Defense Digest

Impact Of Upcoming Efforts To Reform Asbestos Litigation

The first wave   of asbestos personal injury litigation began in the 1970s. It was confined to about 300 companies that processed asbestos or made heavy use of it. Now the litigation has spread to more than 8,000 companies that represent nearly all types of industries in the United States. The great majority of which were themselves customers and users - not producers - of asbestos.

Studies have shown that heavy exposure to asbestos ceased around 1965, when the government began heavily regulating the manufacture and use of asbestos. While asbestos-related illnesses sometimes take 20 to 25 years to develop, the number of patients seen with these type of illnesses has dwindled since the 1980s. Despite the many years of stringent federal regulation and the dwindling number of confirmed medical impairments, asbestos litigation is a booming industry.

Since 2002, a vigorous congressional debate has been underway over how best to reform the asbestos litigation process. A draft bill titled the Fairness in Asbestos Injury Resolution Act (Act) is currently making its way through Congress. The Act would remove asbestos injury compensation from the tort system.

The existing process for litigating personal injury claims for asbestos-related illnesses leads to enormous costs. Various studies have estimated the cumulative cost of resolving these asbestos claims to be $200 billion to $275 billion. The overwhelming majority of the money going to asbestos claimants goes to people with no impairment due to asbestos exposure. The litigation process has not proven to be very effective at directing funds to the claimants most in need of support.

The current litigation system does not adequately distinguish between those with ailments directly attributable to asbestos exposure and those claiming illness from exposure to only a few fibers. Many making claims today are not now and may never become ill as a result of exposure to asbestos. Unimpaired claimants are draining the limited amount of resources available. Without congressional action, defendant companies will not be able to define their exposure and determine their liability.

Asbestos litigation abuses, although widely recognized for many years, have survived because of the political power of plaintiff law firms. The growing tide of asbestos litigation can be traced directly to abusive mass screening activities largely encouraged by these firms. A number of plaintiff law firms sponsor mass asbestos screenings where they employ physicians to "certify" that tested individuals are positive for asbestos exposure. These tests represent the basis for most mass asbestos lawsuits.

Johns Hopkins University scientists recently published a study showing that almost all chest x-rays conducted by technicians working for asbestos law firms were misread by the technicians. Specifically, of the 492 x-rays that were read by six independent, certified radiologists, they found that 96% of those x-rays were read incorrectly by doctors working for the asbestos law firms.

In addition, once a claim has been filed, defendant companies that are still viable become targets in the discovery process. Plaintiffs lawyers coach clients to incriminate companies that still have assets. Under the proposed legislation, victims will not need to prove that a particular defendant caused their illness. This will end the complexities, lengthy delays, and corporate bankruptcies that have become common in the current system.

The Act would create a centralized claims resolution system administered by the federal government. Claims would be compensated from a trust fund on a no-fault basis. The trust fund would be financed by payments from defendants and insurers, probably totaling $140 billion. Claimants who show disease and exposure are assigned to one of ten disease categories, each with its own medical criteria and assigned values. The unimpaired get medical monitoring only.

The Act would have dramatic, sweeping effects. Defendant companies would be freed of litigation costs, and compensation expenditures would become predictable. Insurers would be freed from concern of overwhelming indemnity claims in return for paying known amounts up front. This would eliminate a $2 billion-a-year drag on the U.S. economy, freeing up resources for jobs and investments.

Every year, more and more of these defendant companies succumb to the inevitability of bankruptcy. Asbestos claims are driving these companies out of business. Nearly 100 companies have been forced into bankruptcy as a direct result of asbestos liabilities. Nearly all of the asbestos manufacturers have been driven out of business. Of the thousands of companies defending against asbestos claims, nearly all of them never made or installed asbestos. Many of them are small businesses. They are targets simply because they are still viable. Reform litigation would benefit companies by bringing finality and economic certainty to their outstanding liability.

*Wendy is an associate in our Cherry Hill, NJ office. She can be reached at (856) 414-6301 or wkirby@mdwcg.com.