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Start Up and Funding
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Start-Up Funding. The
legislation contemplates up front funding of approximately $42
billion in the first five years. Yet by the time the
administrative apparatus of the Fund is established, there will
likely be between 400,000 and 600,000 pending claims. These
claims would require at least $30 billion in awards by 2006,
money the Fund will not yet have accrued. Simultaneously, new
claims will continue to accrue even though the Fund lacks the
resources to pay the prior claims
This insufficient level of funding is
compounded by Rand estimates that the Fund will face
approximately 19,000 mesothelioma claims at its inception.
Based on the proposed awards in the legislation, this will
entitle these claimants alone to approximately $20 billion of
the up front funding at inception. Simply put, the monies will
not be there
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According to Dr. Mark Peterson (Co-Founder of the RAND
Corporation's Institute for Civil Justice, former court
expert on asbestos claims value and procedure for four U.S.
District and Bankruptcy Courts and "Special Advisor to the
Courts" regarding the Manville Trust) it will take at
least two years to establish the bureaucracy designed to
administer the Trust. Moreover, the Trust will not contain
sufficient assets to pay the pending claims until 2011 or 2012.
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Fund Solvency. The increase in values under
Judge Becker's bill will cause the size of the trust fund
to greatly exceed any amount the defendants and insurers are
willing to pay. While these proposed values, at a minimum,
should be incorporated into any bill, they would increase the
size of the fund beyond the $140 million projected in the
CBO's April 20, 2004 estimate of S. 2290 to Senator
Nickles. In that letter, the CBO stated, "that operations
of the fund would increase budget deficits by $13 billion over
the 10-year period." The CBO also estimated claims
exceeding $75 billion in the first ten years and $140 billion
for the life of the Trust Fund. The letter further noted:
"In our cost estimate for S. 1125, we concluded that
revenue collections and interest earnings were likely to be
sufficient to pay the estimated cost of claims under that bill.
That is not the case for S. 2290."
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Transparency Absent. The bill fails to resolve
the issue of transparency. Consequently, it is unclear who is
participating at what levels as well as their solvency. In
fact, the issue has been made worse by the inclusion of the
provision allowing insurers to determine the allocations
between them after the legislation is passed. This places the
issue in a state of more uncertainty given many insurers
opposition to the bill.
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Insurance Contributions are Unknown. The
insurance industry's assessments are severable and not
joint-i.e. others do not have to make up for those who refuse
to pay. Foreign insurers are strongly resisting the bill and it
is questionable whether they, like any company, can be
compelled to pay into the Fund, especially since U.S. courts
may not have jurisdiction over them.
The reality is that this bill has still not solved one of the
fundamental problems with the legislation - setting forth a
sufficient amount of money to adequately compensate victims and
establishing a mechanism to make sure the monies are raised and
a process to ensure that the funds are fully received and paid
out to victims.
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Plans to Save The Program Are Born on the Backs of
Victims. The supporters of the legislation know that
the funding remains a problematic issue. The reality, however,
is that structures have been incorporated in the bill to
address the solvency issue by limiting as much as possible the
number of persons who can claim from the Fund. These
restrictions are evidenced by:
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The increase in the burdens of proof for asbestos diseases from
asbestos being "a contributing factor," to a
"substantial contributing factor," a much higher
burden of proof and one that is significantly higher than
required by the courts. The legislation will effectively
require asbestos to be the only possible cause-a principle not
required by any current state law.
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The wide authority given to the Administrator in the sunset
provision to make recommendations to tighten the medical
criteria standards to address solvency issues and the
open-ended time period given in actually shutting the program
down. This is designed to give Congress the ability to affirm
the Administrator's recommendations, as the argument will
be that closing the program down and returning everyone to the
tort system would be an economic disaster. In the end, the
program will be saved on the backs of victims.
Sunset of the Fund
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Sunset Provision Has Not Been Improved and Remains
Illusory. This Provision gives the impression that the
sunset provision has been liberalized in comparison to S. 2290.
S. 2290 provided that if the Administrator made a determination
that the Fund may not be sufficient to meet obligations, the
Administrator was to prepare an annual report with a range of
alternatives, one of which could include termination of the
program no sooner than 7 years after enactment. While the
current bill shortens the first opportunity for sunset to
5-years, there is no provision which would provide a
self-executing sunset.
Instead, the proposed provisions provide the Administrator with
a number of victim unfriendly alternatives to sunsetting the
Act. The bill requires the Adminstrator to suggest tightened
medical and exposure criteria, elimination of medical screening
and monitoring as well as reduction in awards. These
measures would have the effect of watering down or even
eliminating compensation for victims. Such alternatives put
Bill supporters in the position of agreeing in advance to a
system of diluted compensation that they would never agree to
at the enactment stage.
Exposure Criteria
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The Dates for the Weighted Exposure Criteria are
misplaced. Between fiscal years 1996 and 2001, 3,000
of OSHA's inspections and more than 15,000 of its
violations involved asbestos. The EPA has determined that as
many as 35 million homes, schools and businesses are currently
contaminated with asbestos containing Zonolite insulation.
According to OSHA, 1.3 million workers are currently being
exposed to asbestos. Some of these workers will develop
asbestos related diseases over the next 10 to 50 years. The
weighted exposure criteria assume that asbestos is no longer a
problem in this country. The government's own watchdogs
have proven otherwise. If exposure to asbestos continues to
this day, why does the weighted exposure criteria favor those
exposed long ago at the expense of the unwitting who are still
being exposed?
The exposure criteria assume different weighted exposures for
different dates of employment. For example, the bill assumes
that if you worked in a trade working with asbestos, such work
after 1976 had only half the exposure of those working in it
prior to 1976, and that the work in the trade after 1986 was
only ten percent the exposure that would have occurred prior to
1976. These assumptions are arbitrary. No one can assume that
exposure during any one time period was worse than that in any
other. As EPA and OSHA studies have shown, people are still
being exposed to dangerous levels of asbestos in and outside
the workplace. Moreover, these agencies are often forced to
keep this information quite so as not to alarm the populous. If
people aren't told, how are they to know that they were
even exposed? How would they even begin going about proving
their claim?
Many current exposures are occurring outside the workplace.
Situations involving neighborhood, environmental and home
exposure remain problematic and the employment exposures (which
the FAIR Act concentrates on) are not the problem they once
were. For example, many current exposures involve
environmental/neighborhood contaminations that are the result
of conduct that occurred years ago. Yet the effects are still
being felt equally by those in the zone of danger today (e.g.
Libby, 9/11, Dearborn, and El Dorado). Why should those who
worked at a plant years ago be treated any differently than
those who work in the same environment today? Why should a
drywaller or painter who installed drywall prior to 1976 be
treated any differently than the same tradesman who removes it
today? Why should someone who built the World Trade Center be
treated any differently than someone who breathed in asbestos
after its destruction?
The medical and exposure criteria discriminate against those
with non-occupational exposure as well as those exposed more
recently. These two assumptions fail to account for the
majority of asbestos exposures during the last 40 years. These
exposures are a result of home remodeling projects, tear out of
"old asbestos" at older manufacturing plants,
automotive repair (brake and clutch work), and neighborhood
exposure (e.g. a shuttered plant that processed asbestos or
dumped it in the area).
Lung Cancer Claims
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Former Level VII Lung Cancer Claims
Eliminated. The latest draft has eliminated all Level
VII (under S. 1120 and 2290) lung cancer claims. Workers with
millions of asbestos fibers in their lungs and over fifteen
years of asbestos exposure will not be able to file claims with
the Trust or in court. These victims will be left without any
recourse. Some critics have asserted that the original Level
VII cancer claims converted the legislation into a smoker's
compensation bill. Sen. Specter has not only excluded smokers
and ex-smokers within this group, but he has also prevented
non-smokers with lung cancer from obtaining compensation. This
change threw out the baby with the bath water.
It is the medical consensus that people with heavy asbestos
exposure are at a substantially increased risk of lung cancer,
regardless of whether they also have asbestosis or pleural
disease. Scores of studies have concluded that both smokers and
non-smokers with asbestos exposure are at an increased risk of
lung cancer with or without asbestosis or pleural disease. The
Surgeon General's 1986 Report on Cancer in the Workplace
found that smokers with asbestos exposure have a 50-90 times
increased risk of developing lung cancer, while the risk from
smoking alone was only eleven times.
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Smokers Eliminated. The legislation has taken
the draconian step of essentially eliminating lung cancer
claims by smokers and ex-smokers, despite the well-documented
explosive risk of combining these two carcinogens. The bill is
written in a manner that essentially compels anyone who has
smoked more than 100 cigarettes to disprove that their lung
cancer was caused by smoking, notwithstanding evidence of
asbestos fibers in their lungs. As it is impossible to prove a
negative, these people are wiped out of the bill. What's
even more tragic is these persons will be left with no legal
recourse. They will be barred from recovery from the Fund, and
likely will be barred from seeking recourse under another legal
theory, even though the medical evidence demonstrates that
asbestos exposure is even more dangerous when combined with
smoking. Eliminating these claims raises questions about the
constitutionality of the Congress taking away an
individual's right without providing any alternative
recourse for compensation of their injuries.
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Veterans will be Excluded. Most veterans will
not qualify for any compensation under the lung cancer
criteria. Even with weighted exposures (counted as two years
for every actual year of exposure), most veterans will not be
able to meet the 12 or 15 years of weighted exposure required
by levels VII and VIII. Their tours were customarily for less
than four years, and even if doubled under the weighted
exposure provisions, they cannot meet these exposure
requirements. Shipyard workers during WWII are treated more
favorably under the weighted exposure criteria (each year
counted as four of exposure) than their peers who served and
fought. Moreover, they will not be able to make claims if they
smoked.
Pending Cases
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Pending Claims Preempted. The bill will
preempt all asbestos suits immediately upon enactment. The bill
provides an exemption for persons with exigent claims, such as
those with mesothelioma, that will be difficult to meet and
costly to pursue. The bill takes them out of the tort system,
then allows them to go back in if the fund is not up and
running within 9 months - which was 6 months in the previous
draft. The 9 month waiting period is too long for persons with
mesothelioma, who could die within 3 to 6 months. Moreover,
after 9 months, the party has to return to the court system and
start anew. This means likely acquiring new legal
representation and starting at the back of the line. But even
if one survives these hurdles, the legislation imposes severe
venue-based tort reform restrictions on such claims, going well
beyond the bill's purported intent of confining the
legislation to matters within the trust fund. Additionally, the
bill proposes a double standard in preemption by calling for a
preemption of state venue laws that are perceived as favorable
to victims, but leaves in place state venue laws that are more
restrictive than the reforms in the bill. Consequently, victims
in states with restrictive venue laws will not be benefited by
the bill.
Even if the claim returns to the tort system after 9 months,
many of the claimants will die during the delay. Even if they
survive 9 months, there may not be enough time to reinstitute
the case and bring it to conclusion prior to death. This is
particularly true because the claimants will be unable to take
any action within the nine months to preserve their claim, such
as taking a video deposition of the injured party. The stay
will, in effect, eliminate these claims. A better solution is
to let their cases proceed.
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Overturns Settlement Agreements. A number of
victims have settled claims with defendants in the tort system
and are counting on payment of those settlements to pay their
medical bills and take care of their families. Although the
Bill suggests that final settlements where the only remaining
act is payment will be honored, the proposed language carves
out most torts settlements by requiring that a written
settlement agreement be signed directly by the defendant or the
insurer. Most settlements are finalized orally or by a
confirming letter from counsel and require a release that is
signed by the plaintiff but not the companies or insurers. The
Bill allows defendants to create two classes of claimants - one
who has an undisputed settlement with a writing signed by the
defendant and one who has an undisputed settlement that is
documented in the more typical manner.
The legislation would also overturn settlement agreements under the
following circumstances:
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Agreements Awaiting Court Approval Overturned.
In situations where the parties have agreed to a settlement but
are awaiting court approval, the settlement will be voided. The
claimant, having assumed their case was settled and organized
their life accordingly, will have to start all over in the new
system, without any compensation for their cost and hardship.
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Monetary Settlement Inconsistent with the Awards in the
bill are Voided. The legislation requires all
settlements to "expressly anticipate the passage of the
Act and provide for the effects of the Act." This can only
mean that the amount of settlements cannot exceed the monetary
awards of the bill.
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The Bill Preserves Bankruptcy Settlements. The
bill exempts bankruptcy settlements from the settlement
restriction and application of the fund because those
settlements tend to favor businesses.
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Proposed Settlement Process for Exigent
Claimants. The legislation provides exigent claimants
the option of settling their claim, after the original claim
has been preempted, through a special settlement procedure.
However, this process is complicated and filled with hurdles
and loopholes - all to the advantage of defendants and the
Administrator - and will likely result in victims either
waiting longer than the 9 months provided for returning to the
tort system, or getting very little compensation. A better
solution is to allow their claims to proceed due to the
uncertainty over start-up funding, adequacy of contributions,
constitutional problems as well as establishment of a
bureaucracy.
In order to receive an offer of settlement, a claimant will have to
meet the following requirements:
Within 60 days upon enactment, the claimant has to submit to the
Administrator and all defendants a statement indicating that the
claimant would like to pursue an offer of settlement. Within this
time, however, the claimant will have to endure much logistical
hardship involving a transition from a pending claim that is
immediately taken out of court and subject to new rules. These
difficulties include potential termination of his or her existing
representation and other actions involving the unraveling of his or
her pending claim and then determining how to have his or her claim
processed through the new system.
After dealing with the above actions in the first 60 days, the
claimant, over the next 60 days (an additional 2 months) will have
to provide the following information to all defendants and the
Administrator:
- The amount due to be received in relation to any other
settlements that would qualify as a collateral source, together
with copies of all settlement agreements and related documents
sufficient to show the accuracy of that amount. This means
defendants could question the accuracy of any documents or requests
other proof, thus extending the period;
- All the information the claimant would be required to provide
under Sections 115 and 121 of the legislation. In general, this
means that the claimant will have to meet all of the new medical
evidence and criteria requirements under the legislation. This
means new screening, diagnoses, and physicians' certification
in the second 2- month time period. The defendants or the
Administrator could challenge the veracity of the information, thus
extending the time.
- Section 115 pertains to medical evidence auditing
procedures. It requires the Administrator to develop methods
for evaluating medical evidence submitted as part of a claim.
If an audit shows that the medical evidence from a particular
physician or facility is not credible, then the evidence is to
be deemed unacceptable for the purpose of an award. Although
this generally is to apply to evidence submitted for an award
under the bill, because a claimant electing the settlement
process also is subject to Section 115, the evidence that they
submit could be subject to an audit, either by the election of
the Administrator or the request of the defendant.
- Section 121 sets for the criteria that have to be satisfied
for each disease level, including mesothelioma victims under
Level X. As part of the information to be submitted to qualify
for the settlement process, the claimant will have submit
medical evidence meeting the new federal requirements;
- A certification by the claimant that the information provided
is true and complete.
This second 2-month period could very well take longer than 2
months because the next phase of the process allows for the
defendants, within 30 days of the above 3 forms of information
being submitted, to make an offer of settlement in good faith. The
provision, however, provides that the defendants do not have to
make the offer within 30 days until "after service of a
complete set of information." However, if any of the
medical evidence is questioned and becomes subject to an audit, as
Section 115 allows, it could be determined that the claimant has
not satisfied the requirement for having a complete set of
information. Accordingly, the time period could be much longer than
the 2 months described above for the submission of the information.
What is almost certain, however, is that whenever, that time period
is satisfied, the defendant will likely use all 30 days to make an
offer. This means that at a minimum, by the time the claimant gets
to the point of receiving an offer or counter offer from the
defendants, 150 days would have elapsed, given that the claimant,
even without an audit, will likely need all of the first 2-month
requirements to meet the informational requirements.
Additionally, any offer from defendants is not to exceed what the
claimant would receive under the bill, minus any previous
settlements.
Within 20 days of receiving the offer from the defendant, the
claimant is to either accept or reject the offer. If the
defendants' offer is equal to 100 percent of what the claimant
would receive under the Fund, then the claimant is to accept the
offer. At this point, 170 days would have transpired. If the
claimant accepts the offer, the defendants are to make a lump sum
payment within 30 days. At that point, 200 days would have elapsed,
under the best possible case scenario.
The bill provides that if a defendant refuses to make a settlement
offer, then the claimant may go to court and recover an amount
equal to 150 percent of what the claimant would have received under
the legislation. This 150% limit on recovery in the tort system is
an insufficient disincentive for defendants who fail to make a
legitimate offer.
Moreover, if a victim has received at least the scheduled amount
from some of the defendants in their lawsuit before the bill's
passage, the remainder of the claim against other, solvent,
responsible defendants is completely offset and wiped
out by the Specter Bill. The remainder of the claim is
worthless once the bill becomes law. This is an unlawful taking of
property.
Burden of Proof Raised for
Claimants.
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The legislation has raised the burden of proof for claimants
from the evidentiary requirement that asbestos was a
"contributing factor," to the requirement that it was
a "substantial factor," in causing the disease. This
is an enormous burden to meet, and one that claimants would not
have to meet in a court of law. We have a situation where the
Congress has acted to take away individual's right, and
then has subjected them to a process akin to the legal system,
but with a higher burden of proof. This provision is consistent
with the intent of the legislation: abolish the legal system to
shield the companies - like W.R. Grace - liable for the
asbestos disaster and then limit as much as possible the
ability of victims to recover from the fund by: higher burdens
of proof; limited funding; and open-ended sunset provision that
provides the Administrator a means of saving the program by
making the criteria even more stringent in order to reduce the
number of eligible claimants.
Mesothelioma Victims Treated
Unfairly.
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Mesothelioma victims are also treated unfairly by the Specter
Bill. The "one size fits all" approach to
mesothelioma compensation under the Bill will result in a grave
injustice to many asbestos victims. New, radical treatments
offer these victims a chance for extended life, but in many
instances these treatments cost hundreds of thousands or even
millions of dollars--as much as all or most of their scheduled
award. The court system currently allows these victims to
require the asbestos companies to pay all of the cost of this
treatment, plus other losses they've suffered.
Theoretically, the bill provides for "special
adjustments" ofmesotheliomaawards to a tiny percentage of
these asbestos victims, but this provision is best described as
the "rob Peter to pay Paul" provision. Awards for
certain claimants less than 51 years old can be adjusted
upwards by the administrator, but only if he can adjust
downward the payments of
enoughmesotheliomavictims who are over 65 to pay for the
difference (Level IX adjustments may be made "[I]f the
Administrator determines that the impact of all adjustments on
the fund is revenue neutral…" See, section 131,
p.92). This is unfair to the older victims, and inadequate for
the younger ones.
Libby, Montana
Even the mildest asbestos disease
claimants from Libby Montana receive at least 400,000 dollars,
while the basic asbestosis victim from anywhere else only gets
25,000 dollars, if he or she qualifies at all (most do not) (See,
Section 121, p.90 and section 131, p.91). This is unfair to other
former asbestos mine and plant workers. There are hundreds of
expansion plants throughout the US to which asbestos-containing
vermiculite ore from Libby was shipped. There are hundreds of towns
throughout the U.S. which grew up in the shadows of asbestos mines,
factories, steel mills, shipyards, powerhouses and refineries,
where millions of tons of asbestos was installed, manufactured,
processed, or removed.
According to the Environmental Working Group:
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At least 345 Californians died in 2002 from the
deadly asbestos cancer, mesothelioma, and the often-fatal
non-cancer disease, asbestosis, according to the most recent data
from the National Centers for Health Statistics of the Centers
for Disease Control (NCHS 2005). Mesothelioma was responsible for
more than two thirds (244) of the cases, compared to 101
asbestosis fatalities that year. More than one third of the
deaths, 132, were in three metropolitan areas, Los Angeles, San
Diego, and Oakland with 53, 46, and 33 fatalities respectively
(NCHS 2005).
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California led the nation in asbestos mortality
between 1979 and 2002, with 4,618 reported casualties for just
these two forms of asbestos disease. The top California
metropolitan areas for asbestos mortality during that time were
Los Angeles, San Francisco, and San Diego, with 861, 604 and 420
reported deaths respectively. The majority of these casualties
are older men. Hundreds more died from mesothelioma during this
period, but are not reflected in federal statistics due to
reporting oversights described below.
Click here for to
view the number of asbestos fatalities in communities across
California between 1979-2002
The number of people killed each year in
California from these
two signature asbestos diseases more than doubled between 1990 and
2002, from 171 to 345 reported fatalities. From 1979, when
reporting began, through the most recent year for which data are
available (2002), the rate of mesothelioma mortality in California
increased at about 3.5 percent per year; for asbestosis the
increase was roughly 4.4 percent annually.
When the government began tracking mesothelioma
as a cause of death, mortality nationwide more than doubled, from
935 in 1998, to 2,343 in 1999.
Click here to view the top 100 US counties for
asbestos mortalities
It would be unfair to single out the folks
of Libby,
Montana for special
compensation for the same hardships faced my thousands of Americans
throughout the nation.
General Issues
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The June 23, 2003 edition of the Budget Bulletin for
the Republican Staff of the Senate Budget Committee also
concludes that S. 1125 runs afoul of budgetary rules and would
face a point of order under section 302 of the Budget Act
because an increase in revenues cannot be used to offset the
increased spending that would be charged against the Judiciary
Committee's allocation. This bill does not remedy the
problem.
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Legislation Will Become More Restrictive in
Conference. As bad as the above problems with the bill
are, the legislation at this stage represents the maximum
benefits that the backers will be able to offer victims. As it
goes through the process, including a possible legislative
conference, a number of the provisions are likely to become
even more restrictive toward victims - especially concerning
the issue of funding - based on the theory that it will be
impossible to stop a legislative conference report.
The above was not prepared by RGW,PC. It was written by a
colleague.
*** POSTED ON APRIL 18, 2005 ***
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