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Press Release

Judiciary Committee Conservatives Cast Doubt on S. 852



[W]e continue to hold serious reservations about a number of important aspects of the current legislation.

1. The medical criteria are not sufficient
• S. 852, as written, will result in many individuals receiving compensation who are not, in fact, sick from asbestos exposure.
• In order to ensure that true victims of asbestos exposure are compensated fairly, we believe that the medical criteria should be improved.

2. S. 852 does not provide a complete alternative to litigation
• S. 852 leaves potentially thousands of claims outside of the trust fund and undermines the ability of the fund to operate properly.
• At virtually every turn throughout the life of the fund, the possibility of a claim remaining in the tort system is an option.

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.
• [O]ne of the key avenues for abuses, the ‘‘medical screening’’ programs, remains a part of S. 852.

4. The financial structure of the trust fund still causes us concern
• [W]e are satisfied neither that [S. 852’s] allocations formula (inflows) is fair and adequate nor that the cost of the trust fund (outflows) will be sustainable.
• [Congress] 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.

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 [S. 852’s] 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.
• 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.

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.

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

• [S]upport for the fund remains tepid. In fact, for all its potential benefits, the fund has met resistance from both victims and business groups.
• Some victims do not believe it is fair to cap their potential damages—a common complaint for a no-fault system.
• 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.

In summary, our support for this legislation out of Committee should not be viewed as an indication of its readiness for final passage. 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-relatedinjuries 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.