Report Sees Insolvency for Eagle-Picher by ’92 : Litigation: A court-ordered study says the company is struggling under the weight of thousands of asbestos liability claims.

Eagle-Picher Industries Inc. has been financially devastated by liability for asbestos disease claims and faces insolvency by the end of 1992, a court-ordered report released Friday said.

The report by former federal judge Marvin E. Frankel marked a major step in implementing a national class action for thousands of lawsuits filed against companies with insufficient assets to pay asbestos claims.

The 24-page document was a stark portrayal of a company struggling under the weight of asbestos claims, which form the biggest product liability matter in U.S. history. Eagle-Picher, based in Cincinnati, is a maker of industrial products that used asbestos widely for years.

Frankel said Eagle-Picher has more than 64,000 asbestos claims pending with another 20,000 being filed annually. The company’s 1988 forecast of $613 million in asbestos liability was too optimistic, he said, and it faces a cash shortfall of up to $75 million by 1992.

“There is, in a word, a clear danger for disaster for Eagle-Picher within the next two years,” the report said. “There is a strong prospect of insolvency by the end of 1992.”

Frankel also said there is a “clear risk” the company will not be able to pay future claimants seeking to recover for asbestos injuries or deaths. Inhaled asbestos fibers can cause lung cancer and other respiratory ailments many years after the fact.

“At this time Eagle-Picher’s options appear limited,” Frankel said. “Aggressive settlement of claims and aggressive litigation both require cash flow beyond current expectations.”

Frankel was appointed as a special master in the case last month by U.S. District Judge Jack B. Weinstein. Frankel said Eagle-Picher met legal requirements for its claims to be converted into a class action.

Weinstein has said he plans to pool the resources of Eagle-Picher and up to five other companies that don’t have the money to fight cases in court or pay present and future claims.

Weinstein’s effort is part of a three-tiered plan to resolve 20 years of contentious litigation and clear state and federal courts nationwide of some 90,000 asbestos lawsuits.

The judge has said he expects to combine funds from Eagle-Picher and the other companies with money from the Manville trust to settle claims.

Frankel said Eagle-Picher has paid out $5,990 per claim to settle about 64,000 claims to date, sharply higher than 1988 estimates. It also doled out $35 million on legal expenses last year while generating $27 million less from operations than projected.

Eagle-Picher has been forced to sell off businesses to meet its asbestos claims, but even the recent divestiture of three divisions fell short by $12.3 million. Also, its remaining insurance for fiscal 1990 and 1991 is just $8 million, $17 million less than anticipated.

“The result is a picture . . . that is fraught with risks going to the company’s very survival, let alone its ability to meet its asbestos liabilities,” Frankel said.