NU Online News Service, May 11, 3:23 p.m. EDT, Washington--Public Citizen, a consumer group, issued a report yesterday stating that the current draft of asbestos legislation would provide huge benefits for the insurance industry.

The report was issued a day before the Senate Judiciary Committee began to vote on amendments to the bill that would create an alternative claims handling mechanism for asbestos with a $140 billion trust fund to pay injury claimants.

In a report in advance of today's action on the bill, the RAND Corp. pre-released a study indicating that asbestos claimants have received only 42 percent of every dollar insurers and companies have paid to deal with asbestos litigation filed from the early 1970s through the end of 2002.

The Public Citizen analysis said the legislation would by its calculation reduce the potential liability of 10 large asbestos firms by 78.5 percent.

The Public Citizen report said the total contributions by 10 large manufacturers who used asbestos in their products would drop from an estimated $259.5 billion if they were to complete bankruptcy trust fund arrangements under current law, to $5.6 billion.

"On an individual basis, asbestos companies would effectively see their total payments over the life of the fund decline by margins ranging from 40.5 percent to 100 percent," the Public Citizen report said.

It contends that at least eight Fortune 500 companies are huge winners under S. 852, because their annual asbestos payments to the trust fund would be capped at $27.5 million per year for 30 years "no matter how large their revenues or how many asbestos cases they might have pending against them."

In current dollars, the report said, "this means their maximum liability is $378.5 million."

By comparison, the report said, "Dow Chemical projects its future liability at between $1.6 billion and $2.2 billion over the next 15 years from 2004 to 2019. Similarly, Honeywell estimates its future liability payments at $2.75 billion from 2004 through 2018. But the company would pay only 13.8 percent of that amount - $378.5 million - over the next 30 years."

Under the legislation, a $140 billion trust fund would be created to dole out funds to asbestos victims who met 10 levels of medical criteria. Money to populate the fund would be paid by interested parties over 27.5 years. The fund would be administered by the Department of Labor.

Approximately $5 billion would come from trust funds established by several companies under the aegis of bankruptcy courts. Those monies would be used to pay claims to those suffering from mesothelioma, a fatal form of cancer caused by asbestos.

The insurance industry would pay out $46 billion over that period, but the amount would be front-loaded, that is, paid by insurers mostly in the early years of the fund.

According to insurance industry representatives, a shortcoming of the fund arrangement is that the payments would not provide them certainty; that claims would revert to the tort system if the fund can't pay claims within nine months of the period they are finally awarded. And, claims would revert back to the tort system after the law runs out in 27.5 years.

The industry is divided in its support of the legislation. Work on the bill began before Congress took a 10-day recess at the beginning of May, and more than 60 amendments remain to be disposed of before a decision is made to report the bill to the full Senate.

It is therefore impossible to predict whether work on the bill will be completed.

The RAND report, pre-released because of the current markup of the bill, said that more than 730,000 people in the United States filed compensation claims for asbestos-related injuries from the early 1970s through the end of 2002, costing businesses and insurance companies more than $70 billion to pay awards and litigation costs.

The RAND's Institute for Civil Justice in Santa Monica, Calif., adds that claimants have received about 42 cents of every dollar spent on asbestos claims. Another 31 cents has gone to defense costs, and 27 cents has gone to plaintiffs' attorneys and other related costs. The research notes that there is no published research comparing the compensation received by asbestos plaintiffs with their economic losses.

Special Reports /

Insurers Get A Big Payoff From Asbestos Bill: Study

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