Segal McCambridge Legal Blog

Posted By:
May 11, 2012

Reuters: The long, lethal shadow of asbestos


The entire article can be found here

By Ben Berkowitz

BOSTON (Reuters) – As anyone in the United States with a TV or Internet connection probably knows, lawyers want you if you’ve been exposed to asbestos, and they’re paying to get you.

At one point earlier this year, 15 of the 100 most expensive keyword search phrases for click-through ads on Google contained the word “mesothelioma,” the deadly cancer caused by asbestos exposure. The single most expensive phrase, online marketing firm SpyFu reported, was “Florida mesothelioma lawyers,” at $177.74 per click.

The hard sell reflects a troubling truth: Half a century after the first wave of lawsuits were filed for illnesses linked to exposure to asbestos and 40 years after new regulation sharply curtailed use of the insulating and fire-resistant mineral, the asbestos-litigation business is booming.

Some of the country’s biggest and best-known law firms — many of them handling asbestos cases almost exclusively — say the number of lawsuits filed annually, after falling off from a peak, has picked up in recent years. More important, they say, is that payouts for plaintiffs who win their cases have soared.

“It’s easy to see why they’re buying time on CNN and the like. All you need to get is a couple of claims in to make that commercial buy worth the money,” says Marc Mayerson, a litigator with the Orrick law firm in Washington and a professor of insurance law at George Washington University, who has represented defendants in asbestos-related cases since the 1980s.

No central registry keeps track of asbestos lawsuits filed yearly or their outcomes. A tabulation of jury verdicts and settlements, based on an average of all asbestos-related lawsuits reported in Westlaw Journal Asbestos, a Thomson Reuters publication, found that the average award was $6.3 million in 2009, $17.6 million in 2010 and $10.5 million in 2011 — amounts much greater than what lawyers say was the norm more than a decade earlier.

Clearly, mesothelioma and other asbestos-related payouts persist at levels companies and their insurers never expected. Insurers have been adding hundreds of millions of dollars to their asbestos-claim reserves. Travelers Cos, in its annual report for 2011, echoed its peers when it cited a “high degree of uncertainty with respect to future exposure from asbestos claims.”

Meanwhile, the dozens of trusts set up by companies forced into bankruptcy by asbestos liabilities are facing such heavy claims that many are paying only a few cents on the dollar. Some have had to suspend settlements. That has created inequality among victims.

UNEXPECTED TARGETS

Some doctors and lawyers attribute the recent rise in asbestos suits to the unexpected emergence of “asbestos wives and daughters,” women exposed to the mineral by male relatives who worked in asbestos-heavy industries.

David Sugarbaker, a thoracic surgeon at Brigham & Women’s Hospital in Boston who is highly regarded among mesothelioma patient groups, says he’s been seeing more women among new patients every year, but “nobody has been able to quite pin it down.”

No hard data show that the incidence of mesothelioma among women has risen significantly. Indeed, the incidence of the disease overall remained largely flat at about 1 person per 100,000 from 1980 to 2008, while the rate for women held steady at roughly one-sixth that of men, according to the National Cancer Institute.

No matter who is doing the suing, lawyers say plaintiffs are increasingly targeting a new set of deep-pocketed “tertiary defendants” — companies that used asbestos products manufactured by others or were otherwise indirectly linked to asbestos. Such companies can now “find themselves in the midst of a lawsuit where the jury verdicts in the plaintiff-favorable jurisdictions are probably averaging $15 million to $25 million each,” Orrick’s Mayerson says.

Nearly everyone involved in asbestos litigation agrees on one dismaying fact: Most plaintiffs today are sick.

About a decade ago, “unimpaired” plaintiffs — people who had some asbestos exposure but weren’t sick and had no evidence they were getting sick — accounted for “literally hundreds of thousands of claims,” says Mike Angelides, managing partner of the Simmons Law Firm, which by its own estimate accounts for 20 percent of all asbestos-related lawsuits filed in the U.S. every year.

Matt Bergman, a Seattle attorney who specializes in asbestos litigation, says the number of lawsuits probably peaked in 2005, when he estimates 16,000 cases were filed, most from people without any illness.

As courts began to take a dim view of such suits, lawyers focused on sick plaintiffs. Now, Bergman says, only about 2,000 new cases are filed each year, most of them to do with mesothelioma. “I think the system works best when the people who are bringing the cases are the people suffering the most,” he says.

The Institute for Legal Reform, an arm of the U.S. Chamber of Commerce that has been a vehement critic of asbestos litigation, recognizes the shift. In recent years, “there were more cases with more people that were more severely impaired, and the numbers on those claims went up,” says Lisa Rickard, president of the institute.

Angelides says his firm estimates the number of new cases filed a year at around 1,800, way down from the peak but up from more recent years. “Everybody wishes these claims would go down,” he says, “but it’s not time yet.”

DANGEROUS HUGS

Mesothelioma is a particularly lethal cancer. It arises in the delicate tissue that lines body cavities, most often around the lungs, but also in the abdomen and elsewhere.

Years of research have shown that exposure to asbestos — defined roughly as two weeks of constant contact, usually in the air in a workplace — is a primary cause of mesothelioma. (Exposure also causes asbestosis, a chronic, potentially life-shortening lung disease.)

Once exposed, a person has a one-in-20 chance of developing mesothelioma. The average patient is dead within two years of diagnosis, and more than 90 percent are dead within five years, according to the National Cancer Institute.

The reason people who were exposed in the 1960s and 1970s are still being diagnosed is mesothelioma’s long latency period —- the time between exposure and manifestation of disease -— of between 30 and 50 years. Thus people who worked in tainted industrial settings in the 1960s are still getting ill, as are some family members.

Heather Von St. James, a resident of St. Paul, Minnesota, in her early 40s, is an asbestos daughter.

Many nights while growing up, she says, she greeted her father with a hug at the door when he returned home from his job sanding drywall, a fine white dust powdering his jacket. She often put on that jacket before running outside to feed her pet rabbits.

In 2005, just after the birth of her daughter, she was diagnosed with mesothelioma. She immediately remembered those lawyers’ TV ads she had seen late at night. “I called them at 1 o’clock in the morning when I got the diagnosis because I thought, ‘I’ve got nothing to lose,’” she says.

To fight her disease, she had to have a lung removed. That left her chronically weak and easily fatigued, unable to care for her daughter or continue working as a hair stylist and salon owner. She considers herself lucky, compared to other mesothelioma victims, but hesitates to describe herself as “cured.”

The court that heard her lawsuit estimated that the disability caused by her mesothelioma cost her more than $5 million in lost lifetime earnings. “We didn’t get $5 million. It can never replace what I lost,” says St. James, who is bound by confidentiality agreements not to disclose whom she sued or the precise amount she received. Court records indicate that 3M Co was a defendant — not one closely associated with the decades-long morass of asbestos litigation.

3M did not respond to a request for comment.

LIKE “DEATH AND TAXES”

Asbestos — actually a family of half a dozen fibrous minerals — has been valued since Roman times for its heat-resistant properties. For much of the 20th century it pervaded construction sites, ship and rail yards, and many industrial settings. Canada, Russia and South Africa have been major producers, as was the United States.

Concerns about the health risks of asbestos exposure were raised as early as the 1920s. In a September 1958 memo that plaintiffs lawyers are wont to cite, a National Gypsum Co executive wrote: “We know that you will never lose sight of the fact that perhaps the greatest hazard in your plant is with men handling asbestos. Because just as certain as death and taxes is the fact that if you inhale asbestos dust you get asbestosis.”

The first asbestos-related personal-injury claims popped up in federal courts in the 1960s, but asbestos use continued. According to the U.S. Geological Survey, consumption of asbestos in the United States peaked in 1973 at 803,000 metric tons, out of global production of around 4.2 million metric tons.

Within a few years, mounting litigation, as well as scientific evidence linking asbestos to disease, prompted new government and industry regulations on safe handling and use of the mineral. Since 1973, according to the USGS, U.S. consumption has fallen 99.9 percent, though global use is down only around 50 percent.

In the ensuing decades, asbestos litigation overwhelmed one company after another. By government estimates, about 100 companies have been forced into bankruptcy proceedings because of asbestos liabilities — including construction-materials and industrial heavyweights such as Johns Manville (now a part of Berkshire Hathaway Inc), USG Corp and Owens Corning.

The U.S. Bankruptcy Code, amended specifically for the purpose, allows a company to put current and future asbestos liabilities in a trust, fund the trust with certain assets, and walk away to start fresh. Trust administrators determine whether a claim is valid and pay out accordingly. Their decisions can be appealed, but generally, trust claims are more open-and-shut than court litigation.

Each trust values claims differently. The Johns Manville trust values mesothelioma at $350,000, while the Owens Corning trust values it at $215,000, says Steve Kazan, managing principal at Kazan, McClain, Lyons, Greenwood & Harley in Illinois, who litigated his first asbestos case in 1974 and has kept at it since. None of the trusts, lawyers say, come close to paying what the courts do.

The problem for the trusts — and for claimants — is that as claims persist, many of the trusts have to pay out cents on the dollar for each valid claim in order to save for future claims.

Take the example of the Johns Manville trust. In the 23 years since it started, the Manville Personal Injury Settlement Trust has received more than 878,000 claims — 10 times the number initially predicted — and made payments nearing $4.23 billion. The Manville trust’s most recent filing with the U.S. Bankruptcy Court in Manhattan shows claims rose 57 percent in the first nine months of 2011 from a year earlier, to 27,300. Over that time the trust’s assets fell more than 12 percent, to $925.6 million.

As a result, the trust is now paying out approved claims at a rate of 7.5 cents on the dollar. A person with an approved $100,000 claim would receive $7,500.

The USG trust cut its payout rate to 35 cents on the dollar in April 2010 and lowered it again to 30 cents in November 2010. The NGC Bodily Injury Trust, which handles National Gypsum Co claims, warned last November that claim filings were running much higher than expected and cut payments to 18 cents on the dollar.

Last January, the C.E. Thurston & Sons Asbestos Trust suspended all new settlement offers while it recomputed how much it can afford to pay while retaining enough for the future, the trust said on its website.

Reuters sought comment by phone or email from trustees or lawyers for half a dozen asbestos trusts; none responded.

THE INSURERS PAY

Unlike the trusts, the insurance industry thought it had largely solved its asbestos problem through big increases to reserves 10 years ago. It misjudged. “All these insurance companies have dedicated asbestos units, and they’re staffed and they’re busy,” says Larry Reback, an insurance broker with Integro in San Francisco.

Last year, when insurers AIG and The Hartford announced additions of $1.3 billion and $290 million, respectively, to their asbestos reserves, the companies blamed tertiary defendants that never anticipated litigation and now are being sued. AIG and Hartford have repeatedly declined to comment on the additions to their reserves.

Major oil companies are on the list, as people who were working decades ago challenge what the companies knew about asbestos safety at the time. Automakers are being hit with asbestos lawsuits, too, largely related to the asbestos lining in many vehicle brakes. Just this month a federal appellate court said lawsuits could proceed against drugmaker Pfizer Inc over asbestos-linked materials a subsidiary made a generation ago. “We strongly dispute” those lawsuits, Pfizer said.

In February, Travelers said it put $175 million into its asbestos-claim reserves in 2011, up 25 percent from 2010, citing more litigation and larger payouts because of those lawsuits. While announcing an increase in its own reserves, MetLife said in August that it saw asbestos-related claims rise 11 percent in the first half of the year after dropping steadily from 2003 through 2010.

In 2009, A.M. Best, the major rater of insurers, raised its estimate of future industry asbestos liabilities to $75 billion from $65 billion. The number may rise again in the next year, mainly because of mesothelioma claims, says Brian O’Larte, an A.M. Best analyst in New Jersey. All told, by its assessment, the industry is about 4 percent underfunded for the $75 billion in liabilities it faces.

Insurers keep assuming, mistakenly, that liabilities will taper, O’Larte says. “Every time they do a ground-up study, they say, ‘We got it right this time.’” he says. “We don’t assume that.”

(Editing by John Blanton and Prudence Crowther)Reuters


Posted By:
April 30, 2012

Exposure to asbestos allegedly related to an increased risk of coronary artery disease


Source: Science Codex
Asbestos workers at significantly increased risk of heart disease/strokes
Workers exposed to asbestos as part of their job are at significantly greater risk of heart disease and stroke than the general population, finds research published online in Occupational and Environmental Medicine.
Women seem to be at greater risk than men, the research indicates.
It is well known that asbestos workers are already prone to serious lung disease, such as mesothelioma and asbestosis, as a direct result of their exposure to asbestos fibres.
The researchers set out to explore the impact of asbestos as an inflammatory agent on the risk of heart disease and stroke, given that inflammation is now known to have a role in cardiovascular disease.
They analysed cause of death among just under 100,000 asbestos workers taking part in regular voluntary health monitoring and answering questions on levels of exposure for the Asbestos Workers Survey.
The average monitoring period was 19 years, with the average age on the date of the first medical examination being 35.
Most of the men taking part in the survey worked in asbestos removal while most of the women worked in manufacturing.
Over half of the men (58%) and women (52%) were smokers at the time of their first medical examination, proportions which had fallen only slightly (55% and 49%) at the time of their last medical examination. Smoking is a known risk factor for heart attack and stroke.
The research team compared the number of deaths from stroke and heart attacks among these workers between 1971 and 2005 against the number that would be expected to occur in the general population (standardised mortality ratios).
During the study period, 15,557 people died from all causes. Stroke accounted for just over 1000 deaths while heart disease accounted for another 4000.
Based on the standardised mortality ratios, asbestos workers were significantly more likely to die of cardiovascular disease than the general population, even after taking account of smoking.
Male asbestos workers were 63% more likely to die of a stroke and 39% more likely to die of heart disease. The corresponding figures for women were, respectively, 100% and 89%.
And there was some evidence that the longer the duration of exposure to asbestos, the greater was the likelihood of dying from heart disease, even after taking account of smoking.


Posted By:
April 27, 2012

Retrial of $322M Verdict results in defense win for Union Carbide



Company wins asbestos suit on 2nd try

JACKSON, Mississippi — An asbestos lawsuit that once resulted in a $322 million verdict for a Mississippi man has turned in favor of the company he sued.

Thomas Brown’s lawyers had called the verdict last year the largest asbestos award for a single plaintiff in U.S. history. But it wasn’t long before the Mississippi Supreme Court removed the judge in the case for allegedly not disclosing his parents had been involved in similar asbestos litigation.

A specially-appointed judge, William Coleman, threw out the verdict and ordered another trial. The lawsuit was moved to Jones County, where a jury on Wednesday ruled in favor of Union Carbide Corp.

Brown, of Brookhaven, claimed he inhaled asbestos dust while mixing drilling mud manufactured by Union Carbide. He said he was required to take oxygen 24-hours a day.

“Eight experts, including an independent medical examiner, testified at trial that Mr. Brown, like many plaintiffs who have asserted similar asbestos allegations, did not have an asbestos-related disease caused by UCC,” company spokeswoman Sarah Opperman said Friday in a statement.

“UCC is gratified that the jury carefully considered the evidence and reached this unanimous decision,” she said.

Brown’s Dallas lawyer, Allen Hossley, also didn’t immediately respond to a message requesting comment.

After the first trial and record verdict, Union Carbide asked Smith County Circuit Judge Eddie Bowen to toss out the award. They also asked Bowen to step down from the case. When Bowen didn’t respond, Union Carbide went to the Supreme Court and asked the justices to remove him.

Union Carbide claimed Bowen was a practicing attorney when his father and mother sued Union Carbide for $1 million. Union Carbide argued that Bowen’s bias and prejudice against the company was clear from his rulings, comments in front of the jury, and his coaching of Brown’s attorneys in questioning witnesses.

Union Carbide is a wholly owned subsidiary of The Dow Chemical Company, according to its website, with over 2,400 employees. Its corporate center is in Houston and it has other locations in Texas, New Jersey, Louisiana and West Virginia.


Posted By:
January 27, 2012

Wisconsin appeals court reverses $1.5 million asbestos award


The estate of a man who died from malignant mesothelioma did not produce enough evidence to prove he was exposed to the asbestos-containing brake shoes supplied by the defendant.

By Joe Forward, Legal Writer, State Bar of Wisconsin

Jan. 24, 2012 — In a recent decision, a Wisconsin appeals court reversed a $1.5 million damages award against a brake-shoe supplier whose product contained asbestos, concluding the evidence was insufficient to prove causation.

John Pender worked as a painter and glass setter for 41 years, from 1952 to 1993. In 2006, he was diagnosed with malignant mesothelioma and died shortly thereafter.

Pender's estate sued various product manufacturers based on negligence and strict products liability, claiming the brake shoes they supplied to Pender's employer, Harnischfeger Corp., contained asbestos that created an asbestos-laden dust during the grinding process.

Pneumo Abex LLC, a brake shoe supplier, was one of the manufacturers. Abex did not dispute that its product contained asbestos. But in Estate of John Pender v. Pneumo Abex LLC, (Jan. 18, 2012), the District I Wisconsin Court of Appeals agreed with Abex that the estate did not produce sufficient evidence to prove Pender had actual exposure to Abex's product.

The record indicated that Abex supplied brake shoes to Harnishfeger Corp. while Pender worked there, but there was insufficient evidence that Abex's brake shoes were supplied to the particular plant where Pender worked.

Harnishfeger had several plants in Milwaukee, and nine different companies supplied brake shoes to the company for a 20-year period. The other suppliers that Pender's estate sued were dismissed at the summary judgment stage. At trial, Abex stood as the sole defendant.

A jury found Abex liable on theories of both negligence and strict liability, awarding damages of nearly $1.5 million. But the appeals court ruled the case was over at summary judgment.

"We would have to pile inference upon inference in order to conclude that Pender was exposed to Abex's brake shoes while working at the National Avenue plant," wrote Judge Kitty Brennan.

"The evidence fails to take Pender's alleged exposure outside the realm of speculation and conjecture." The court noted a lack of evidence that Abex's brake shoes were ever delivered to Harnishfeger's National Avenue plant specifically, or were ever present or grinded there.

"The evidence presented to the trial court created on a 'mere possibility' of causation, which is not enough to survive summary judgment," the appeals court concluded.

The original article can be found here


Posted By:


California court upends $600M Thorpe Insulation Asbestos Trust


From Courthouse News Service

http://www.courthousenews.com/2012/01/24/43302.htm

 

Insurance companies can challenge a $600 million trust created to settle thousands of asbestos-related claims against a California insulation company, the 9th Circuit ruled Tuesday.
     Burdened by some 2,000 asbestos-related lawsuits and with more on the horizon, Thorpe Insulation and its subsidiary, Pacific Insulation, filed for Chapter 11 bankruptcy protection in 2007.
     A family-owned company, Thorpe installed and removed asbestos-insulation products in Southern California from the late 1940s to the early 1970s in both industrial and commercial buildings. During the last 30 years, it has faced about 12,000 lawsuits for wrongful death and personal injury; since 1978, its insurers have paid out more than $180 million defending and settling such claims, according to the ruling.
     A Los Angeles federal judge approved a reorganization plan for the companies in 2009 that established the Thorpe Insulation Settlement Trust to handle present and future asbestos-related claims. Thorpe’s settlements with 13 insurers funded the trust with more than $600 million in cash and securities, the ruling states.
     But objections came from insurance companies that had refused to settle with Thorpe – Continental Insurance Co., National Fire Insurance Co. of Hartford, Motor Vehicle Casualty Co., Central National Insurance Co. of Omaha and Century Indemnity Co. Among their various claims, the insurers said that the court approved a settlement built in bad faith by attorneys with conflicts of interest.
     U.S. District Judge Dale Fisher affirmed the plan nonetheless, finding that it pre-empted any state-law contracts among the non-settling insurance companies. At any rate, those companies did not have standing to challenge the plan in bankruptcy or federal court because it was “insurance neutral, Fisher said.
     But the federal appeals court in Pasadena reached a different conclusion. Though the three-judge panel agreed that the plan overrides state-level contracts, it reversed as to standing Tuesday
     ”Appellants argue that the plan is not insurance neutral because of possible preclusive effects of the plan, because they are responsible for claims channeled to the trust, because the trust permits direct file suits against appellants, because they are a contingent beneficiary of the trust, and because the plan and trust distribution procedure can be changed without court supervision,” Judge Ronald Gould wrote for the unanimous panel. “We conclude that the plan may economically affect appellants in substantial ways. A plan is not insurance neutral when it may have a substantial economic impact on insurers.”
     ”Because the plan had likely effects that would increase economic exposure of the insurer appellants to asbestos claimants, they had a right to be heard fully and fairly before the plan was finalized,” Gould added.
     On remand, the District Court should “return the case to the bankruptcy court to give appellants the opportunity to present their proof and argument.”
     As the plan is already in motion, Gould acknowledged that this decision throws a wrench into the proceedings.
     ”There is no entirely tidy way to resolve this case because the plan has proceeded without stay and without full input from insurer parties who will be economically affected by the plan,” he wrote. “But we have concluded that the starting place is for us to reverse the judgment of the District Court, and to remand to the District Court with instructions that it remand to the bankruptcy court to permit appellants to submit their proof on all issues they previously preserved.”
     No one with the Thorpe Insulation Settlement Trust was immediately available for comment. 


Posted By:


New York Court affirms award for Travelers Insurance in asbestos coverage dispute


The decision can be found at http://www.nycourts.gov/reporter/3dseries/2012/2012_00421.htm

From http://newsandinsight.thomsonreuters.com/Legal/

A New York appellate court affirmed a $420.4 million ruling in favor of insurer Travelers Cos, handing it a victory in one of the longest-running and most complex asbestos-related litigations in history.

The dispute has to do with the obligations of certain reinsurers to Travelers, which joined in payments of nearly $1 billion to cover asbestos claims against the company Western MacArthur. Travelers subsequently sought to recover some of its payments from its reinsurance companies.

Among those reinsurers is the U.S. unit of industry leader Munich Re and units of the insurer and reinsurer ACE Ltd. A spokeswoman for Munich Re Americas declined to comment. An ACE spokesman could not immediately be reached for a comment.

In October 2010 a lower New York court ruled that the reinsurers were obliged to help cover Travelers. That ruling was affirmed on appeal on Tuesday.

The Appellate Division, First Department, ruled 4-1 that the reinsurance companies were bound by a concept known as the “follow the fortunes doctrine,” which holds that reinsurers share the burdens taken on by the insurance companies with which they do business.

The appellate court found that the lower court “correctly determined that the follow-the-fortunes doctrine required defendants to accept the reinsurance presentation made by (Travelers unit) USF&G.”

A Travelers spokesman could not immediately comment on the ruling.

The facts behind the case date to 1948, when USF&G first wrote a liability insurance policy for Western Asbestos Co. By the late 1970s, people harmed by asbestos began to sue Western Asbestos’ successor company, Western MacArthur, which in 1993 sued USF&G and two other insurers seeking indemnification.

In 2002, the sides reached a settlement, which resulted in Western MacArthur going into bankruptcy. USF&G then sought indemnification from its reinsurers.

The one dissenter in Tuesday’s ruling was Justice Sheila Abdus-Salaam, who said there was a genuine dispute as to whether some of the settlement USF&G reached with Western MacArthur was subject to the reinsurance treaties.

Besides the length of the litigation, the case is notable because of the high-profile law firms involved. Travelers was represented on the appeal by Simpson Thacher & Bartlett, while Wachtell, Lipton, Rosen & Katz represented Munich Re and Boies, Schiller & Flexner represented ACE.

The case is United States Fidelity & Guaranty Company vs. American Re-Insurance Co, New York Supreme Court, Appellate Division, First Department, No. 604517/02.

For American Re-Insurance Company: Herbert Wachtell of Wachtell, Lipton, Rosen & Katz.

For Excess Casaulty Reinsurance Association and OneBeacon America Insurance Company: Kathleen Sullivan of Quinn Emanuel Urquhart & Sullivan.

For ACE Property & Casualty Company: George Carpinello of Boies, Schiller & Flexner.

For respondents: Mary Kay Vyskocil of Simpson Thacher & Bartlett


Posted By:
October 20, 2011

More follow-up on asbestos bankruptcy trusts


Two articles from Law.com and Forbes.com on the recent GAO report detailing the secrecy issues surrounding asbestos bankruptcy trusts

LAW.com: GAO Reports Shines Light on Secretive Asbestos Trusts

GAO Reports Shines Light on Secretive Asbestos Trusts
The Government Accountability Office released a new report on Wednesday analyzing asbestos injury trusts, detailing a multi-billion-dollar system of plaintiff claims and payouts that operates largely in secret.

By Brian Glaser

10-20-2011

The Government Accountability Office released a new report on Wednesday analyzing asbestos injury trusts, shining some light on a multi-billion-dollar system of plaintiff claims and payouts that operates largely in secret.

The report, Asbestos Injury Compensation: The Role and Administration of Asbestos Trusts [PDF], reviewed 52 asbestos-related bankruptcy trusts that “have paid about 3.3 million claims valued at about $17.5 billion.”

The GAO found that while the majority of the trusts made general data available, very few provide detailed information about their activities without being directed to by a court of law: “Most asbestos trusts we reviewed publish for public review annual financial reports and generally include total number of claims received and paid. Other information in the possession of a trust, such as an individual’s exposure to asbestos, is generally not available to outside parties but may be obtained, for example, in the course of litigation pursuant to a court-ordered subpoena.”

In fact, the report found that only “one trust’s financial report contained claimant names and amounts paid to these individuals.”

Forbes reporter Daniel Fisher, in a review of the GAO findings, wrote that the report “gives fuel to critics who say the plaintiff lawyers who largely oversee the operation of these trusts prevent them from sharing information about how much their clients have been paid. That allows some plaintiffs to hit up multiple trusts with claims that may contradict each other.”

The month-old report was given to the House Judiciary Committee on September 23, at the request of Texas Republican Lamar Smith, the committee chairman, and is now being released to the public following a 30-day hold.

Accompanying the release of the report was a statement from Lisa Rickard, president of the U.S. Chamber Institute for Legal Reform. Rickard said, “It is becoming clear that rather than acting to prevent abusive claims, the asbestos trusts are effectively encouraging fraud by inhibiting claims information sharing between the trusts and the tort system. We hope that Congress’s growing attention to this important issue will ensure that the trusts operate in a manner fair to asbestos victims and job-creating businesses, not plaintiffs’ lawyers and fraudulent claimants.”

Fisher’s analysis of the report pinpoints several findings of processes in the current trust system that could result in fraudulent claims:

The GAO report said 98% of trust claims go through “expedited review” process that requires only a claim form with “documented evidence” of exposure such as work history, invoices, or deposition testimony of plaintiff or coworkers plus a medical report. Prior investigations have shown how a tiny number of physicians have submitted tens of thousands of diagnoses of asbestos-related disease, many of them subsequently found to be incorrect.

One solution would be to require the trusts to share basic claims information in a central database. But the GAO said 65% of trusts reviewed treated claims information as confidential under rules that consider information submitted as part of a legal settlement process as privileged. Defendants and insurers say the trusts should be treated as non-adversarial settlement vehicles. They frequently seek information about claims paid so they can set off any court award by the amount the plaintiff has already obtained elsewhere.

The report itself does not claim to have documented any regular occurrences of fraud, however, and includes review of the trust distribution procedures (TDP) that each trust has in place: “Although the possibility exists that a claimant could file the same medical evidence and altered work histories with different trusts, each trust’s focus is to ensure that each claim meets the criteria defined in its TDP, meaning the claimant has met the requisite medical and exposure histories to the satisfaction of the trustees. Of the trust officials that we interviewed that conducted audits, none indicated that these audits had identified cases of fraud.”

Forbes.com: GAO Report Details Secrecy Of Asbestos Trusts

By Daniel Fisher

A General Accountability Office study of asbestos injury trusts released today shows that trusts with some $36 billion in assets operate largely in secret, submitting annual financial reports to bankruptcy courts but only revealing information about claims under the threat of subpoena.

The report, conducted at the request of Rep. Lamar Smith (R-Texas), the chairman of the House Judiciary Committee, gives fuel to critics who say the plaintiff lawyers who largely oversee the operation of these trusts prevent them from sharing information about how much their clients have been paid. That allows some plaintiffs to hit up multiple trusts with claims that may contradict each other. The trusts paid 461,000 claims totaling $3 billion in 2010. They have disbursed $17 billion so far to millions of workers who claim they came down with breathing disorders or cancer due to asbestos.

The report looked at 52 of the 60 trusts created in the wake of asbestos-related bankruptcies and found that only one publicly disclosed the identity and claims of people it had paid. Most of the rest resist such disclosure, citing the confidentiality of claimant medical records. The report's authors downplayed the risk of fraud, however, saying most trusts audit claims.

"Although the possibility exists that a claimant could file the same medical evidence and altered work histories with different trusts, each trust's focus is to ensure that each claim meets the criteria defined in its (trust rules), meaning the claimant has met the requisite medical and exposure histories to the satisfaction of the trustees. Of the trust officials that we interviewed that conducted audits, none indicated that these audits had identified cases of fraud.

The U.S. Chamber, which represents companies targeted by asbestos lawsuits, wasn't convinced. In a release accompanying the report Lisa Rickard, president of the Chamber's Institute for Legal Reform, said:

"It is becoming clear that rather than acting to prevent abusive claims, the asbestos trusts are effectively encouraging fraud by inhibiting claims information sharing between the trusts and the tort system. We hope that Congress's growing attention to this important issue will ensure that the trusts operate in a manner fair to asbestos victims and job-creating businesses, not plaintiffs' lawyers and fraudulent claimants.

The report was completed Sept. 23 but only became available today after a 30-day hold.

Critics of the asbestos-trust system point to examples like the Kananian case in Ohio, where lawyers were sanctioned for submitting conflicting work histories to multiple trusts on behalf of a man who died of mesothelioma, which is usually attributed to asbestos. In that case lawyers filed papers placing their client in harm's way throughout his life, from laying on the top berth of a ship with rattling asbestos-clad pipes above his head in World War II, to removing asbestos-laced linoleum flooring in his basement himself, to smoking Camel cigarettes with asbestos filters that were marketed toward women for a couple of years in the 1950s. Internal documents revealed one of Kananian's lawyers telling colleagues to "immediately brief all personnel ... that they are not to 'make up' information to make a claim qualify."

A similar scandal erupted in Texas after a federal judge demanded the records for thousands of plaintiffs claiming they'd come down with silicosis and found most had already hit up the asbestos trusts for money. Doctors say the two conditions almost never occur in the same patient and the outbreak of silicosis claimed in the lawsuits would have dwarfed any recorded in the medical literature.

Approximately 100 companies have declared bankruptcy at least partly due to asbestos-related liability so far. In the usual pattern lawyers for asbestos plaintiffs claim they represent the largest class of creditors and set up a trust to hold the bankrupt company's assets and disburse them to their clients over time. The trusts have grown from 16 with $4.2 billion in assets in 2000, to 60 with $36.8 billion in assets this year.

The GAO report said 98% of trust claims go through "expedited review" process that requires only a claim form with "documented evidence" of exposure such as work history, invoices, or deposition testimony of plaintiff or coworkers plus a medical report. Prior investigations have shown how a tiny number of physicians have submitted tens of thousands of diagnoses of asbestos-related disease, many of them subsequently found to be incorrect.

One solution would be to require the trusts to share basic claims information in a central database. But the GAO said 65% of trusts reviewed treated claims information as confidential under rules that consider information submitted as part of a legal settlement process as privileged. Defendants and insurers say the trusts should be treated as non-adversarial settlement vehicles. They frequently seek information about claims paid so they can set off any court award by the amount the plaintiff has already obtained elsewhere.

Lawyers have a way around that, however: They simply wait until the trial is over before submitting claims to the bankruptcy trusts.

During hearings, three plaintiff attorneys said everything the defendants want is available through discovery in litigation and the trusts are "analogous to ay other settling party and related negotiations and payments are privileged."

Defendants argue more information should be disclosed because payment information might reveal plaintiffs have already gotten more than the claims are worth.

The Institute for Legal Reform proposes quarterly reports disclosing every claim made and details including exposure history. The GAO report said quarterly reports won't necessarily root out fraud and one person receiving payments from several trust "does not itself reveal impropriety."


Posted By:
October 19, 2011

WSJ Law Blog: Congress Examines Alleged Fraud by Asbestos Claimants


Congress Examines Alleged Fraud by Asbestos Claimants
September 9, 2011
By Dionne Searcey

Asbestos litigation may seem like a blast from the mass tort past, but it continues to be the key breadwinner for many a plaintiff attorney's family.

Aided by a bevy of advertising on the Internet and TV, asbestos claims are on the rise. And the payouts are still big. Today in Congress, a House Judiciary Committee heard testimony on alleged fraud and abuse in the asbestos compensation system.

The committee reviewed transparency issues in asbestos trusts, which are massive pools of money set up by companies in bankruptcy to pay off asbestos claims. Defense attorneys have long claimed that plaintiffs double dip and get inflated payouts by filing multiple asbestos claims, both in court and with asbestos trusts, for the same injury. Because settlements are secret and the trusts aren't required to make public their payouts, it's difficult to verify whether claimants are getting overpaid.

In a written statement, Charles Siegel, a partner at the Dallas plaintiffs' firm Waters & Kraus LLP, disputes that point, saying, "there is no windfall of money available to mesothelioma claimants, and plaintiffs cannot and do not 'game the system' such that solvent tort defendants pay the liability shares of bankrupt companies."

See Reuters advanced take on the Congressional hearings here.

Reuters points out that complaints about asbestos litigation have been mounting for years on the Hill yet lawmakers never passed any kind of reform bill. It remains to be seen what the outcome will be of today's hearings.

For now the asbestos litigation train keeps rolling. Later this month in San Francisco, attorneys will gather for a Perrin conference to hear about the state of the asbestos litigation, a roundup of legislation affecting asbestos suits, and a discussion about the future of asbestos bankruptcies.


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GAO: Asbestos Injury Compensation: The Role and Administration of Asbestos Trusts


On October 19, 2011, the the U.S. Government Accountability Office (GAO) issued the report “Asbestos Injury Compensation: The Role and Administration of Asbestos Trusts”

From the GAO website:

Summary
Asbestos litigation arose out of millions of Americans’ lengthy occupational exposure to asbestos which is linked to malignant and nonmalignant diseases. To date, about 100 companies have declared bankruptcy at least partially due to asbestos-related liability. In accordance with Chapter 11 and 524(g) of the federal bankruptcy code, a company may transfer its liabilities and certain assets to an asbestos personal injury trust, which is then responsible for compensating present and future claimants. Since 1988, 60 trusts have been established to pay claims with about $37 billion in total assets. GAO was asked to examine asbestos trusts set up pursuant to 524(g). This report addresses: (1) How much asbestos trusts have paid in claims and how trusts are administered, (2) How trust claim and payment information is made available to outside parties, and (3) Stakeholder–plaintiff and defense attorneys, trust officials, and other interested parties–views on whether more trust and claimant information should be made available to outside parties and efforts to change the trust system and processes. GAO analyzed trust agreements for 44 of 60 trusts and trust distribution procedures for 52 of 60 trusts, as well as financial reports for 47 of 60 trusts for 2009 and 2010. GAO also interviewed U.S. Bankruptcy Court judges and the trustees, general counsels, or directors from 11 trusts.

From 1988 through 2010, GAO’s analysis of available trust payment data show that trusts have paid about 3.3 million claims valued at about $17.5 billion and that each trust has trust distribution procedures (TDP) that govern its administration and establish the process for assessing and paying claims. Typically, TDPs include sections related to the intake and evaluation of claims, payment processes, and audit programs. Claims that meet the TDP’s criteria for a particular disease are paid in the amount specified in the TDP. Most asbestos trusts we reviewed publish for public review annual financial reports and generally include total number of claims received and paid. Other information in the possession of a trust, such as an individual’s exposure to asbestos, is generally not available to outside parties but may be obtained, for example, in the course of litigation pursuant to a court-ordered subpoena. The 44 trust agreements GAO reviewed all required that trusts submit annual financial reports to the U.S. Bankruptcy Court of jurisdiction. Although TDPs typically provide that the trusts will make claim and payment information available to claimants and other parties, each trust ultimately determines what information it will make available. Of the 47 trust annual financial reports for 2009 and 2010 that GAO reviewed, all included the total amount of payments made and most included the total number of claims received and paid. One trust’s financial report contained claimant names and amounts paid to these individuals. Of the 52 trust TDPs GAO reviewed, 33 (64 percent) included sections related to protecting the confidentiality of claimants’ information and these sections often state that the trusts will only disclose information to outside parties with permission of the claimant or in response to a valid subpoena. Views differ on whether more trust and claimant information should be made available and there have been efforts to change the trust system. Plaintiff attorneys and trusts oppose proposals that would require additional disclosure of claimant information, such as amounts paid to individual claimants, stating that such information is available to the defense through subpoenas and that disclosure otherwise could compromise the confidentiality of claimants’ private information. Defense attorneys support additional disclosure, stating that such information could be used to offset asbestos defendants’ settlements in court and reduce fraudulent claims. In recent years, there have been various proposals to require additional disclosure of claimant information. One of these proposals was recently brought before the Judicial Conference of the United States, the primary policy making body of the U.S. courts. In commenting on a draft copy of this report, the Department of Justice and the Administrative Office of the U.S. Courts provided technical clarifications, which GAO incorporated where appropriate.

The highlights of the report can be found here

The full report can be found here


Posted By:
October 11, 2011

WSJ: Garlock Loses Bid to Look into Old Asbestos Bankruptcies


The Daily Docket: Garlock Loses Bid to Look into Old Asbestos Bankruptcies.

Judge Denies Garlock Bid To Revisit Old Asbestos Bankruptcies

Jacqueline Palank 10 October 2011

A judge denied Garlock Sealing Technologies LLC’s bid to obtain legal documents from decade-old asbestos bankruptcies, warning the consequences of doing so would upend previously struck resolutions to billions of dollars in claims.

U.S. Bankruptcy Judge Judith K. Fitzgerald on Friday denied Garlock’s request to reopen old bankruptcies and to page through documents in which law firms disclosed their clients in those cases, according to court papers.

The judge decided that Garlock failed to provide a valid reason to support its request, which she warned would result in “enormous” consequences if granted.

“The negative publicity with the likely effect on stock and bond prices for those publicly traded entities, employee morale, resulting management issues and administrative burdens…cannot be justified in these circumstances where Garlock did not appear or participate in while the cases were open and active and did not seek access to the 2019s during the life of the cases,” Fitzgerald wrote.

An attorney for Garlock couldn’t be reached for comment Monday.

Garlock sought to pull records from and intervene in bankruptcies filed between 2000 and 2004 by 12 manufacturers that, like Garlock, had been hit with hundreds or even thousands of personal-injury claims by individuals exposed to asbestos in their products.

Until the “bankruptcy wave” began, Garlock said it was able to defend itself from many of these claims by arguing that its products didn’t release “medically significant” amounts of asbestos into the air. Instead, Garlock argued, plaintiffs were likely more harmed by the larger amounts of asbestos contained in other manufacturers’ products.

But once those other manufacturers sought court protection, all pending litigation against them ground to a halt. Since Garlock wasn’t in bankruptcy, plaintiffs were free to continue pursuing litigation and settlement talks against it.

Garlock now questions the resulting settlements it struck with plaintiffs, arguing that law firms and plaintiffs may have lied about whose products exposed them to asbestos in order to collect what they could from Garlock rather than take their chances in bankruptcy.

That’s why Garlock sought the client lists filed in the bankruptcies of such manufacturers as Armstrong World Industries Inc., Pittsburgh Corning Corp., USG Corp. and W.R. Grace & Co. Garlock, which filed for Chapter 11 protection in June 2010, thought the documents could possibly show evidence of plaintiffs’ exposure to asbestos through the bankrupt manufacturers’ products, potentially reducing Garlock’s liabilities.

Fitzgerald, however, discredited this argument as “disingenuous” and said the harm Garlock is alleging it suffered is “imagined.”

“To date [Garlock] has not identified a creditor in its case who also was a creditor in one of these bankruptcy cases and whose exposure evidence was allegedly concealed,” Fitzgerald wrote.

Garlock, of Palmyra, N.Y., manufactures hydraulic and metallic gaskets, conveyor belts and other products. It has been a defendant in asbestos personal-injury lawsuits for more than three decades.