Unregulated workplaces’ exposure to asbestos fibers is linked to pleural and lung fibrosis (asbestosis), lung cancer, as well as pleural and peritoneal malignant mesothelioma. Asbestos-containing products included roofing shingles, ceiling and floor tiles, paper and cement products, and automobile friction parts such as clutches, brakes, and transmission systems. The federal government imposed regulations governing workplace safety in relation to occupational asbestos exposure through the Occupational Safety and Health Act (OSHA) of 1970. No employee should be exposed to an airborne concentration of asbestos exceeding 0.1 f/cc as an 8-hour time-weighted average (TWA). The airborne concentration of asbestos at the workplace should not exceed 1 f/cc, averaged over a 30-minute sampling period.
History of asbestos exposure, lawsuits, and compensation
Scientists and researchers discovered the health risks of asbestos exposure in the early 1900s. Evidence shows that asbestos manufacturers were aware of the effects of their products on their workers and end users for decades and failed to protect them. These manufacturers also tried to hide these findings and deny responsibility. Among the early asbestos reports was the 1918 Prudential Insurance Company report that revealed excess deaths from pulmonary disease among asbestos workers. According to the report, life insurance companies generally declined to cover asbestos workers due to the perceived health risks associated with the industry.
Judge Jack Weinstein, who presided over the asbestos mass tort cases in the early 1980s, stated that: “The reports concerning the occupational risks of asbestos, including the incidence of asbestosis and lung cancer among exposed workers, have been substantial in number and publicly available in medical, engineering, legal, and general information publications since the early 1930s. There is compelling evidence that asbestos manufacturers and distributors who were aware of the growing knowledge of the dangers of asbestos sought to conceal this information from workers and the general public.”
Many workers and other people who became ill after asbestos exposure started filing lawsuits in large numbers in the 1960s. Evidence uncovered by plaintiffs’ attorneys established that “manufacturers knew that asbestos posed potentially life-threatening hazards and chose to keep that information from workers and others who might be exposed.’’ This information angered juries, who began awarding large punitive damages to responsible companies.
The Laws Regarding Asbestos Exposure and Compensation
The 1973 Fifth Circuit’s decision in the asbestos personal injury litigation benchmark case of Borel v. Fibreboard Paper Products Corp established that asbestos product manufacturers and distributors are liable to persons injured by using their products because they failed to warn handlers about the products’ health risks.
The Borel court found that every asbestos exposure could constitute a substantial contributing factor in causing asbestos diseases. Also, every defendant who contributed to the plaintiff’s aggregate asbestos exposure is legally responsible for the plaintiff’s asbestos-related injuries. Courts countrywide have accepted the legal principles set out in the Borel case. This development in the law led to thousands of lawsuits by people killed and injured by exposure to asbestos and asbestos-containing products against the manufacturers and distributors of those products.
Due to the overwhelming number of people who have been made sick or died from asbestos exposure and the large numbers of anticipated future claims, dozens of asbestos manufacturers chose bankruptcy to deal with these claims. These bankruptcies led to the formation of asbestos personal injury trusts to ensure that the tens of thousands of people who are currently sick and dying, and those who fall ill for decades to come as a result of their asbestos exposure, are compensated for their injuries. As of 2011, there were sixty asbestos personal injury trusts. These trusts have similar frameworks.
The Formation of Asbestos Trusts
Chapter 11 and section 524(g) allow a company to stop all pending asbestos lawsuits against it and set up a fund to settle all present and future asbestos claims. The automatic stay provision and the injunction available under section 524(g) protect parent and subsidiary companies from future asbestos lawsuits derived from their affiliated debtor’s torts.
According to 11 U.S.C. § 524(g), an asbestos trust must treat all similar claimants uniformly. To fulfill this obligation, a trust must project the number of expected future claims and determine their historic settlement value. I.e., what its predecessor would have paid to settle the claims had they been brought in the tort system. Trusts have fixed assets that cannot pay the full historical settlement value of all claims; therefore, they set a payment percentage. Each qualified claimant is paid the liquidated value of his or her claim, discounted by the payment percentage.
Trust distribution procedures (TDP)
The trust’s operations are based on the lawsuits settled in the tort system and governed by the trust distribution procedures (TDP). This is a document approved by the bankruptcy court when confirming a reorganization plan to create the trust. It sets forth guidelines for the administration of the trust and establishes a process for assessing and paying valid claims. The TDP also includes the settlement amounts that the trust will offer to a claimant with an asbestos-related disease who meets the exposure and medical criteria set out in the TDP, thereby presumptively establishing the trust’s liability. Claimants who believe that they are entitled to a larger payment from a trust because, for example, they have higher than normal damages, or manifested illness at an early age, can reject the standard settlement and seek an ”individual review” of their claims, which may or may not result in a higher settlement. In either case, trusts are designed to value claims at the tort-system settlement share of the debtor, not the joint-and-several total value of the claim against all responsible parties, as would be fixed by a jury.
For a claimant to recover from an asbestos trust, he or she must provide medical evidence demonstrating that the claimant has an asbestos-related disease and satisfactory evidence that the trust has responsibility for the claimant’s injuries. The evidence required depends on the nature of the claimant’s disease. For instance, a claimant with mesothelioma must provide a diagnosis of that disease by a physician who physically examined the claimant, or a diagnosis by a board-certified pathologist or a pathology report prepared at or on behalf of an accredited hospital, as well as appropriate evidence of product identification.
Trusts routinely reject deficient claims. Audit programs also help to ensure that the trusts do not pay fraudulent claims. Most asbestos victims were exposed to asbestos-containing products from multiple defendants. Unless there is an adjudication of liability and award, and payment of damages, each defendant or trust remains responsible.
What is the difference between asbestos torts and trusts?
The asbestos personal injury trusts are not tort defendants. Rather, they settle claims created by the liability of their insolvent predecessors. Unlike solvent defendants, a trust does not contest liability when a plaintiff proves exposure to products for which the trust is liable. Because trusts pay a percentage of a claim’s settlement value, the amounts are small compared to those paid in the tort system. Also, the amount paid to claimants varies widely from trust to trust.
According to a GAO survey, the median payment percentage by asbestos trusts is 25%. Since trusts do not have sufficient funds to pay the full scheduled value to all present and future claimants, most recoveries are very small compared to the damages juries routinely award to asbestos victims.
In the tort system, a plaintiff can recover from any defendant whose products were a ‘‘substantial contributing factor’’ to his injury. Accordingly, plaintiffs often sue numerous defendants and can assert claims against, and recover from, multiple asbestos trusts.
In the tort system, a party can assign liability for wrongdoing to another if it has proof of liability. The plaintiff must prove liability against the defendants he or she sues. And if a defendant believes another entity is also at fault, and this matters to that defendant in the way the verdict might be apportioned, that defendant has the burden to prove this additional alleged fault. Courts assign each defendant a share of liability. They also reduce the amount in a verdict to reflect settlement payments that a plaintiff recovered from other tort-system defendants and trusts.
Final thoughts
It is estimated that over 100 million people in the US were occupationally exposed to asbestos during the twentieth century. Even after the regulation of asbestos use in the country in the 1970s, thousands of Americans are diagnosed with asbestos-related conditions each year. The combination of asbestos’s toxicity, widespread use, and the long latency period between exposure and the development of asbestos-related disease makes it necessary for asbestos trusts to maintain sustainable resources in anticipation of future claims.