U.S. Stands Aside on Asbestos: Government Won't Pay Into Proposed Fund, Despite Navy Cases

By Shailagh Murray
Staff Reporter of the Wall Street Journal

November 11, 2003

http://online.wsj.com/article/0,,SB106851522355998700,00.html

[For an archive of articles and documents concerning asbestos-related occupational and environmental safety and health, visit http://www.nycosh.org/workplace_hazards/Asbestos/asbestos.html]

WASHINGTON -- There is an empty chair at the Senate's asbestos-settlement talks. It belongs to Uncle Sam.

Some of the most lethal exposures to asbestos have occurred in U.S. Navy shipyards. But the courts have ruled that the federal government can't be forced to pay compensation for the harm the deadly dust has caused.

A group of senators, led by Majority Leader Bill Frist, now are trying to create a trust fund to settle the tens of thousands of asbestos cases that victims bring under tort law. But while the government would administer the fund, it won't contribute a dime. Instead, the fund would rely on contributions from the asbestos industry and its insurers.

Mr. Frist, a Tennessee Republican, is seeking to improve a bill that the Judiciary Committee passed this summer, with the hope of laying the groundwork for a final deal that could be voted on by the Senate early next year. The House is sitting on the sidelines, waiting to see if the Senate can pass a bill.

There is no official tally of government workers with asbestos-related diseases. Industry data, collected in recent years, shows that claims from individuals exposed in military and shipyard construction accounted for 26% of cases of mesothelioma, a deadly asbestos-related lung cancer, 16% of other lung-cancer cases and 13% of disabling lung-disease cases.

The current proposal would provide about $114 billion to assist victims. Insurers would contribute $46 billion over the next 27 years, while defendant companies would pay $57 billion. The rest of the funding would come from private trusts, already set up by individual manufacturers, and the federal trust's investment income. If the fund runs out of money, victims could return to court.

Senate Judiciary Chairman Orrin Hatch, whose panel is conducting the negotiations on the trust, acknowledges that the government bears some responsibility for victims' suffering. But he says Republicans won't support a bill that includes federal funding, because of fear of driving up the federal deficit and the precedent it could set for other liability cases, such as with tobacco and breast implants. "It would just kill any opportunity to get things done," the Utah Republican says. Arizona Republican Sen. Jon Kyl, another pivotal player, says his big concern is that if the government steps in, "it would be hard to get the private sector to pony up" its share.

Labor officials and asbestos lawyers warn that the $114 billion proposed is too little to pay all victims. They argue that some federal funding should be pledged to help bail out the trust if it runs out of cash.

If the government's money were in the pot, "there would be some reasonable expectation that people will be paid," says Robert Hatten, an asbestos attorney in Newport News, Va., who has represented workers at the Norfolk Naval shipyard and private shipyards since the 1970s.

A recent report by the Congressional Budget Office, Congress's official scorekeeper, acknowledges that it is difficult to predict how much money will be needed -- and suggests the government may be drawn in if the calculations aren't right. "Faced with insolvency, the Fund's administrator would probably borrow from the U.S. Treasury," the report states.

There are 300,000 asbestos settlements pending. Estimates of the number of future claims range from 1.5 million to as high as 2.7 million. The science used to predict the extent of illnesses is inexact, because it can take 30 years or longer for asbestos-related lung damage to take hold.

The U.S. government began using asbestos -- the best-known fire retardant -- on Navy ships during World War II. Bulkheads, pipes, ceilings, floors and machinery was coated with asbestos. President Jimmy Carter issued a memorandum in November 1979 declaring that while the government would search in earnest for an alternative, asbestos use remained necessary "for purposes of the national defense."

While use has dropped markedly, there are still some manufacturing processes that use asbestos, including roofing compounds and car and airplane brakes, for which alternatives have yet to be found.

Years of court cases have turned up mountains of memorandums implicating industry and the federal government for ignoring or playing down the dangers of working with asbestos. "Who is responsible? They both are responsible," says Dr. David Egilman, a Massachusetts physician and occupational-health expert who has investigated asbestos's dangers for more than 20 years.

Victims began suing asbestos makers 30 years ago. And manufacturers, struggling under the load, began going bankrupt in the 1980s. As part of those bankruptcies, trusts were created to compensate victims. But there often wasn't enough money left to pay full settlements. Congress has been considering the idea of a single trust fund to compensate victims since the early 1980s.

The companies also have long argued that the federal government should bear at least some of the financial burden.

David Austern, general counsel to the asbestos-victims trust set up by Johns-Manville Corp., a major asbestos producer, told the Senate Judiciary Committee a year ago that "there is a very long record that establishes the government's knowledge about the dangers of asbestos." Prior to establishing the trust, Johns-Manville lost a U.S. Claims Court bid for federal assistance in paying claims. The company sought payment on the basis that the Pentagon had mandated asbestos use on Navy ships. But it couldn't show that the government was more at fault than Manville, the legal standard set by the courts.

"Everyone acknowledges that the government was at fault. But so what? Not one single penny," Mr. Austern says.

The government even profits some from asbestos litigation. The Manville trust and others like it must pay taxes on investment income and capital gains -- to the tune of about $100 million over the life of the Manville trust. And government workers who win asbestos lawsuits must return the federal workers' compensation they have received. "The Navy has been a huge beneficiary of the plaintiffs' bar," says Mr. Hatten, the Virginia asbestos lawyer. "They pay only a small fraction of the compensation benefits," because many of the workers reap big judgments in court.

Write to Shailagh Murray at shailagh.murray@wsj.com3

ASBESTOS AND THE FEDERAL GOVERNMENT

Wall Street Journal

November 11, 2003

1935: U.S. Public Health Service receives a study of asbestos health hazards prepared by the Metropolitan Life Insurance Co.

1943: Government requires respirators for asbestos workers and provides a safe-particle threshold.

1967: A PHS survey finds high fiber counts in a Pittsburgh-Corning factory but doesn't inform the company for more than a year; later, the U.S. pays part of a settlement, the only time it pays in an asbestos case.

1970: New Occupational Safety and Health Act imposes strict safety standards for asbestos workers.

1979: Justice Department bars submarine workers from suing the U.S. because they are already eligible for federal workers' compensation.

Mid-1980s: Congress considers a bill to establish a federally administered trust fund for asbestos victims, with the government paying half the cost. Though popular, it fails to pass.

2003: Reviving the trust-fund concept, Senate considers bill that would require companies to pay $114 billion to asbestos victims.

Sources: "Outrageous Misconduct" by Paul Brodeur; congressional records

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*** POSTED NOVEMBER 12, 2003 ***