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Washington Examiner
February 6, 2006

A fairer way to settle asbestos cases

Since the 1970s, more than 850,000 individuals have filed lawsuits claiming harm from exposure to asbestos. More than 8,400 corporations have been named as defendants so far, and more than 70 have gone bankrupt.

Asbestos litigation is the longest-running and, arguably, the most abusive mass tort in U.S. history. At long last, the full U.S. Senate is poised to take up legislation that offers a solution: S 852, the FAIR (Fairness in Asbestos Injury Resolution) Act. A companion bill is working its way through the House.

The FAIR Act would halt all litigation, move asbestos claims out of the tort system, and compensate victims from a trust fund into which defendants and insurance companies pay a share. The fund would be administered under the Department of Labor. It's a controversial solution with many legitimate debating points:

Size of the trust fund. How much will be needed to pay legitimate claims over the next 30 or 40 years? The Congressional Budget Office estimates $129 billion to $150 billion. The RAND Institute for Civil Justice estimates $130 billion to $195 billion in future claims. The economic consulting firm of Bates White puts the range at $300 billion to $695 billion, but critics say the Bates study greatly overestimates the number of people likely to file claims. The FAIR act provides a trust fund of $140 billion.

Fairness. Who gets paid, and how much, from the trust fund? Ideally, all sick people — and only sick people — will qualify for compensation, and administrative costs will be kept reasonably low. Neither ideal comes close to being realized under the current tort system.

RAND estimates that through 2002, total spending on asbestos claims exceeded $70 billion. Only 42 percent of that, $30 billion, was eventually paid to 730,000 claimants. The rest was eaten up in litigation costs. Moreover, the great majority of claimants (between two-thirds and 90 percent, according to RAND) were unimpaired by any illness.

To address that problem, the FAIR Act sets out medical criteria that claimants must meet to qualify for compensation. Specifying medical criteria is controversial, of course. If the standards are too strict, deserving claimants might not qualify. If too loose, the criteria will allow uninjured people to collect benefits. As for legal costs, the FAIR Act limits lawyers' fees to 5 percent. Because the no-fault trust fund would be administered by a presumably impartial master, tens of billions of dollars in legal costs would be eliminated.

If Congress fails to enact a legislative remedy, another dozen or so major corporations will probably go bankrupt. Another $35 billion to $50 billion will be placed in trust funds. And trial lawyers will have that much more incentive to file lawsuits and collect big contingency fees.

This is a huge and immensely complex bill, running to almost 400 pages. For all its difficulties, however, the trust-fund approach under the FAIR Act is the least objectionable way to halt tort litigation that has incurred monumental costs — and been grossly unfair to claimants and defendants alike.

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