Asbestos Reform Bill: Dead Man Walking

So, how is it that in an area where the term "crisis" genuinely applieswhere terminally ill people do not receive adequate compensation, where people who are not sick receive too much compensation, and where dozens of companies have had to declare bankruptcythe 108th Congress has gotten tied up in knots over a bill that no one likes and few think will work?

Let me begin with the central feature of S. 1125a trust fund that would be used to compensate victims of asbestos exposure without the need for litigation.

What in the recent history of the insurance industry led anyone to believe that a trust fund concept was a good idea?

The parallels between the proposed asbestos trust fund and the proposed Environment Insurance Resolution Fund that was supposed to resolve coverage disputes under Superfund (and which nearly led to a civil war within the industry) are well known.

How do you allocate funding shares among insurance companies? How do you collect money from foreign reinsurers who are outside U.S. jurisdiction? How do you assure that companies with substantial asbestos exposure do not solve their problems by shifting their losses to companies with little exposure?

During the middle of the debate over S. 1125, I happened to be chatting with an industry lobbyist who was around during the 1993 Superfund debate. I asked him how things were going. He just shook his head and said, "Steve, its everything you can imagine."

If I could imagine it, couldnt others imagine it, too?

Another question: Why did the industry put its bottom line funding number on the table before others in the negotiations (specifically labor) agreed to anything?

In the first draft of the legislation, the insurance industry agreed to contribute $45 billion to a proposed $108 billion fund. Not surprisingly, after the Senate Judiciary Committee got through with S. 1125, the insurance industrys potential liability was much higher. Some say it is unlimited.

The industry now says that the $45 billion contribution to the $108 billion fund in the original draft is the most it can afford. I dont claim to be the savviest guy in the world, but even I would have guessed that if one side offers $108 billion, the other side is going to automatically say, "Its not enough."

If the original draft called for a $154 billion fund (which labor unions now say is the minimum necessary), they would have demanded $200 billion.

I dont blame labor for that. Thats the way negotiations work. But why did the industry put a number on the table so early in the process that gave it so little room to maneuver?

Besides that, was it ever realistic to expect that this would be a completely closed system, in that claimants would have no recourse if the fund ran out of money before they exhibited an asbestos-related disease?

I understand that a lot of things happen behind the scenes. Private assurances are made, no doubt in good faith, by politicians who are working to reach a consensus among starkly divergent groups that they will protect the industrys interests.

But at the end of the day, I have to think that the only interest politicians will protect is their own.

All this gives rise to what I think is the most important question of all: Why even consider something as complicated as a trust fund when a much simpler solution was at hand?

Sen. Don Nickles, R-Okla., proposed a medical standards bill that would have established objective criteria for asbestos-related claims. This would have assured that only those claimants who are actually ill would be able to pursue their claims. Those with asymptomatic exposure would be placed on an inactive docket.

For some reason, this simple, straightforward approach was abandoned in favor of the monumentally complicated trust fund.

One theory I heard from a person I highly respect is that the Senate Judiciary Committee wanted to pursue its own approach rather than be seen taking up the idea of Sen. Nickles. In other words, it was driven by political ego. Much as I hate to believe that politicians are driven by any motivation other than altruism, who knows what politicians really think?

Sen. Nickles is retiring from the Senate this year, so maybe next year the Senate Judiciary Committee can pick up his proposal, massage it a bit and claim it as its own.

I understand that Senate Majority Leader Bill Frist, R-Tenn., plans to bring S. 1125 up for a vote in the next couple of months despite the fact that no one likes it and it probably will die. Wouldnt it be a good idea to let the bill die and start over next year with a more realistic approach?

Steven Brostoff is NUs longtime Washington editor. He may be reached at sbrostoff@nuco.com.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, February 6, 2004. Copyright 2004 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.