ADDITIONAL VIEWS OF SENATORS SESSIONS, CORNYN, GRASSLEY, KYL, GRAHAM, BROWNBACK, AND COBURN

The asbestos litigation explosion of recent years has caused untold harm to asbestos victims, has cost billions of dollars and has bankrupted over 70 businesses. The RAND Institute notes that asbestos litigation is `the longest-running mass tort litigation in the United States.' 1

[Footnote] Today, it continues to deny many victims timely compensation, serves as a significant drain on the national economy, and hinders America's competitiveness on the global stage. This albatross should not be allowed to continue.

[Footnote 1: Stephen J. Carroll, Asbestos Litigation, Rand Inst. for Justice, xvii (2005).]

S. 852 represents a step forward in our efforts to craft legislation that would offer a national solution to this problem. The bill includes a number of important improvements over the legislation we considered in the 108th Congress, S. 1125 and S. 2290. These improvements combined with the considerable efforts of the Chairman to advance the bill compelled us to vote it out of Committee.

However, we continue to hold serious reservations about a number of important aspects of the current legislation. These concerns generally can be summarized as follows: (1) the medical criteria as written do not ensure that the trust fund will pay only the claims of individuals who are truly sick from asbestos exposure; (2) the trust fund does not create a complete and permanent alternative to litigation, particularly in that it allows a large number of claims to remain in or return to the courts; (3) the trust fund is not adequately protected from much of the abuses and fraud that has contributed a great deal to the existing situation; (4) it is neither clear that the cost of the trust fund can be sustained nor that the allocations formula is structured fairly; (5) the level of available information for our study and analysis is not sufficient to conduct adequate due diligence; and (6) the trust fund does not enjoy the level of broad support from the victims and the parties who are contributing to it that we would prefer.

1. The medical criteria are not sufficient

Because claimants may suffer from diseases that may or may not have been caused by asbestos exposure, and because asbestos exposure may leave markers without impairment or illness, it is essential that this Fund contains medical criteria and exposure requirements that distinguish claimants, based on medical and scientific standards, who have disease caused by asbestos exposure from those who do not. Unfortunately, S. 852, as written, will result in many individuals receiving compensation who are not, in fact, sick from asbestos exposure.

For example, Level VI provides compensation for claimants suffering from `other cancers', including colorectal, laryngeal, esophageal, pharyngeal and stomach cancer. These cancers commonly affect the general public, and according to the overwhelming weight of the medical evidence, are not caused by exposure to asbestos. 2

[Footnote] In addition, the use of CT Scans for diagnoses is fraught with potential abuse and problems. These and other problems could bankrupt the fund, leaving inadequate funds to compensate those victims who are truly sick from asbestos exposure.

[Footnote 2: See Generally, Goodman, M., Cancer in Asbestos-Exposed Occupational Cohorts: A Meta-Analysis, Cancer Causes and Control, 10: 453-65 (1999).]

In order to ensure that true victims of asbestos exposure are compensated fairly, we believe that the medical criteria should be improved. Doing so would greatly increase the chances of the trust fund's success and help bring resolution to thousands of asbestos victims.

2. S. 852 does not provide a complete alternative to litigation

One of the key benefits of a trust fund should be exiting the current broken asbestos litigation system--one where attorneys' fees and other administrative costs are consuming approximately 58% of all asbestos-related litigation costs. 3

[Footnote] Unfortunately, the current version of the trust fund in S. 852 leaves potentially thousands of claims outside of the trust fund and undermines the ability of the fund to operate properly.

[Footnote 3: Carroll, supra note 1, at 105.]

At virtually every turn throughout the life of the fund, the possibility of a claim remaining in the tort system is an option. At start-up, claimants may choose to stay in court if the trust fund is not certified as operational by the Administrator within a certain time frame. Similarly, rather than putting all claims pending at the time of enactment that do not have a final judgment or verdict into the trust fund, S. 852 leaves many current claims in court. Finally, and potentially most troubling, the current legislation would allow a complete reversion to the tort system in the event the Administrator finds the trust fund is insolvent. Below, we discuss the likelihood, or at least potential, that the fund's viability may be in question, but the prospect of spending billions of dollars to create a federal trust fund only to return to the current, albeit slightly modified, court system is troubling.

Virtually everyone agrees that the current system is badly broken. Accordingly, we would prefer that S. 852, or any trust fund legislation, place as many claimants as possible into the newly created fund in order to prevent their continuation in the current fraudulent, broken asbestos litigation system.

One of the advantages of a no-fault compensation system, such as the asbestos trust fund, is the ease with which claims may be filed. Instead of forcing claimants or their attorneys to fully litigate their claim against the defendant companies, the current trust fund only requires them to submit the requisite paperwork and documentation to the Administrator. While S. 852 limits attorney's fees to 5% of the award paid to the claimant, we believe that an attorney, representing a mesothelioma victim who recovers $1.1 million from the trust fund, should not be entitled to $55,000 in attorney's fees for simply filing paperwork with the Administrator.

3. The trust fund does not sufficiently avoid current fraudulent practices

The level of fraud underlying the current asbestos litigation crisis is well documented and troubling. 4

[Footnote] One of the primary benefits of a trust fund should be eliminating these fraudulent practices from continuing. S. 852 goes a long way toward eliminating those abuses but does not go far enough.

[Footnote 4: Senate Comm. on the Judiciary, 180th Cong., The Fairness in Asbestos Injury Resolution Act of 2003, (Comm. Report 2003) (additional views of Sen. Kyl).]

Specifically, we are very concerned about the potential abuses with regard to silica litigation and the on-going Multi-District Litigation (MDL) in Corpus Christi, Texas. What has transpired there is more than alarming. The details of the fraud and corruption are covered in the additional views offered by Senators Kyl, Cornyn and Coburn within this document. However, it can be summarized by Judge Janice Jack, who is presiding over this litigation, when she referred to `great red flags of fraud' with respect to numerous doctors signing off on claimants' medical records as consistent with diseases related to silica exposure without performing appropriate analysis. 5

[Footnote]

[Footnote 5: Jonathan D. Glater, Civil Suits Over Silica in Texas Become a Criminal Matter in New York, N.Y. TIMES (May 18, 2005).]

The trust fund currently takes some steps to address this specific concern--requiring plaintiffs to demonstrate by a preponderance of the evidence that, in short, they are not trying to `double-dip' and obtain a trust fund award while also pursuing a silica claim through the court system. Our concern is that the current language in the bill is not sufficient. It allows a claimant to show that he would only receive Level One medical monitoring and, thus, not a monetary award, and then be eligible to pursue a silica claim in court. This provision opens the door to extension of the existing fraudulent system.

Finally, we remain concerned that one of the key avenues for abuses, the `medical screening' programs, remains a part of S. 852. While improved in many respects--that is, limiting compensation to Medicare rates, requiring screeners to be approved and to not have excessively profited from screening historically--the mere existence of the medical screening program is troubling. At a lifetime cost of $600 million, this program calls into question the soundness of the trust fund and continues a practice that caused much of the problems we are attempting to solve in the first place.

4. The financial structure of the trust fund still causes us concern

The trust fund depends on a comprehensive understanding of the cash inflows and cash outflows. Unfortunately, while we await the analysis of the CBO, at the present we are satisfied neither that the allocations formula (inflows) is fair and adequate nor that the cost of the trust fund (outflows) will be sustainable.

The allocations to be assessed upon the insurance companies have been left to an insurance commission. While this remains disconcerting to us and many insurance companies, the allocations against defendant companies under the trust fund is particularly troubling. We should never be so careless as to place what amounts to a substantial tax burden on companies without knowing whether this burden is fair and whether it accurately reflects the amount the company would owe under the tort system.

The bill's current funding allocations have the potential to create substantial hardship for companies that have adequately insured themselves against asbestos litigation exposure. Since the fund will strip companies of their insurance coverage and it uses past asbestos expenditures, including those covered by insurance, to determine tier placement, certain companies who have paid no out-of-pocket expenses due to adequate insurance coverage stand to pay substantial sums. For example, the fund's allocations formula will require one company, which has $110 million in total past asbestos expenditures but no out-of-pocket expenses and, it believes, adequate insurance to cover all projected future expenses, to pay $16.5 million per year into the fund equaling $495 million over the life of the fund. Many companies predict that this inequity in funding allocations will drive them into bankruptcy. One of the goals of this legislation is to prevent more companies from going into bankruptcy. In addition, if companies cannot pay their required allocation under the fund, the ultimate viability of the fund may be questionable.

However, our concerns with the outflows or cost of the trust fund center more directly on the effect of medical criteria and the likely number of claimants. As previously discussed, failure to further improve the medical criteria will lead to an increased number of payouts to claimants who are not truly sick from asbestos exposure and, potentially, to the eventual bankruptcy of the fund. In addition, we are concerned that the data we were given regarding claims predictions may be insufficient and outdated. At the present, we are relying solely on one person's projections, those of Dr. Fran Rabinowitz, and the analysis of one company, Goldman Sachs, to determine the total cost of the Trust Fund. Should the claims predictions data, upon which the entire fund is based, prove incorrect; the overall viability of the fund will be jeopardized. Finally, the provisions providing Level IV compensation to residents of Libby, Montana without requiring proof of occupational exposure are problematic and call into question the possibility that other sites throughout the country where significant quantities of asbestos have been mined or processed will qualify, or ask to qualify, for the same benefits. The proposition of this alone could add significant stress to the Trust Fund and potentially lead to its insolvency.

We are also concerned that potential problems created by locating the asbestos trust fund within the Department of Labor will place additional and unnecessary financial strain on the trust fund. As the Department of Labor's experience with the Black Lung Trust Fund shows, housing the asbestos trust fund within the Department of Labor will lead to the inefficient processing of claims and will create an expectation that the federal government guarantees the solvency of the fund. 6

[Footnote] Instead, we believe that a private, non-profit corporation would alleviate these concerns by processing claims quickly and efficiently and by preventing the expectation of a taxpayer bailout should the fund become insolvent.

[Footnote 6: The history of the Department of Labor's Black Lung Trust Fund demonstrates that the risk of a federal government bail-out is very real. The fund, which had access to financing from the Treasury to cover early claims, owed $2.8 billion to the Treasury by the end of 1985. What is worse, any default by the fund in ultimately repaying its debt--which now exceeds $8 billion--will represent an additional charge to taxpayers.]

5. Available information has been insufficient to perform adequate due diligence

One particularly concerning problem has been the lack of information that is available to the Committee with regard to the underlying financial analysis of the trust fund. We have repeatedly requested more information on the financial analysis upon which this trust fund is based. The proponents of the trust fund have provided us with only cursory data. We have inadequate information regarding the identity of the companies required to pay into the fund and their allocations; the past asbestos expenditures of those companies; and whether these companies have received notification of their impending liability. We, as a Congress, should take great care not to enact legislation of this magnitude without performing due diligence adequate enough to ensure that it is based on sound financial analysis.

6. Trust fund support should be stronger among victims and contributing companies

While the potential overall economic benefit to ending the current abusive litigation environment is readily apparent and while the goal to streamline and improve compensation for victims is laudable, support for the fund remains tepid. In fact, for all its potential benefits, the fund has met resistance from both victims and business groups.

Determining the level of support for the trust fund is a difficult task. Among victims' groups, support for the trust fund varies. Some groups are supportive to be sure, but we have received many letters of concern as well. Some victims do not believe it is fair to cap their potential damages--a common complaint for a no-fault system. Still, others recognize that a no-fault system will increase the likelihood they will receive compensation quickly and efficiently.

Among those paying for the fund, again, opinions are mixed. The fund imposes a significant assessment (only semantically different from a tax) upon American businesses to pay for it. Yet, many companies are so desperate for reform that they would support virtually any reform we might enact. Conversely, numerous companies are either opposed or, at best, neutral to our consideration of S. 852. Among the most important concerns are the start-up of the fund and the associated `leakage' from the fund; concerns about the fairness of the allocations formula; concerns about the medical criteria and how the costs associated with that criteria will impact the viability of the trust fund; and concerns about the lack of subrogation.

For a trust fund of this magnitude, we would prefer to see a much broader spectrum of support among victims and those contributing to the Fund. After all, while these groups often have competing interests, they are the intended beneficiaries of the legislation and we would hope that we could engender as much support as possible from them.

In summary, our support for this legislation out of Committee should not be viewed as an indication of its readiness for final passage. Instead, it represents a commitment to continue working to improve it. There are two indispensable characteristics to enacting any type of asbestos litigation reform: predictability and finality. The reform must provide predictability for victims of asbestos-related injuries as well as for the insurers and defendant companies paying for it. In addition, it must provide finality to those paying for it by ensuring that they will not be forced to pay under dual tracks or into the trust fund only to revert back to the same broken tort system. Unfortunately, at this time, this bill provides neither predictability nor finality to the extent needed to ensure the viability of the fund.

While we support the admirable goal behind this legislation--enhancing benefits to victims who are truly sick from asbestos exposure by compensating them generously, quickly and efficiently and by limiting administrative costs and attorney's fees while providing finality for American businesses--we believe that a significant number of important issues must be addressed for it to be successful.
Jeff Sessions.
John Cornyn.
Charles E. Grassley.
Jon Kyl.
Lindsey O. Graham.
Sam Brownback.
Tom Coburn.