Washington--Despite changes made by the Senate Judiciary Committee, proposed legislation to establish a $140 billion trust fund for compensating asbestos victims is still deeply flawed, according to the Property Casualty Insurers Association of America (PCI).

In a letter to Senate Majority Leader Bill Frist, R-Tenn., PCI President Ernst Csiszar said that in spite of changes made by the committee, the asbestos bill, known as S. 852, "is unacceptable and we will continue to oppose the bill unless substantial improvements addressing insurer concerns are made."

Mr. Csiszar stated that his criticism should not be taken as a slight at Committee Chairman Arlen Specter, R-Penn., Ranking Member Patrick Leahy, D-Vt., or any of the committee members.

"We sincerely believe that everyone who has been involved in seeking a permanent solution to the asbestos litigation crisis is committed to the goal of providing those who are injured from exposure to asbestos a fairer, more timely and more efficient mechanism to compensate them for their injuries," he said in the letter.

However, he explained that the legislation still fails to resolve issues in three areas critical to the insurance industry: the funding of the trust, potential sunsets for the trust and "leakage," or the movement of cases from the trust back to the court system.

"From the outset, the insurance industry has maintained that any trust fund legislation must provide certainty and finality if the industry were to support it," Mr. Csiszar said.

On funding the trust, Mr. Csiszar noted that the insurance industry is required to provide a significant amount of the trust in its early years, including half of its first-year payment within 90 days of the bill's enactment.

Additionally, he noted that the committee made several changes to increase benefits to asbestos victims and failed to provide a guarantee that the trust would end the asbestos lawsuit system, all without any changes for insurers.

"To the extent any payments are required to be made outside the trust fund, there should be a corresponding reduction in the aggregate funding levels," he said in the letter. "Moreover, during the past two years insurers have continued to pay asbestos claims, totaling billions of dollars, yet there has not been a corresponding adjustment to the overall insurer aggregate funding level."

Concerns over the lack of a guarantee for insurers are also included as part of the 'leakage" issue. This insurance industry has looked to the asbestos bill as a means of providing a stable system of resolving asbestos claims with a certain cost level.

Mr. Csiszar noted that some provisions of the current bill would allow for cases to remain outside of the trust, in instances of mass settlements agreed to prior to the enactment of the bill or instances in which claims fall short of a final judgment or verdict.

Additionally, he said, the bill does nothing to prevent "double-dipping," in which asbestos victims file claims with both the asbestos trust and their workers' compensation insurer.

Given the major funding provided by the insurance industry in the early years of the trust, Mr. Csiszar called on Sen. Frist to ensure that a minimum amount of time be required before it could sunset, noting that earlier versions of the bill required the fund to exist seven years before it could be allowed to expire.

"Allowing the fund to sunset at any time after startup would mean that insurers would bear a greater risk than defendant participants because insurers are providing a disproportionate share ($20.6 billion) of the upfront funding in the first five years," he said in the letter. If the fund is allowed to sunset, he added, then cases that would return to the tort system should be heard in federal courts.

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PCI Voices Beef Over Asbestos Bill

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