Insurers Tussle Over Shares For Asbestos Fund Payouts

The committee was scheduled to meet on the legislation, S. 1125, as this article went to press. For an update, see the National Underwriters internet site at www.nationalunderwriter.com.

Meanwhile, David Farmer, senior vice president of federal affairs for the Downers Grove, Ill.-based Alliance of American Insurers, said that within the insurance industry negotiations have stopped, at least temporarily, concerning the industrys proposed $45 billion share of the compensation fund.

Carriers are seeking to develop a consensus formula on how that amount will be allocated among their companies, he said.

Mr. Farmer said he expects Sen. Hatch to go forward with the current provision in S. 1125, which calls for establishment of an Asbestos Insurers Commission to determine individual company shares of the funding requirement, with perhaps a few changes.

However, Mr. Farmer said, he believes that if the industry can reach a consensus on a funding allocation procedure, it could be added to the bill as an amendment on the Senate floor.

Mr. Farmer noted that the Alliance does not now have a position on S. 1125, pending further analysis of the final bill.

"We remain hopeful," Mr. Farmer said. But he added it is important to wait and see what the committee produces.

The issue, he noted, is cost.

"We support a system that is fair, equitable and affordable," Mr. Farmer said.

With the agreement on medical criteria, and the likelihood that the size of compensation awards will be increased, the costs of the proposed system will rise, he said.

That, Mr. Farmer said, increases the probability that the proposed $108 billion fund will not be sufficient to resolve all asbestos-related claims.

How the committee proposes to handle that possibility is still unknown, he said.

That is why the Alliance wants to see a final proposal before taking a position, Mr. Farmer said.

Anne Sittmann, a representative of the Des Plaines, Ill.-based National Association of Independent Insurers, added that the more expansive the parameters of the asbestos debate, the more complicated the process.

"The true goal of asbestos litigation reform is to get money to the sickest people," Ms. Sittmann said. "The more the parameters are expanded, the more the cost increases, therefore potentially delaying funding to those who are critically ill."

Ms. Sittmann said that reform legislation must appropriately compensate all victims, while reducing transaction costs and providing finality for defendants.

As for the insurance industry, she said, $45 billion must represent the ultimate industry total liability and must be allocated equitably between direct writers and reinsurers.

Under the medical criteria agreement, those with the most severe form of asbestosis will receive higher compensation. In addition, those who have "mixed causation" and who might otherwise not qualify for compensation will now be eligible.

In addition, the agreement creates a medical exceptions panel which will allow claimants who do not meet the stated criteria to demonstrate that special circumstances merit compensation nonetheless.

Also, a cut-off date, which denies compensation to those exposed after Dec. 31, 1982, has been eliminated.

Sen. Hatch, in a statement last week, called for quick action on the legislation. Without it, he said, the consequences are dire.

"Jobs will be lost, pensions will be drained and victims will be left in the dust because all of the money needed to compensate them would have been sucked up by the broken system where 86 percent of the claimants who are not sick are getting most of the funds," Sen. Hatch said.

But the committees ranking Democrat, Sen. Patrick Leahy, D-Vt., urged the committee to proceed cautiously. He said the committee needs to get the most accurate projections of claims based on the new medical criteria.

Then, he said, the committee needs to run the numbers to assure the fund remains solvent during its anticipated 50-year life.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, June 30, 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.