Meet the new asbestos–or maybe it's just the same as the old asbestos. That's the sentiment expressed by experts on the question of what mass tort issue will be the next to fuel class action lawsuits that property-casualty insurers could find themselves on the hook to cover.

Defendants have scored some major judicial wins in asbestos cases and there have been some favorable law changes in a number of states, but at the same time, they see a trial bar looking for new alternatives to get asbestos claims into court.

On the plus side, Romy Comiter, a senior manager in the London office of Smart Business and Advisory Consulting LLC, noted “significant changes in the landscape of how these claims are filed and handled.” Among the major factors driving change, she noted, have been tort reforms passed in states like Mississippi and Texas, as well as other places that have sought to require claimants to meet some form of medical criteria.

“A lot of these cases aren't reaching court now unless the claimant is actually sick,” Ms. Comiter said, noting a 50 percent decrease in filings and estimates that a vast majority–85 percent of payments made this year–will be for people with malignant illnesses relating to asbestos exposure as opposed to those who have been exposed to asbestos but have shown no symptoms of disease.

Another major factor has been court rulings like one issued by U.S. District Judge Janis Graham Jack in the Southern District of Texas, Corpus Christi, in a mass tort action over silica exposure in June 2005.

Judge Jack's ruling, said David Golden, director of commercial lines for the Property Casualty Insurers Association of America, has resulted in a “more complete” discovery process in litigation. Such a process enables insurers to “get at not only who is making claims, but against whom are they making these claims.”

Specifically, he said insurers can see if claimants have already received money from other asbestos trusts, or if they have made other claims that would bring their asbestos claims into question.

“Defendants picked up a right to know when a particular plaintiff has already claimed money and why,” he said, noting the new rules help defendants ascertain if what is being claimed is true or even medically possible. Judge Jack in her often-quoted ruling admonished law firms and medical screeners they hired to diagnose thousands of plaintiffs with both asbestosis and silicosis–a combination that is extremely rare medically.

As a result, claims relating to asbestos exposure and diseases are falling, Ms. Comiter said, noting that the Johns-Mansville trust said it received only 10,500 new filings in 2006, slightly more than half of the 20,000 it received the prior year. Various reports, she added, “suggest other trusts and defendants are seeing a significant downturn in the number of nonmalignant claims” as well.

When cases go to court, Mr. Golden noted, the tort reforms and legal decisions have “moved us a little bit closer to balance” in the litigation environment.

“We're closer to giving defendants an equal shot in the court system, which had been tilted pretty far in favor of the plaintiff for quite a while,” he said.

In prior years, Mr. Golden noted that much of asbestos money was being set up in trusts by many of the same attorneys who would be bringing claims against them. Now, he said, “we're basically getting more toward a system where a plaintiff that is truly injured and [whose injury] is directly tied to asbestos can get justice,” he said, “but also to a system where a defendant company can get justice as well.”

Ms. Comiter said one other factor that may help keep litigation down is the fact that many of the defendant companies and trusts are in far better financial shape than they were 10 years ago. That means claimants can receive better settlements, she suggested.

In the late 1990s, she said a claimant may have gotten $30,000 from the Johns-Manville trust and would then sue others to recoup more money. Now, a mesothelioma claim would likely involve roughly $1 million, she said, presumably lessening the need to sue peripheral defendants.

If claims are down, and the litigation environment has improved, does this mean insurers and defendants can start looking for the light at the end of the tunnel?

Not necessarily, said Mark Behrens, a partner with the law firm of Shook Hardy & Bacon LLP in Washington, D.C.

While acknowledging that the “environment has improved significantly” for insurers and defendant companies in the asbestos litigation arena, Mr. Behrens would not say asbestos has passed the high watermark as an issue. “Every time somebody's made a prediction, it's turned out to be wrong,” he said.

In fact, he recalled a conversation with an insurance executive who noted that every time the management of the company changed, the new senior executives would call a meeting to ask what the “next asbestos” would be. The answer given, he said, was “the next asbestos is asbestos.”

Essentially, Mr. Golden said, the plaintiffs' bar has adjusted to the new playing field and changed their tactics.

“We've seen a shift in where cases have been filed,” he said. “Now we're seeing more in states like Delaware because personal injury attorneys are seeking friendlier venues.”

Mr. Behrens noted that Southern California has become a favorite jurisdiction for firms that had been filing cases in Texas. Additionally, he said other places that have seen an uptick in cases include Washington State and Virginia.

Effectively, Mr. Behrens explained, the problem remains the same, it's just not as centrally located. “Instead of having one jurisdiction that's a major problem, you've got several that are smaller problems.”

In addition, Mr. Behrens noted that plaintiffs' attorneys have begun offering “new theories” to courts regarding potential liability for asbestos for a whole new class of defendants. “Some members of the plaintiffs bar are trying to pursue claims in new jurisdictions against a new category of defendant,” he said.

Ms. Comiter also recognized the growing trend of new, less direct claims, such as “nonproduct” claims, which could involve something such as an employee who goes on site to service a candy or soda machine at a plant where they are exposed to asbestos, or the family of an exposed worker who wears dust covered clothing home.

The courts, she said, have been “very diverse” on such claims, but a key factor in the litigation could be what constitutes an “occurrence” in terms of providing coverage for a company's liability. If the courts were to see each unique exposure as an occurrence, then “nonproduct would become major,” she said. “It could be huge,” and involve tens of thousands of claims that would also be contained to primary insurers.

Mr. Golden noted that the new batch of cases is “really just getting started,” and it remains difficult to tell if they will lead to a resurgence in asbestos litigation.

“It's hard to tell right now whether those types of cases are really gaining traction or not,” he said, noting that it remains to be determined if the courts will adopt a consistent stance on the issues involved.

“There are still courts that will take those cases,” he added. “It may be a few more years before we know where we stand.”

Mr. Behrens shared the view that these indirect claims have been a “mixed bag” in the courts, but he pointed to one case that could prove troublesome.

In Braaten vs. Buffalo Pumps Inc., et al, which is currently in the Washington State appellate system, an appellate court ruled that the makers of valves and gaskets sold to the Navy and used with asbestos had an obligation to warn end users of the products they manufactured about the potential dangers of asbestos that could be used with their products. “The theory is that somehow the valve manufacturer should have to warn about asbestos that is put on the products after they're sold to the Navy,” he said.

Mr. Golden noted that cases like the Braaten case could become more of the norm as plaintiffs have moved beyond the initial defendant companies. “Much of the litigation, at this point, does involve peripheral defendants,” he said, noting that cases can now involve “everyone in the distribution chain” that dealt with asbestos products, including wholesalers and installers.

In general, Mr. Behrens said mesothelioma claims should “hold steady” for the foreseeable future, given the considerable amount of time the disease can take to show itself and the fact asbestos was not widely regulated until at least the 1970s.

Ms. Comiter added that the full effects of the changes made to the asbestos landscape have not been fully felt yet, and there will be a “time lag” in the handling of claims being filed under the new rules that will eventually be sorted out. “It's going to take a few years to filter through” to all the players involved, she said, but she also cautioned companies to continue monitoring their exposures and loss estimates relating to asbestos claims.

Mr. Golden offered a warning to companies that asbestos should by no means fade from their lists of concerns, but also a hope that the worst of it is over.

Asbestos “is not going away any time soon by any stretch.” he said. “Will it have less of an economic impact than it has in the past 20 years? We hope so, but it's too soon to tell.”

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