Asbestos Reform At Critical Juncture; Negotiating Continues
Washington
Negotiations over asbestos litigation reform legislation may be entering a decisive phase in the Senate.
Sources tell National Underwriter that Republican and Democratic leaders in the Senate have assigned top staff members to try and work out a compromise on asbestos litigation reform in a process that excludes all the major stakeholders, including insurance companies.
The sources, who asked not to be identified, said that the way the process has been described, the staffers are essentially starting at square one and seeing if they can reach agreements on relatively noncontroversial, nonmonetary issues.
These small steps are called "confidence-building measures," sources said.
Then, the staffers will see if they can reach an agreement on the size of a trust fund that will be allocated to resolve asbestos-related claims.
The staffers represent Senate Majority Leader Bill Frist, R-Tenn.; Senate Judiciary Committee Chairman Orrin Hatch, R-Utah; Minority Leader Tom Daschle, D-S.D.; Judiciary Committee Ranking Democrat Patrick Leahy, D-Vt.; and Sen. Chris Dodd, D-Conn.
At the same time, these sources said, a group of insurance companies with significant asbestos liability are meeting separately to see if they can reach an agreement on an allocation formula for the insurance industrys share of the trust fund.
The key issue, sources said, is how much money foreign reinsurers will put into the trust fund.
Regarding the Senate negotiations, the sources said there is a great deal of skepticism about whether they can succeed. There is still a tremendous difference between the amount of money industry is willing to pay into the fund and the amount that labor unions are demanding, they said.
While manufacturers and insurance companies want to pay no more than $110 billion into the fund, labor is demanding nearly $155 billion.
These sources said that no one is talking publicly about the process because no one wants to be accused of undermining it.
"No one wants to be blamed, but no one wants to tell the truth," one source said.
Another source said that at some point, either the business and insurance groups or labor unions will have to give ground.
"I dont know if one side or the other will blink, or if we will remain in the never-never land of endless negotiations and stalemate," the source said.
Underlying the process is the fear that more large manufacturers are ready to declare bankruptcy if Congress fails to pass asbestos legislation.
One source said that manufacturers have what is called "prepackaged bankruptcies" in place.
In these prepackaged bankruptcies, the source said, insurance proceeds are viewed as assets of the estate, and the insurance company obligations are accelerated. This means, he said, that a lot of money, probably billions, must be paid up front.
Its not clear whether this would threaten the solvency of some companies, this source said, but it clearly would be a major hit.
It is unclear how long the Senate negotiations will take or whether legislation can be approved this year. At one time, the expectation was that Congress would adjourn for the year on Nov. 21.
However, the current speculation is that the Senate will break for Thanksgiving and then reconvene in December.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, November 7, 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.
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