Asbestos Bill Could Be Windfall for Business
The Senate has taken a major step toward setting up a national fund to compensate people whose health has been ruined by asbestos, but the first and biggest beneficiaries of the plan may be companies such as Halliburton -- the Texas oil services firm -- which could save $3.5 billion of its pending liability for asbestos claims.
On a 10-8 vote last week, the Senate Judiciary Committee sent to the floor a business-backed plan to close the courts to all asbestos claims. Instead, the claims would be transferred to a newly created federal trust fund.
Over its 27-year life, the fund is supposed to have $108 billion to pay people who develop cancer or other health impairments from their exposure to asbestos in the workplace.
The money in the trust fund would come from about 8,500 companies that made or sold asbestos products directly or through their subsidiaries, as well as the companies’ insurers. But most of the firms would pay no more than $25 million a year.
The arrangement could prove a windfall for Halliburton and its insurers.
In February, the company reached a “global settlement” of 200,000 asbestos claims. Under the deal, Halliburton and its insurers agreed to pay $4.2 billion to settle the claims.
Dresser Industries, a Halliburton subsidiary, had incurred the asbestos liability through another company it once owned.
But the Senate bill, the fate of which remains uncertain, would cancel all such pending settlements.
At $25 million a year, Halliburton would pay $675 million over the 27-year life of the federal trust fund.
Halliburton did not make or sell asbestos products. However, in 1998, when Vice President Dick Cheney was its chief executive, it acquired Dresser Industries, which in turn had owned Harbison-Walker Refractories, a brick-maker that used asbestos.
Last year, the liability for asbestos claims against Dresser fell on Halliburton and drove down its stock price.
The global settlement announced this year is not yet final. It would end all current and future claims against Halliburton and allow the company to avoid filing bankruptcy for Dresser Industries.
A Halliburton spokeswoman said insurers would pay much of the $4.2 billion.
“We have said for some time that federal legislation is needed because asbestos is really a national health issue,” said spokeswoman Beverly Scippa. “The current system is broken and unfair to all parties, including asbestos claimants.”
But lawyers who represent people who have been sickened by asbestos cite the Halliburton example to illustrate their contention that the bill is a bailout for big business.
“It’s a scandal and a disgrace. It demonstrates the Republicans’ commitment to take care of corporations and screw their victims,” said Steven Kazan, an Oakland lawyer who filed the first asbestos lawsuits in 1974.
Experts say there are about 300,000 pending asbestos claims nationwide, and Kazan expects new cancer cases to occur for another 20 years.
“Asbestos is still legal,” he said. “It is in brakes and gaskets. I’m still seeing guys come in sick.”
Until the 1970s, asbestos -- a fibrous mineral -- was used widely for insulation and fireproofing of buildings. Inhaling the fibers causes lung damage, including deadly mesothelioma.
Despite the well-understood danger, asbestos has not been banned entirely.
An estimated 1.3 million workers in construction and industry face “significant asbestos exposure on the job,” according to the U.S. Occupational Safety and Health Administration.
Victims are not always older workers who labored in shipyards or factories.
Angela Ruhl, 39, of Garden Grove has two teenage children and suffers from mesothelioma, the asbestos-induced cancer that is usually fatal.
Her uncle worked at the Long Beach Naval Shipyard, and she believes she was exposed through him and his work clothes, which were laundered at her home.
“I know it’s incurable,” she said of her disease, although she has responded well to several experimental drugs.
After being shocked by the diagnosis of the medical condition, Ruhl said she was jolted again when she learned that the pending legislation could cancel the settlement she and her lawyer had worked out with the unnamed companies that made the asbestos.
“I was dumbfounded. I didn’t think they could do this retroactively,” she said.
“We have received a settlement and signed the agreement, but this would cancel it because the money has not been paid yet.”
Besides victims like Ruhl, trial lawyers have a strong reason to oppose the Senate bill. If it becomes law, it would essentially end the asbestos litigation that has proved lucrative for lawyers such as Kazan.
Sen. Orrin G. Hatch (R-Utah), the Judiciary Committee chairman, is the chief sponsor of the Fairness in Asbestos Injury Resolution Act, and he blames trial lawyers for blocking reform.
“Some people are making a very good living off this broken system,” Hatch said during Thursday’s daylong hearing. “They are the ones hurting the system for a quick buck and don’t want their lottery taken away.”
Hatch said the trust fund would benefit asbestos victims because it would be more efficient and reliable than going to court.
“It would be a no-fault system. We would pay all the claims. And they would not face the uncertainties of the tort lottery system,” he said. “It would also wring out these transaction costs.”
He was referring to the lawyers’ fees, which he said can amount to 50% of the total paid by a corporation.
All the committee’s Republicans, with the exception of Jon Kyl of Arizona, voted for Hatch’s proposal. Kyl abstained, and several other Republicans said they worried the fund was overly generous to people who may not have suffered true injuries from their exposure to asbestos.
All the Democrats, with the exception of California’s Dianne Feinstein, voted against the measure.
Several committee Democrats, including Patrick J. Leahy of Vermont and Edward M. Kennedy of Massachusetts, said they liked the idea of a national trust fund, but that Hatch’s plan does not provide enough money for victims.
At the hearing, the panel voted to raise the payment for victims of mesothelioma, which is unique to asbestos exposure, to $1 million. But Kennedy noted that payments to lung cancer victims who have been exposed to asbestos will be limited to $150,000.
“That is outrageous,” Kennedy said. “The real crisis that confronts us is not an ‘asbestos litigation crisis.’ It is an asbestos-induced disease crisis.”
Feinstein said she decided to vote for the bill after she won approval of amendments that increased the compensation for victims. She said she was convinced the current system is not working.
Dozens of businesses have been driven into bankruptcy by asbestos claims. And many victims have been left seeking money through bankruptcy courts.
“Clearly the interest of victims, as well as the interest of companies’ insurers, are best served by a fair bill that can move hundreds of thousands of asbestos cases into a no-fault system where victims will receive adequate remedies without the overwhelming court costs,” Feinstein said.
She noted the bill incorporated a proposal by Sen. Patty Murray (D-Wash.) to outlaw the use of asbestos.
While the bill passed a major hurdle by clearing the Judiciary Committee, a vote before the full Senate has not been scheduled.
Insurers who championed the original proposal turned against the bill Friday because of its soaring cost. The American Insurance Assn. announced it would oppose the bill becoming law unless it was changed significantly.
For many years, the asbestos problem has defied solution.
Twice, lawyers have arranged huge settlements between thousands of victims and dozens of companies that sought to resolve all pending and future claims. In both instances, the Supreme Court voided the settlements and ruled that lawyers cannot cancel claims from future victims who are not part of the deal.
However, the justices urged Congress to pass legislation that would resolve asbestos claims, acknowledging that the courts could be overwhelmed dealing with hundreds of thousands of claims.
But some senators wondered last week whether the trust fund proposal is constitutional.
“We are taking away the fundamental right to a jury trial,” said Sen. Arlen Specter (R-Pa.). “Nine justices will decide whether this is constitutional or not, and it will probably be a 5-4 [vote].”
