With a showdown in the Senate looming over creation of anon-exclusive asbestos claims trust fund, the insurance industry isquietly turning up the heat to thwart efforts by the SenateJudiciary Committee's leadership to pass reform legislation thisyear.

The bill would create an alternative claims processing systemfor those injured by exposure to asbestos in the workplace thatwould be administered through a group overseen by the U.S.Department of Labor.

Claims would be paid from funds remaining in existing trustfunds as well as contributions from defendants and insurers, for atotal of some $140 billion. The money would be paid over 27.5years. Under the bill, insurers would wind up paying approximately$45 billion–most of it in the first several years the fund is inexistence.

With Sen. Arlen Specter, R-Pa., chair of the JudiciaryCommittee, announcing last week that the bill would indeed be takenup the week of Feb. 6, a full-court press is underway against thebill, which has support from the Bush administration and SenateMajority Leader William Frist, R-Tenn.

Insurance industry trade groups have been quietly writingletters to senators and the Senate leadership making clear theiropposition to the bill in its present form–focusing on the fact thelegislation does not assure exclusivity in the claims process,leaving open the possibility of additional lawsuits seeking damagesbeyond those to be paid by the trust fund.

To derail the bill, insurers are also buttonholing senatorialfriends and their staffers to persuade them to introduceamendments–which, if passed, will upset the delicate bipartisanbalance that Sen. Specter and his chief ally on the committee, Sen.Patrick Leahy, D-Vt., created to get the proposal through thecommittee last May.

The Hartford, for example, has been shopping an amendment thatwould tighten considerably the medical criteria needed to qualifyfor a payment, as well as the standards used to judge the X-rayssubmitted as evidence of injury from exposure to asbestos in theworkplace.

A New York federal grand jury is investigating abuses ininterpreting such X-rays. The probe deals with cases whereinvestigators believe people were illegally qualified to win claimsfrom a trust fund being administered by a Texas court throughsloppy or fraudulent interpretation of such X-rays by so-called“b-readers.”

The amendment is totally unacceptable to organized labor, whosesupport is seen as crucial to the bill, as well as the triallawyers, another key constituency working to kill the bill.

Moreover, most large defendants–such as General Electric, DuPontand ExxonMobil–are also working to bottle up the bill. A criticalreason they oppose the legislation as written is that it couldforce them to open their books to outside auditors empowered todetermine how much they should contribute to the $140 billion trustfund that would be used to pay claims.

The major problem with the bill for insurers and defendants isthat to win Sen. Leahy's support, Sen. Specter had to includelanguage that allows “leakage”–that is, the ability of plaintiffsto have their claims revert to the courts and therefore be paidoutside the trust fund if there is no money to pay their claimwithin nine months.

Moreover, all claims would revert to the tort system after theprogram expires in 27.5 years.

All property-casualty insurance trade groups have already sentletters to the Senate leadership, or are drafting such letters,pointing out what provisions will make them oppose the bill if leftunchanged.

The insurance industry's position is best summed up by a lettersent by the American Insurance Association, dated Jan. 20, to Sen.Frist, an unabashed supporter of the Specter/Leahy bill.

According to a consensus of congressional staffers and industrylobbyists, this letter marks the first time insurers have said theasbestos bill is worse than the current system.

Specifically, the letter says: “To provide certainty andfinality, the bill must provide the exclusive administrative remedyfor resolution of asbestos-related claims. Absent inclusion of allsuch claims in the fund or a credit for claims left in thelitigation system, there can be no real finality for insurers.”

The letter is signed by Marc Racicot, new president of the AIAand a former chairman of the Republican National Committee.

“Our industry would inevitably find itself paying bothsubstantial sums to the fund and additional large sums to the tortsystem for claims permitted to 'leak' outside the fund,” the lettercontinues. “This would present insurers with an even moreuntenable, expensive situation than that posed by the current,highly dysfunctional litigation system.”