End the Asbestos Nightmare
by Bonner Cohen
Even before he took
the oath of office for his second term, President Bush pledged
to work with Congress to reform the nation's costly asbestos-litigation
system. Noting the loss of jobs and the wave of bankruptcies
brought on by asbestos lawsuits, Bush urged Congress to "get
the job done," adding that he wants to sign legislation
this year.1
For a nation mired
in the muck of asbestos lawsuits for over three decades, reform
will not come a minute too soon. A Rand Institute for Civil
Justice study released last year found that companies have paid
out over $70 billion for asbestos claims in the past 30 years.2 According to the American Tort Reform
Association, at least 74 companies have filed for bankruptcy
protection in the face of a never-ending flood of asbestos lawsuits.3
In 2003 alone, over
100,000 new cases were filed, further clogging a court system
that is already bursting at the seams. Currently, over 600,000
asbestos cases are pending, according to Rand and Tillinghast-Towers
Perrin, a consulting firm.4
The economic carnage brought on by the litigation has cost 130,000
U.S. workers their jobs.5
And those companies still left standing are forced to divert
substantial funds from investment to litigation, with no end
in sight.
Asbestos was once
widely used as fireproofing in homes, buildings, and ships, as
well as in brake linings and chemical filters. Heavy exposure
to the tiny fibers that comprise asbestos can result in the substance
becoming embedded in lung tissue where it can cause various respiratory
ailments, including a rare form of cancer.
The current litigation
system, however, does not adequately distinguish between those
with ailments directly attributable to asbestos exposure, and
those claiming illness from exposure to only a few fibers. Indeed,
many making claims today are not now and may never become ill
as result of exposure to asbestos. As economists Joseph Stiglitz,
Jonathan Orszag and Peter Orszag point out, "the share of
total new claimants who are unimpaired" has soared from
about 4 percent to around 75 percent in the last two decades.6
Unless today's lawsuit-ridden
asbestos mess is fixed, people with legitimate claims will never
be compensated, and companies straddled with eternal asbestos
liability will never see the light of day. Unfortunately, a
draft bill recently floated by Senate Judiciary Chairman Arlen
Specter (R-Penn.) falls well short of offering the kind of asbestos
relief the nation desperately needs. Among other things, the
Specter plan envisions the creation of a trust fund administered
by the Labor Department into which companies with asbestos liability
would contribute billions of dollars to cover the claims of people
with asbestos-related illnesses. But the Specter proposal does
not have a price tag for the trust fund, and, in a bizarre twist,
it would allow some people alleging injury to return to the courts
if their claims are not met to their satisfaction.7
It's no wonder that
some companies have already concluded that they would be better
off with the current tort system, warts and all, than with a
trust fund that leaves the door open to additional costly litigation.
Wily trial lawyers have already located friendly venues for
boarding the asbestos gravy train. Madison County, Ill., for
example, has become the nation's magnet for asbestos lawsuits,
with 411 cases filed in 2000, 884 in 2001 and 953 cases in 2003.
In another Illinois county, St. Clair, the number of class-action
lawsuits has increased by 1,100 percent in the past two years.8 The Specter plan, by failing to cap
companies' liability, will do little to stem this relentless
tide of what are, in many cases, frivolous lawsuits.
What's more, the
Specter plan would impose what is known as "joint and several
liability" on all companies entangled in the asbestos-litigation
web. This means that businesses with sound balance sheets (regardless
of their existing liability) will be held liable for the payments
of companies unable to meet their obligations because they are
insolvent or have been granted hardship or equity adjustments
by the administrators of the trust fund.9
Asbestos lawsuits
have been a boon to trial lawyers, but they have been a bust
to most Americans who have seen untold billions of dollars in
public and private funds devoured by a dysfunctional litigation
system. It's time for Congress and the White House to put an
end to this senseless waste.
# # #
Bonner Cohen is a senior fellow at the National Center for Public
Policy Research. Comments may be sent to bcohen@nationalcenter.org.
Footnotes:
1. Klaus Marre and
Kari Lundgren, "Industry Wary of Spector's Asbestos Reform
Bill," The Hill 12 Jan. 2005: 3.
2. Albert B. Crenshaw,
"Asbestos Claims Solution Sought," Washington Post
4 Jan. 2005: E10.
3. Joseph Curl,
"Bush Pushes Legislation on Class-Action Lawsuits,"
Washington Times 7 Jan. 2005: A4.
4. Crenshaw, "Asabestos
Claims,": E1.
5. Doug Bandow,"Fighting
the Asbestos Fire," Washington Times22 13 Jan. 2005: A16.
6. Bandow, "Fighting,":
A16.
7. Crenshaw, "Asbestos
Claims,": E1.
8. Curl, "Bush
Pushes,": A4.
9. Joint Letter
to the Honorable Arlen Specter, United States Senate, 3 Jan.
2005 E. I. du Pont de Nemeors and Company, Exxon Mobile Corporation,
Federal Mogul Corporation and the Official Committee of Unsecured
Creditors of Federal Mogul Corp., Foster Wheeler Ltd., Hopeman
Brothers, Inc., IU North America, Inc., National Service Industries,
Inc., and Oglebay Norton Company.
