: Article on status of asbestos legislation

CQ TODAY - LEGAL AFFAIRS
Oct. 9, 2003 - 7:37 p.m.
Insurers Patch Up Split on Asbestos Bill, But Now Make Tough Set of Demands
By Keith Perine, CQ Staff
Property and casualty insurers have discarded their differences over a Senate bill that would create a fund to pay asbestos claims and instead have coalesced around a single list of demands that will be difficult for lawmakers to meet.

The insurance industry's new hard-line stance fundamentally imperils the effort of Senate leaders struggling to hammer out asbestos legislation that can stand a chance of passing Congress.

As approved by the Senate Judiciary Committee on a 10-8 vote July 10, the measure (S 1125) would establish a $108 billion trust fund, which would be removed from the regular court system, to pay claims related to asbestos exposure.

Defendant companies and insurers would split at least $104 billion in contributions to the fund over 27 years. Claimants who could prove they were exposed to asbestos would be slotted into one of 10 medical categories for payments.

A committee amendment to the bill would impose a contingent funding requirement that could mean tens of billions of dollars more in contributions.

That language and other changes to the bill caused several large insurers to back away from the measure entirely. Other insurers floated a proposal to establish a separate, insurer-controlled fund.

The once-again-unified industry now insists it should not have to pay more than $45 billion into the fund over the 27 years. That figure is at least $7 billion less than they now would be obligated to contribute under the bill.

But it matches, in current dollars, the approximately $28 billion that industry representatives say is already in reserve to pay asbestos claims.

$275 Billion Total Cost Estimate
The cost of past and future legal claims related to health problems caused by asbestos, a fire-resistant substance linked to cancer and other diseases, has been estimated at as much as $275 billion.

<Insurers> have watched with dismay as their share of the tab has grown, from $45 billion under the bill as introduced in May by Orrin G. Hatch, R-Utah, to $52 billion - and possibly more than that - under the committee-reported measure.

Other amendments to the bill in committee also created the possibility that asbestos claimants could return to regular courts in the future if the fund runs out of money.

Letter to Frist
In an Oct. 7 letter to Senate Majority Leader Bill Frist, R-Tenn., stating their position on the cost issue, the heads of five insurance trade groups also said the bill should "provide an exclusive remedy for all asbestos-related claims, pending and future;" put "reasonable limits" on attorneys' fees; and not put insurers on the hook for any contingent funding.

If the fund runs dry too early, insurers want asbestos lawsuits to be heard only in federal courts using specified medical criteria.

Senate leadership aides have been meeting with business and insurance lobbyists and labor officials in recent weeks. The backing of all three industry camps is essential to the effort.

For their part, labor officials are still insisting that the claims values in the current bill are far too low to be fair to those sickened by asbestos.

Business lobbyists sandwiched between the other two camps are optimistic that talks on Capitol Hill can yield a compromise. They have been less vocal with their objections. But the apparent divisions among the various players and their Senate allies will be hard to bridge.

Other than funding allocations and claims awards, the biggest issue facing Senate leaders is a committee-approved amendment by Joseph R. Biden Jr., D-Del., that would allow the fund to expire automatically if, in any year, the administrator could not certify that at least 95 percent of claims were paid.

Businesses and insurers are united in their vehement opposition to the Biden language, which removes the single incentive they have to contribute to a federal fund - immunity from civil lawsuits in federal and state courts.

Lawmakers have few options to meet insurers' demands. They could reduce either the size of the fund or the claims payment amounts, or shift billions of dollars in contributions to defendant companies. All of those options would lead to protest from labor officials or defendant companies.

Labor officials are not the only ones concerned that $108 billion is not going to be enough to pay all claims. The Congressional Budget Office has estimated that the fund will need $136 billion to pay all claims.

The CBO has also noted that prior estimates of the volume of asbestos claims have fallen far short, and that the revenue stream into the fund cannot be fully guaranteed.

Fears of a Government Bailout
The legislation faces opposition from other quarters as well.

The Republican Policy Committee has issued its own study raising the most important fear conservative lawmakers have about the bill - the possibility that the federal government eventually might have to bail out the fund.

The bill calls for $4 billion in existing trusts established by bankrupt companies to be folded into the new fund. Officials representing several of those trusts have threatened to file lawsuits challenging that provision if the bill becomes law.