Senator Hatches Asbestos Plan

Participation in the fund would be mandatory for all insurance companies that have paid at least $1 million in asbestos-related defense and indemnity costs.

At press time, Sen. Hatch had released a draft of his proposal, with the expectation that he would introduce a formal bill after press time. It is possible that the formal bill will differ somewhat from the draft, but the basic structure Sen. Hatch is proposing is likely to remain intact. (See NU Online News Service for updates.)

Industry groups that have been pursuing asbestos litigation reform are praising Sen. Hatch for advancing the process.

The proposal has the potential to do what the American Insurance Association believes needs to be done, said Gary Karr, a representative of the Washington-based AIA. That is, he said, to bring fairness and certainty to a system that is out of control.

Carl Parks, senior vice president of government relations with the Des Plaines, Ill.-based National Association of Independent Insurers, said that NAII supports reform legislation, adding that any final bill should include provisions such as medical criteria that would bring some control to asbestos litigation.

Mr. Parks added that any bill should also contain provisions protecting defendants who have been dragged into asbestos litigation simply because they once sold or installed products containing asbestos.

"Asbestos litigation reform is about conserving scarce resources to care for people who have become ill from asbestos exposure and its also about protecting businesses and preserving jobs," he said.

Michael Baroody, chairman of the Asbestos Alliance, a coalition of business groups that includes the Downers Grove, Ill.-based Alliance of American Insurers, also praised the draft and called for legislation to be enacted this year.

The current asbestos litigation "scandal," he said, is not only dragging down the economy, it is hurting the people it should be helping–asbestos victims. "Now more than ever, Congress must step in and legislate a solution," Mr. Baroody said.

Under the draft bill asbestos claimants would have to meet specified medical criteria in order to qualify for compensation. Those who were exposed to asbestos but who demonstrate no asbestos-related condition would not qualify for any compensation.

Those who demonstrate a mild form of what is called pleural thickening would not receive direct compensation but would qualify for reimbursable medical monitoring.

All claims would be filed through a United States Court of Asbestos Claims, which would determine a claimants eligibility for compensation. The draft also would establish an appeals procedure for claimants who are denied compensation.

As for the insurance industry, the draft would create a five-member commission that will determine the amount that each insurer participant would be required to pay into the fund.

The contributions would be determined based on four factors: net written premiums on asbestos-related policies in force from Jan. 1, 1940, through Dec. 31, 1986; net paid losses for asbestos injuries compared to all such losses for the insurance industry; net carried reserve levels for asbestos claims based on the most recent financial statements; and future liability.

An insurance company would have the right to obtain United States District Court review of a determination by the Asbestos Insurers Commission. However, the review would not be de novo. Instead, the court would be instructed to uphold the determination so long as it is not "arbitrary and capricious."

Turning to reinsurance, the draft would create a private right of action for insurance companies against any reinsurer that is obligated to reimburse the insurer for asbestos-related claims. All such actions would have to be filed in the United States District Court for the District of Columbia.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, May 26, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.