Asbestos Lawsuits Surge

January 22, 2003
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Asbestos generally has not been used in construction since the 1970s, but it still is in place in a number of buildings.
A short while ago, it appeared that asbestos liability was fading into the background as a business concern. All the asbestos manufacturers had been sued and building products containing asbestos haven’t been installed for years. However, according to the Insurance Information Institute, claims are now growing again. And HVACR contractors, distributors, and manufacturers are facing potentially huge lawsuits.

“Asbestos liability looks to be one of the largest ever faced by businesses in the United States and abroad,” proclaims the Institute. “For the U.S. insurance industry, asbestos-related losses could eventually reach as much as $65 billion, more than the combined total for the September 11 terrorist attacks and Hurricane Andrew.” What’s more, it says, the cumulative liability, including U.S. and foreign insurers and companies’ uncovered liabilities, could reach $200 billion.

In a report called “The Asbestos Threat,” by Raymond J. Keating, chief economist for the Small Business Survival Committee, “The targets of asbestos lawsuits now have spread far beyond asbestos manufacturers to businesses that had absolutely nothing to do with the production of asbestos. Thousands of businesses are now in the crosshairs of asbestos litigation. And they range from huge multinational firms down to local small businesses.”

That includes heating and cooling contractors.

Asbestos Was Widely Used

Because of its heat- and fire-resistant qualities, asbestos was applied in a number of building products. HVACR-related products that contained asbestos included insulation, pipe wrap, duct insulation, refractory, and boiler jackets.

In the 1960s, a U.S. medical researcher established a link between the inhalation of airborne asbestos particles and disease. The diseases associated with asbestos include asbestosis (a noncancerous lung illness), lung cancer, and mesothelioma (a rare form of cancer).

Asbestos generally has not been used in construction since the 1970s, but it still is in place in a number of buildings. Asbestos abatement consists of either encasement (to prevent airborne particles) or removal by qualified professionals.

Litigation Begins

Filing of the first asbestos-related lawsuit, says the Insurance Information Institute, took place in Texas in 1966. However, it wasn’t until the 1980s that lawsuits increased dramatically.

A significant event occurred in 1982 when the Johns-Manville Corporation, a major building materials manufacturer, filed for Chapter 11 bankruptcy protection and, as part of its reorganization, the Manville Personal Injury Settlement Trust was set up to pay asbestos claims.

So many claims were filed that the U.S. district court eventually made it a limited fund in order to provide some compensation, based on a percentage of the dollar, to ongoing claimants.

Other companies likewise declared bankruptcy and established trusts to pay asbestos claims.

A study by the RAND Institute for Civil Justice, released in September 2002, states that more than 600,000 people in the United States have filed asbestos claims, which have cost businesses more than $54 billion as of the end of 2000. The study adds that 500,000 to 2.4 million more claims could be filed in the coming years.

“The fact that the trusts pay only pennies on the dollar is one of the reasons why the litigation is spreading to greater numbers of defendants,” said Deborah Hensler, a RAND study author who is a professor of law at Stanford University. “If claimants cannot get adequate compensation from the former deep pockets, they must look for greater compensation from other defendants or pursue additional defendants.”

The RAND study says that early asbestos lawsuits were limited to approximately 300 companies that produced asbestos or made extensive use of it. Today, it says, litigation involves more than 6,000 companies in a number of industries.

In a recent article in Fortune magazine, a plaintiffs attorney explained the lawsuit progression as follows: “In the early days of the litigation, you had Manville. Manville goes away. Next in line are the regional distributors. If they go away, next in line are the contractors who bought from them.”

Claims Keep Expanding

“We found that over the past decade there has been a rapid increase in both the number of asbestos claims and the cost of the litigation,” said Stephen Carroll, an economist who headed the RAND study. “This surge challenges the notion that the litigation is manageable and raises new questions about whether there will be enough money to pay all the claims that are likely to be filed.”

The study relates that 65 percent of the compensation paid over the last decade went to people who had a noncancerous condition, and that increasing claims for noncancerous illness explains the recent growth in the number of cases.

A significant percentage of current claimants show no signs of illness, declares the Insurance Information Institute, but because they were exposed to the substance and asbestos-related diseases can have a latency period of up to 40 years, they are filing claims in the hope of getting compensation now — should they become sick at some point in the future — before funds dry up or statutes of limitation go into effect.

The contention of some is that the seriously ill could be squeezed out of receiving payment by the increasing claims of those who are not ill. Keating declared, “Many of the truly ill are not being compensated due to lawsuits from people who are healthy today and, in fact, may never develop any asbestos-related diseases.”

And Keating emphasized that a company does not have to be a big business to be targeted for an asbestos lawsuit. Smaller businesses that have been sued, he reported, include a plumbing contractor in Florida and a plumbing and heating contractor in Maryland.

In fact, a law firm that says it specializes in asbestos litigation has compiled a list on its Web site of companies that “may have manufactured and distributed asbestos and asbestos-related products.” Its list currently identifies 11 plumbing and heating contractors, as well as suppliers and manufacturers.

Taming The Lawsuit Monster

In the U.S. Supreme Court case Ortiz v. Fibreboard Corporation, Justice David Souter wrote: “The elephantine mass of asbestos cases … defies customary judicial administration and calls for national legislation.”

The Asbestos Alliance, a coalition led by the National Association of Manufacturers (NAM) that includes asbestos defendant companies and trade associations, is pushing for passage of congressional legislation to get this “elephantine mass” under control and help prevent a business dilemma.

Its proposed solution would:

1. Establish objective medical criteria for asbestos-related impairment.

2. Liberalize the statutes of limitation to remove the incentive for the premature filing of asbestos cases.

3. Eliminate consolidation of cases that create “bet-the-company” situations, leading to settlements with people who may not be sick.

4. Eliminate conditions that allow concentration of claims in judicial jurisdictions that have no connection with those claims.

On Sept. 25, 2002, the Senate Judiciary Committee held an informational hearing to discuss asbestos litigation.

Michael Baroody, chairman of the Asbestos Alliance and executive vice president of NAM, remarked, “This is an essential step toward reforming the asbestos litigation system, and we are very pleased that Senators Leahy and Hatch have brought this issue front and center before Congress.”

In fact, Rep. Chris Cannon (R-Utah) sponsored a bill called the “Asbestos Claims Priorities and Compensation Act of 2002.”

The bill proposes to give priority to claimants who demonstrate actual physical harm and preserves the rights of those who may become sick in the future. However, the bill was not addressed in 2002 and must be reintroduced in the current session for consideration.

For more information on the Asbestos Alliance and its asbestos litigation reform efforts, visit www.asbestossolution.org.

Note: The Asbestos Alliance referred The News to an attorney who will shed more light on the asbestos liability problem and provide some tips for HVACR contractors, distributors, and manufacturers in dealing with potential litigation. Look for this story in an upcoming issue of The News.

Publication date: 01/27/2003

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