Magazine article Risk Management

The Rocky Road to Asbestos Litigation Reform

Magazine article Risk Management

The Rocky Road to Asbestos Litigation Reform

Article excerpt

Since the early part of the 20th Century, asbestos has been incorporated into thousands of products, such as pipe covering, block insulation and roofing materials. But given all the health and litigation problems it has caused, it may have been better left undiscovered.

As a rule, only those people who experience prolonged exposure to asbestos in the workplace are likely to contract an asbestos-related disease. Even though severe restrictions were placed on the use of asbestos in 1986, numerous lawsuits continue to be filed against its manufacturers and suppliers. Since many of these companies have already been forced into bankruptcy, firms with only a remote connection to the manufacture, use or distribution of asbestos are being increasingly targeted for asbestos-related lawsuits.

A variety of diseases have been linked to asbestos exposure, including mesothelioma, various other cancers, asbestosis and pleural thickening, or plaques. With the exception of mesothelioma, which is fatal and unquestionably caused by asbestos, asbestos claims have been difficult to adjudicate. In some cases, the relationship of the injury to asbestos is a subject of much contention. In other cases, the claimant is not functionally impaired and is unlikely to develop a serious asbestos-related disease. The large volume of asbestos cases has compounded these difficulties. Plaintiff attorneys typically assemble a large "inventory" of cases, only a few of which involve seriously ill claimants. Because of the prohibitive costs of litigation, case inventories are often settled out-of-court and limited resources are largely directed toward unimpaired claimants at the expense of those who are seriously ill.

Asbestos litigation has, in many ways, taken on a life of its own. Entire legal firms have dedicated their practice to asbestos lawsuits, turning this into the king of all long-tail exposures, capable of sinking not only companies that made, used or distributed asbestos, but the insurance and reinsurance companies that covered them for it as well. Sadly, efforts to attack this problem legislatively have failed thus far, but by understanding how these initiatives have fallen short, perhaps a new legislative solution for the future can be devised.

Historical Perspective

In the initial phase of asbestos litigation, which began in the late 1960s, most claimants were seriously ill and came from industries in which workers experienced intensive occupational exposure to asbestos (e.g., asbestos mining, shipyards, railroad and automobile maintenance). This initial phase of asbestos litigation culminated in 1982, when Johns-Manville Corporation, the principal asbestos defendant, filed for bankruptcy, the result of which was the formation of a trust to pay asbestos claims.

By the mid-1980s, plaintiff attorneys began to assemble a large "inventory" of asbestos cases that included only a few seriously ill claimants. In the search for additional claimants, these attorneys began to target firms that employed people who were occupationally exposed to asbestos, but the exposure was not nearly as intense it had been as historically. According to a Rand Corporation study, the fraction of claims that asserted nonmalignant conditions grew through the late 1980s and early 1990s stabilizing at about 90% of annual claims in the late 1990s.

To date, nearly 70 companies have been driven into bankruptcy by asbestos litigation. Trusts that are formed after reorganization typically pay asbestos claims at a small fraction of their liquidated claim value (i.e., pennies on the dollar). For this reason, plaintiff attorneys began to pursue additional defendants, many of whom have only a remote connection to the manufacture, use or distribution of asbestos. Rand Corporation observed that the list of defendants named on asbestos claims has grown from approximately 300 firms in 1983 to approximately 6,000 firms by the end of 2000. …

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