Asbestos Reform Appears Doomed Again

Political bickering, claims of underfunding may kill bill in the current Congress

Washington

Despite efforts in the U.S. Senate to keep the flagging hopes for asbestos legislation alive in this Congress, at least one securities analyst remains dubious about the bill's chances.

In a note to investors, Joe Lieber of Washington Analysis urged investors "to remain cautious about enactment of asbestos legislation next year." His comments were prompted by several recent developments:

o One was a Nov. 17 hearing before the Senate Judiciary Committee on whether the $140 billion proposed to fund settlement of claims contained in legislation passed in May was adequate.

o The other was a recent promise by Sen. William Frist, R-Tenn., the Senate majority leader, to bring the issue up as the first order of business when Congress reconvenes in January.

A consulting group's findings that an asbestos trust fund to be created by proposed Senate legislation is woefully inadequate came under withering fire at the Judiciary Committee hearing.

The hearing was convened by Committee Chairman Sen. Arlen Specter, R-Pa., even though it is rare that a Senate committee holds a hearing on legislation that it has already reported out. The legislation at issue is S. 852, the Fairness in Asbestos Injury Resolution Act of 2005.

The hearing was held against the background of Sen. Frist's promise for early action next year on the bill.

That promise has prompted comments ranging from hostility to outright incredulity from Democrats in Congress as well as analysts.

For example, Sen. Dianne Feinstein, D-Calif., said at the hearing that "if [the cost] isn't known before the new year, I don't know how we can consider this bill on the floor in January." Sen. Feinstein supported the bill when it came before the Judiciary Committee in May.

In addition, Senate Minority Leader Harry Reid, D-Nev., said on the Senate floor that "this bill is not acceptable in its current form. It's not even close."

In his note to investors, Mr. Lieber of Washington Analysis said that Sen. Frist "has made such pronouncements in the past only to have to delay consideration of the measure. While this is the best chance to get a bill to the Senate floor since the issue first emerged some five years ago, we would not be surprised if its consideration was deferred once again in 2006."

Mr. Lieber added that "since an asbestos bill still has many hurdles to overcome, we continue to believe it unlikely that any measure will be signed into law next year."

In the first place, Mr. Lieber noted, "supporters would probably have to defeat an attempted filibuster in the Senate. We note, however, that there is considerable bipartisan support for asbestos legislation in the House (as well as substantial bipartisan opposition). While supporters of a bill are probably fairly close to having enough votes to overcome a filibuster, the hardened political climate in Washington may induce Democratic leaders to demand greater party loyalty in opposing the legislation."

The Nov. 17 hearing was convened to deal with the findings of the Bates White consulting firm that the proposed fund would face claims of between $301 billion and $561 billion, and go broke within three years.

The Congressional Budget Office estimated in August the long-term costs of the fund at between $120 billion and $150 billion, and Douglas Holtz-Eakin, retiring director of the CBO, reiterated that estimate in his testimony at the hearing.

"CBO's estimate of the claims likely to be filed under S. 852 for compensation for injury resulting from asbestos exposure is based on analyses by a number of experts who studied the legislation and similar proposals in the 108th Congress," he said.

Controversy Arises

However, Denise Martin, senior vice president at the National Economic Research Associates in New York, charged at the hearing that the Bates White study "grossly overestimated the population at risk from asbestos disease."

Laura Welch, medical director at the Center to Protect Workers Rights, said Bates White had assumed a barber who started work in 1970 had the same risk of asbestos-related cancer as a shipyard insulator during World War II. "Clearly this is not the case," she added.

Charles Bates, chairman of Bates White, countered that a large number of people who do not currently have valid court claims for asbestos-related injuries would file for compensation if the fund is established.

He said millions of people were alive who had worked in occupations covered by the proposed legislation, adding that "the act greatly increases the incentives to file [claims]."

Flag: Key Elements

Head: What Would S. 852 Do?

S. 852, the Fairness in Asbestos Injury Resolution Act of 2005, among other things:

o Would remove claims for damages from exposure to asbestos in the workplace from the courts to special panels under the aegis of the Department of Labor.

o Would pay claims based on 10 different levels of compensation, with the sickest getting the quickest airings of their claims–and the most monetary damages.

However, critics contend that:

o The proposed fund to pay claims–financed in large part by insurers–would face demands far above congressional estimates and go broke within three years.

o Millions who worked in fields covered by the proposed act might see a greater incentive to file claims with an injury fund to tap.

o Bipartisan support will break down in the currently toxic political climate in Washington, dooming consideration in this Congress.

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Asbestos Reform Appears Doomed Again

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