Fri Aug 13, 7:44 PM ET

WASHINGTON (Reuters) - Draft legislation that aims to bridge the gap between competing Senate plans for a U.S. asbestos compensation fund is being circulated by California Democrat Sen. Dianne Feinstein (news, bio, voting record).

The California Democrat's bill assumes a fund of $140 billion to $144 billion, depending on whether existing compensation trusts are brought into the plan, according to a summary sent to Reuters on Friday.

Pending asbestos injury suits would be taken out of the courts and into the new scheme unless a verdict has already been reached or the victim has entered an enforceable settlement.

Asbestos was widely used for fireproofing and insulation until the 1970s. Scientists say inhaled fibers are linked to cancer and other diseases. In recent years hundreds of thousands of injury claims have been filed, forcing companies to pay out $70 billion in compensation to date.

U.S. Senate Majority Leader Bill Frist and Senate Democratic Leader Tom Daschle have been unable to agree on the final details of a plan to take asbestos claims out of the courts and establish a fund paid into by companies and their insurers.

Frist, a Tennessee Republican, has offered a $140 billion fund while Daschle of South Dakota has proposed $145 billion.

According to sources close to the talks, Daschle has proposed allowing asbestos cases for which a trial date has been set to proceed in court.

Frist, however, wants existing claims to revert to the new fund, except in cases where there is a final court judgment -- saying businesses and insurers are not willing to fund a compensation trust while suits can still be filed in court.

Under the Feinstein proposal, victims could revert to the court system at any time the fund administrator certifies the trust has run out of money.

If the fund fails to get going within 90 days the sickest asbestos victims could return to the court system until the fund becomes operational, according to the Feinstein bill.

There would also be an expedited handling of claims by the fund of the most serious, terminally ill patients, under the Feinstein proposal.

In July, a federal bankruptcy judge approved a $4.2 billion settlement between two units of energy services company Halliburton (NYSE:HAL - news) that could end the companies' long-running liability over asbestos claims.

Most of the claims regarding exposure to asbestos and silica stem from Halliburton's acquisition of DII, formerly Dresser Industries, which the company bought in the 1990s when it was led by Vice President Dick Cheney (news - web sites).

*** POSTED AUGUST 16, 2004 ***