home by an occupationally exposed person. A claimant establishing `take home' exposure must demonstrate that: (1) the claimant lived and used the residence of an occupationally exposed person during the required exposure time; and (2) the occupationally exposed person can satisfy the exposure requirements for the level claimed. It is understood that household members may travel to a certain extent for work or vacation and still be considered as `living with' another member of the household. Except for Level IX claims, a Physicians Panel will review all `take home' exposure claims determine whether the causal relationship between the take home exposure to asbestos is comparable to the occupationally exposed person.
Libby, Montana--The Administrator shall waive the occupational exposure r