Groups Warn On Asbestos Bill Cost; Threaten Opposition

In addition, insurance companies and asbestos defendants could be assessed up to $1 billion a year each if the fund runs out of money before all claimants are paid.

At press time, the Committee was scheduled to consider the controversial issue of claims values (that is, the specific amounts that will be paid to claimants who contract the different asbestos-related illnesses).

Labor unions have been pressing the Committee to increase the claims values from what was in the original draft of S. 1125.

For example, under the original draft, those contracting mesothelioma, a fatal asbestos-related cancer, would receive $750,000 from a trust fund established by the legislation. Committee members are expected to offer amendments that could raise the claims value for mesothelioma to more than $1 million.

Joe Manero, a representative of the Downers Grove, Ill.-based Alliance of American Insurers, said that the legislation must not become a blank check for Alliance members. It must not become an open-ended pot of money.

The letter that the Alliance, NAII and NAMIC sent to Sen. Hatch, Mr. Manero said, is conciliatory in tone and stresses a desire to work with all members of the Committee to forge a compromise.

Georgiann Howell, a representative of the Indianapolis-based NAMIC, said the legal system should fairly compensate those truly injured by asbestos. But she noted that the potential industry liabilities in the legislation are substantial enough to put some small mutual insurance companies out of business.

Anne Sittmann, a representative of the Des Plaines, Ill.-based NAII, added that NAII is concerned about the allocation process, involving how much each company must contribute to the fund.

The allocation, she said, must equitably distribute liability between insurers and reinsurers based on exposure to asbestos-related loss in order to avoid cross-subsidization, Ms. Sittmann said.

In addition, she said, there must be a limit to the liability of each company.

Ms. Howell said the recent changes to the bill definitely make it less attractive to insurers, who could end up opposing the bill. But they dont want that to be the end result, she said.

In their letter, the three associations said that the original concept of a $108 billion trust fund is adequate to provide equitable compensation to victims of asbestos-related diseases, and that the industrys original liability of $45 billion must represent the industrys final cost.

"To maintain the support of the insurance industry, the total costs of the program must stay within the original funding limits," the letter says.

In the AIA letter, Robert E. Vagley, the associations president, said that the end result of the Committees efforts must be that all projected asbestos compensation and related costs stay within the core program funding outlined in the original draft. "This was and remains a high but tolerable target," he said. "If this cannot be achieved, we will oppose the legislation."

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Reproduced from National Underwriter Edition, July 14, 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.