Critical votes are scheduled this week in the U.S. Senate on proposed legislation creating a $140 billion trust fund to handle asbestos claims, with important segments of the insurance industry adamantly opposed.
However, a consensus of insurance and other industry lobbyists and congressional staffers is that momentum for the bill–S. 852, the Fairness in Asbestos Injury Resolution (FAIR) Act–is growing and that it could pass the Senate as early as late this week. These officials pointed to the fact that a vote to take up the bill passed the Senate, 98-1, last Tuesday even though Senate Minority Leader Harry Reid, D-Nev., had voiced adamant opposition.
In another sign of the bill's growing momentum, the Bush administration announced its backing last Wednesday.
"The administration supports Senate passage of S. 852," a White House statement said on behalf of President George W. Bush. "Asbestos-related litigation has clogged the courts, depriving those with injuries of a meaningful remedy and resulting in the loss of tens of thousands of jobs, the bankruptcy of at least 70 companies, and costs to the U.S. economy estimated at over $300 billion."
Acknowledging the bill has significant opposition, the administration did say it will seek changes, although doing that could undermine support. The statement said while the White House has "serious concerns about certain provisions of the bill, the administration looks forward to working with Congress to strengthen and improve this important legislation before it is presented to the president for his signature."
Opponents lost a critical vote on Feb. 9 on an amendment, proposed by Sen. John Cornyn, R-Texas, that would have substituted strong medical criteria for the trust fund system as a means of resolving claims by those injured by exposure to asbestos in the workplace.
The amendment by Sen. Cornyn–similar to the House approach–would have established specific medical criteria to distinguish between the claims of people "who are physically impaired due to exposure to asbestos or silica and the claims of people who are not experiencing any physical problems associated with exposure to asbestos or silica."
The insurance industry and some large defendants had been supporting establishment of medical criteria as an alternative to the creation of a trust fund for several years. But that concept has won little support from Sen. Arlen Specter, R-Pa., chair of the Judiciary Committee and the driving force behind removing asbestos claims from the court system as a means of reducing the cost of handling claims.
The medical criteria measure called for no venue reform–that is, removal of asbestos claims litigation from state courts to federal courts.
In comments calling for defeat of Sen. Cornyn's amendment, Sen. Specter said the cost of settling asbestos claims had been forcing a number of large firms into bankruptcy court.
He also said under the current system, only 42 cents of every asbestos claims dollar is going to victims, with 27 cents of every claims dollar going to plaintiff's lawyers.
Sen. Specter pointed out another issue raising the ire of insurers. He said the amendment proposed by Sen. Cornyn would give no relief to workers from firms which have gone bankrupt, and for those workers exposed to asbestos while laboring in such government installations as shipyards.
Supporters of Sen. Cornyn's amendment contended that by allowing claimants who are actually impaired to pursue their claims in the judicial system, while deferring the claims of those who are not impaired, "the asbestos litigation log jam would cleared."
"It is estimated that 90 percent of asbestos claims fall into the category of those showing no physical impairment," according to one paper circulated by an advocacy group to members of the Senate.
Sen. Specter said the current environment for settling asbestos claims is "scandalous." He added that Sen. Cornyn's amendment would defeat the trust fund proposal, adding that it is "window dressing," as well as a "red herring."
Heaping additional scorn on the amendment, he said, "it is not even a palliative."
Insurance lobbyists now say their best hope for killing the trust fund approach lies in the House of Representatives, where a bill similar to the amendment proposed by Sen. Cornyn–H.R. 1957, the Asbestos Claims bill–already has 60 co-sponsors.
A critical vote that could occur as early as Feb. 13 involves potential budget points of order, according to a memo sent Feb. 3 to Republicans by the U.S. Senate Republican Policy Committee. Committee Chairman Judd Gregg, R-N.H., is considering filing a procedural motion that would take 60 votes to overcome, on the grounds that the bill would affect the budget in violation of the rules. But Sen. Arlen Specter, R-Pa.–chairman of the Judiciary Committee and primary drafter and sponsor of the asbestos legislation–is arguing that no taxpayer money would be used for the fund or its expenses, the memo said.
Another potential budget point of order relates to a Senate rule which provides that a committee cannot spend beyond the amount allocated to it, according to the Policy Committee paper.
According to one industry lawyer, at least 13 Republicans are considering supporting the point of order because they oppose the bill. Joined with the minimum 35 Democrats who object to it, that would kill the bill right then and there, congressional staffers and industry lobbyists said.
The key is whether Sen. Gregg, as Budget Committee chair, raises the point of order. Republicans are reluctant to vote against Sen. Specter, who reportedly picked up a lot of credibility and leverage within the Republican caucus for his support for, and ability to win confirmation of Supreme Court Justice Samuel Alito.
A strong harbinger of growing support for the bill last week was the decision of Senate Minority Leader Harry Reid, D-Nev., to drop his opposition to consideration of the bill. "Now that we've spent some time focusing on the flaws in the bill, now's the time to begin the debate," a representative for Sen. Reid said last Tuesday.
The bill would move settlement of asbestos claims out of the tort system–at least temporarily. Besides Sen. Specter, its sponsors include Sen. Patrick Leahy, D-Vermont, ranking minority member of the Judiciary Committee.
An insurance industry lawyer who asked that his name not be used said Sen. Reid dropped his objection to consideration of the bill after finding that he had only 35 of the 41 votes needed to block action.
The bill still faces strong opposition from most insurance groups and a number of large underwriters. However, there are industry supporters, including St. Paul/Travelers, MetLife and ACE.
Other opponents include trial lawyers, the AFL-CIO and some large defendants, but many medium-sized defendants back the bill and, according to several insurance industry sources, are strongly supporting Majority Leader William Frist, R-Tenn., in his efforts to get the bill through the Senate.
With the bill open to amendments, Senate Democrats could seek to use the legislation to generate votes on lobbying reform, Medicare, veteran funding, the minimum wage, and any number of other items, all designed to force Republicans to commit themselves on potentially embarrassing votes, lobbyists noted.
The bill would create an administrative panel within the Labor Department to deal with claims resulting from exposure to asbestos in the workplace. Contributions to the fund would be from defendants and insurers over a 27.5-year period. After that, claims would revert to the tort system–a sticking point for the insurance industry as well as its supporters in Congress.
The insurance industry contribution to the trust fund would be $45 billion. As the Property Casualty Insurers Association of America pointed out in a Jan. 26 letter to Sen. Frist, the industry would be forced to make "disproportionately large contributions ($20.6 billion) in the first five years to fund start-up costs, with a very high likelihood that the fund would fail in its early years."
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.