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A large volume of litigation has been occasioned by occupational exposure to asbestos, which may ultimately result in payments of $200 billion or more and has already bankrupted numerous companies. This litigation "explosion" has led to a number of innovations in legal process, but some of the settlements that seemed most promising were overturned by the Supreme Court, with the Court suggesting that the situation "calls for national legislation."

Bills in the 108^th Congress dealt with asbestos in various ways. H.R. 1586 (Cannon), H.R. 1737 (Dooley) and S. 413 (Nickles) would conserve the resources of defendant corporations - many of which have been bankrupted by asbestos cases - so that funds could be applied first to workers who are already sick. This would be done by postponing the cases of those who show early symptoms of asbestos disease but are not yet impaired.

There were also bills - H.R. 1114 (Kirk) and S. 2290 (Hatch) - that would try to resolve the question of asbestos litigation comprehensively. S. 2290 received the most attention, was reported out by the Senate Judiciary Committee and debated on the floor. The House did not act on any of these asbestos bills. S. 2290 would spell out uniform criteria for diagnosing and classifying asbestos diseases in 10 categories, each with a specified level of compensation, ranging from $20,000 to $1 million. It would establish a fund through which all claims are paid, financed by assessments on defendant companies and their insurers. Each of the largest firms subject to assessment would be responsible for paying up to $25 million per year for 27 years. The assessments (including those of insurers) could eventually total $108 billion, with provisions in the measure for perhaps $30 billion more if needed.

Key points of S. 2290 that were not resolved include the adequacy of the funding scheme, the levels of compensation, medical criteria (especially as regards smoking history), and transition issues. In the 109' Congress, the chairman of the Senate Judiciary Committee has continued to encourage negotiations with the goal of a revised bill that can command broad support.

This report discusses such issues thematically, and will be updated to reflect major legislative actions. A section-by-section analysis of S. 2290 may be found in CRS Report RS21815, Fairness in Asbestos Injury Resolution Act of 2004.

Contents

Scope of Litigation ................................................. 2

Procedural Improvisation ............................................ 2

Policy Alternatives ................................................. 4

Status Quo ...................................................4

Changes in Tort Law ...........................................5

Proving "Physical Impairment”..................................... 5

Administrative System .......................................... 6

S. 2290 - Points of Debate .......................................... 6

Funding Adequacy .............................................7

Compensation Adequacy ........................................8

Medical Criteria .............................................. 10

Disputed Categories ....................................... 10

The Tobacco Question .....................................10

Diagnostic Quality Control ................................. 11

Transition Issues .............................................12

Start-Up ................................................12

Status of Current Settlements ............................... 12

Cash Flow Timing ........................................12

List of Tables

Table 1. Asbestos Disease Categories and Compensable Amounts ........... 9

Asbestos Litigation: Prospects for Legislative Resolution

Asbestos has been widely used as an insulation material, friction product (e.g., in brakes and clutches) and textile reinforcement, due to its unique combination of strength, flexibility and resistance to heat and corrosion. Over the years, scientific studies have increasingly implicated the material as a cause of debilitating, fatal lung diseases. Protective standards have been adopted and progressively tightened, but human exposures continue to occur through ongoing use and from legacy buildings and equipment.1 Moreover, cases of asbestosis, lung cancer and other diseases will be emerging for years to come because they occur after a long latency.

Although most cases of asbestos-related disease have occurred from occupational exposure, few of the affected workers have been able to obtain medical and financial assistance from their employers under state workers compensation law. However, many have successfully sued the manufacturers of asbestos under claims of products liability, to such an extent that many large firms have been forced into bankruptcy. This litigation "explosion" has led to calls for legislation that would expedite the settlement process through administrative alternatives.

The legislation that advanced the farthest was S. 2290 in the 108' Congress, which was reported by committee and debated on the floor (although withdrawn after failing a test vote). Through the rest of 2004 the Senate leadership continued negotiations on the bill, and the chairman of the Judiciary Committee in the 109' Congress (Mr. Specter) has encouraged further negotiations among interested parties, expressing the intention of introducing a compromise measure promptly. The most difficult of the disagreements over S. 2290 (discussed further below) still await resolution.

This report describes how the asbestos litigation process has evolved, and then discusses some legislative "fixes" that have been tried or proposed. Finally, we discuss more extensively S. 2290, the bill receiving the most attention in the 108' Congress. The discussion is thematic, highlighting the sub-issues remaining most in dispute. For a section-by-section explanation of S. 2290, see CRS Report RS21815, Fairness in Asbestos Injury Resolution Act of 2004, by Henry Cohen.

1The Environmental Protection Agency issued a regulation in 1986 that would have banned virtually all major uses, but most of the rule was overturned by the Fifth Circuit Court of Appeals (Corrosion-Proof Fittings, 947 F.2d 1201). A stand-alone bill in the 108th Congress, S. 1115 (Murray), would have mandated such a ban (with a procedure for EPA to allow exceptions). One of the bills for resolving litigation, S. 2290 (Hatch), would also include a ban on future usage. Current regulatory standards are described in CRS Report RS21042, Asbestos: Federal Regulation of Uses, by Edward Rappaport.

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