Vol 2 (2005) - Issue 6

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A "FAIR" Solution? The US Congress Considers a Trust Fund to Address the Asbestos Litigation Crisis

Asbestos litigation in the United States has become an increasingly unmanageable and expensive problem adversely affecting claimants, defendant corporations and their constituents, insurers, and the court system. Repeated attempts to arrive at a federal legislative solution have failed to pass in previous years. However, in 2005, the bill for the Fairness in Asbestos Injury Resolution Act (the ‘FAIR Act’), sponsored by Senator Arlen Specter, has gained momentum and could be considered by the full Senate as early as the fall of 2005. The FAIR Act proposes to create a federal trust fund (the ‘Fund’) to pay all asbestos claimants, which would result in the removal of all asbestos-related personal injury claims from the US tort system. As with any legislative compromise designed to meet the conflicting needs of multiple constituencies, the FAIR Act presents serious issues for many parties. This article addresses problems posed by the current manner in which asbestos litigation is handled, the proposed legislative solution embodied in the FAIR Act, and how the FAIR Act could affect tort defendants and insurers located outside the United States.

The asbestos litigation problem

Asbestos-related lawsuits have overwhelmed the US courts and driven over seventy corporations into bankruptcy and, at the same time, have arguably failed to adequately compensate claimants. Of each dollar spent on asbestos-related claims and litigation, only approximately 42% reaches claimants, while about 31% goes towards defense costs, and plaintiffs’ counsel receives about 27%. Additionally, approximately two-thirds of claims are asserted by plaintiffs without any functional impairment, thus diverting settlement monies from those plaintiffs who are truly ill.
Furthermore, the number of claims filed annually has sky-rocketed during and since the 1990s and particularly since the late 1990s. Those who have studied this phenomenon believe that asbestos claims will continue to be filed at such a rate for many years to come given that asbestos-related illnesses may take between twenty to forty years from the date of first exposure to manifest themselves. Widespread use of asbestos in most products did not cease until 1986, when the Environmental Protection Agency and the Occupational Safety and Health Administration began regulating the manufacture and use of asbestos in the United States.
Although asbestos-related bankruptcies have in many instances resulted in the creation of trusts to compensate asbestos claimants, these trusts have only paid cents on the dollar to asbestos claimant creditors. Such bankruptcies have also resulted in the loss of between 52000 and 60 000 jobs as well as the loss of a significant amount of workers’ pension funds.