The Congressional Budget Office today said the asbestos litigation reform bill now before the U.S. Senate is likely to add to the federal budget deficit over the next 10 years, and contributions into the fund are unlikely to be adequate to pay all claims.
The revenue collection stream that would be generated by the legislation is "highly uncertain," the CBO added.
The American Trial Lawyers Association immediately jumped on the report, saying that it "confirms the fundamental flaws with the proposal that victims, public health experts, independent claims analysts and senators on both sides of the aisle have been pointing out for months."
Julie Rochman, an American Insurance Association representative, pointed out a comment in the report that the ability to estimate the value of claims made on behalf of individuals who are truly sick from asbestos is "a somewhat inexact science."
Ms. Rochman added that the AIA is reviewing the CBO report but "cannot yet comment on it in detail."
"We do remain committed to creating a federal solution that quickly and fully compensates all legitimate asbestos claims, without importing the claims abuse practices present in the current tort system," she added.
The CBO estimated in the report that, in the first 10 years, the fund would have to borrow almost $8 billion to meet injury claims because more than half of all anticipated claims would come in that initial period, outstripping industry contributions.
"The interest cost of this borrowing would add significantly to the long-term costs faced by the fund and contributes to the possibility that the fund might become insolvent," the CBO said.
The CBO estimated the fund would increase projected budget deficits over the 2006-2015 period by about $6.5 billion, excluding borrowing costs, because payments and other costs over the first 10 years of the fund would be $70 billion, while contributions would be $63 billion.
The report is likely to give all sides in the asbestos litigation legislation debate something to think about as Congress returns to work after the Labor Day weekend.
The bill passed the Senate Judiciary Committee in May with little support from Democrats and weak support from majority Republicans, some of whom said they would vote to get it out of committee but would reserve the right to change their mind later.
However, the bill is being backed by the White House, and Senate Majority Leader Bill Frist, R-Tenn., met with insurance and defendant company officials before the August recess to ask them to help him get it through the Senate.
Reacting to Sen. Frist's comments on the Senate floor on July 29 that "it is my intention to bring that bill to the floor and pass it this fall," Senate Minority Leader Harry Reid, D-Nev., was openly derisive.
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