Creating a fair and equitable method of compensating victims of asbestos exposure is a noble goal.  If done properly, it could significantly ease the burden that asbestos litigation has placed on our judicial system.  But, despite its name, the FAIR Act is anything but fair.  It is not fair to asbestos victims -- it does not even include them all.  It is not fair to taxpayers -- we have no clear idea what the cost to the federal government will be.  And, it is not fair to contributors -- although a handful of Fortune 500 companies will save billions under the Trust Fund, many small and medium businesses with limited asbestos exposure liability will pay more than their share.

As you know, asbestos exposure is a serious problem.  By 1980, over twenty five million workers had been exposed to asbestos in primary asbestos industries.  Millions more were exposed in other industries and in subsequent years.  Some 300,000 workers have died from asbestos-related diseases, and almost as many will likely die in the next 30-40 years.  Millions already have or will develop asbestosis or pleural disease.  Many people see these numbers and focus on the court system and the defendant companies, but we must keep in mind that the fundamental problem is a matter of public health.  We should do all we can to ensure that exposed workers receive the compensation they deserve and never lose sight of the real victims in this debate.

On the merits, this bill has many problems.  It excludes tens of thousands of lung cancer victims, ignoring the powerful synergistic effect between asbestos and tobacco in the causation of lung cancer and leaves them without the option of seeking compensation in the courts.  It also excludes victims who cannot prove that asbestos exposure was a "substantial contributing factor" to their disease, rather than just a contributing factor, as previous bills have required.  This change will make it harder for victims to receive compensation from the Trust Fund than it would have been had they remained in the court system.

Yet, despite these exclusions, the Trust Fund will not have adequate funding to ensure compensation for all the victims it does include.  The proposed total funding of $140 billion over 30 years, with $42 billion of up-front funding in the first 5 years, was based on what companies were willing to pay.  The figure was not based on what would likely be necessary to provide adequate compensation to victims.  Not only that, but the Act does not specify what the companies will pay -- it does not even require a specific determination until after the Trust Fund is up and running.  How can we know that the $140 billion will be met?  And who will shoulder the most responsibility?

These funding issues present a serious problem not only because of the impact they could have on victim recovery but also because of the potential costs they could place on Federal taxpayers.  In a letter dated November 14, 2006, the Chairman of the Budget Committee, Senator Gregg, and the Ranking Member, Senator Conrad, wrote to you and Senator Reid stressing that the asbestos bill was not ready for Floor action because of its uncertain budgetary implications.  Those include: "the actual cost of the program; whether proposed funding will be sufficient to compensate all claims; clarity on the allocation of assessments to business and insurance entities, including the balance of those assessments and whether these assessments will generate adequate revenues to satisfy the program's costs; [and] the amount that will be borrowed from the Federal government under the bill's Federal borrowing authority."

Senators Gregg and Conrad are not the only ones who are unclear on the programs costs.  The CBO has cautioned that $140 billion may not be sufficient to satisfy the program's claims and costs.  And the Bates White economic consulting firm recently released a study estimating that the Fund could actually incur costs between $161 billion and $421 billion.

The FAIR Act is simply not ready for consideration on the Senate Floor.  The creation of an asbestos trust fund has serious consequences.  It removes all asbestos claims from the tort system, completely eliminating a critical vehicle for victim compensation.

*** POSTED ON JANUARY 30, 2006 ***