Since the early 1980’s, companies responsible for inflicting asbestos-related
illness on hundreds of thousands of Americans have sought to limit or
escape legal liability through filing for Chapter 11 bankruptcy protection.
By filing Chapter 11, a company is given immediate immunity from lawsuits
filed by the victims of its asbestos products. The company is then given
many years to satisfy a number of legal requirements while the victims,
many of whom do not have the luxury of time, are forced to wait. Upon
meeting the requirements, the company is granted permanent immunity from
lawsuits filed by all past and future victims, and is able to emerge from
bankruptcy and continue doing business as usual.
The one consolation to asbestos illness victims is the requirement that
the company pool assets and insurance proceeds and place them in a trust
to compensate past and future victims. The trust establishes guidelines
dictating the amount of compensation to be paid to claimants based primarily
on severity of illness. While it is not necessary for victims to appear
in court or provide testimony, the amount received from the trust is often
far less than what would have been received if the company could be sued
in a lawsuit.
Despite their many shortcomings, asbestos bankruptcy trusts are becoming
an increasingly important component of the compensation available to victims
of asbestos disease. This is due to a continuing decrease in the number
of viable companies that can be sued in court and a continuing increase
in the number of companies filing Chapter 11 bankruptcy.
In 2010, almost 25 years since the first asbestos bankruptcy trust was
formed, there are 44 trusts actively paying claims, and nine proposed
trusts which are expected to start paying claims in the near future. The
combined assets of these trusts are believed to be in excess of $20 billion.
The significance of this amount is understood when considering that, from
the time the first asbestos bankruptcy trust was formed in 1986 through
2008, the total claims paid by all trusts was approximately $11 billion.
Given the increasing importance of asbestos bankruptcy claims to an asbestos
injury victim’s overall recovery, it is crucial that the victim’s
attorney be experienced in navigating the myriad of administrative requirements
for each of the active trusts. The Worthington Law Office has been helping
its asbestos cancer clients receive compensation from asbestos bankruptcy
trusts for nearly 20 years. Our clients’ recoveries from the trusts
are frequently among the highest in the country.
In order to aid in the understanding of how asbestos bankruptcy trusts
came to exist, how trust claims are processed and the current status and
future outlook of these trusts, we are providing this guide to asbestos
bankruptcy trusts. If you have any questions, or would like to learn more,
please contact us at info@rgwpc.com or
1-800-931-9399.
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What Are Asbestos Bankruptcy Trusts and How Did They Get Here?
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I. |
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“Gimme Shelter or Else I’m Gonna Fade Away” |
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II. |
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Johns Manville Leads the Way |
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III. |
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New Rules Based on the Revised Manville Trust |
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Asbestos Bankruptcy Trusts as of 2010
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I. |
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Who’s Left? |
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II. |
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Who’s Next? |
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III. |
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What’s Left? |
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How Does the Asbestos Bankruptcy Claims Process Work?
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I. |
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Determining Which Claims to Submit |
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II. |
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Determining the Level of Review for Each Claim |
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III. |
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What Medical and Exposure Evidence Must be Produced? |
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IV. |
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How is the Claim Value Determined? |
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V. |
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How Much is Paid to the Claimant? |
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VI. |
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Do I Qualify for Compensation From Asbestos Bankruptcy Trusts? |
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Asbestos Bankruptcy Trust Update for October 22, 2010 |
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Leslie Controls on the Fast Track to having its “Pre-Packaged”
Bankruptcy Plan Approved Could Begin Paying Claims by Early 2011 |
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What Are Asbestos Bankruptcy Trusts and How Did They Get Here?
“Gimme Shelter or Else I’m Gonna Fade Away”
Since the 1930’s, many asbestos product manufacturers and suppliers
knew about the serious health risks of asbestos. With demand for asbestos
products escalating during the 1940’s, 1950’s and 1960’s,
companies placed their economic interests ahead of public health by simply
ignoring the risks and focusing instead on satisfying the demand for their
products. By this time, millions of Americans had been exposed to the
dangerous fibers in their homes, schools, workplaces and vehicles.
By the mid to late 1960’s, with incidence of asbestos-related illness
on the rise, the first personal injury/product liability lawsuits began
being filed against asbestos companies. The first verdict in favor of
an injured worker against an asbestos company was entered in 1971. With
this determination of legal responsibility on the part of asbestos companies,
thousands of new lawsuits were filed.
In the wake of these lawsuits, many asbestos companies found their liabilities
growing at a dramatic rate with no end in sight. Many of these companies
sought protection by filing for Chapter 11 bankruptcy. Unlike Chapter
7 bankruptcies where the business is shut down and all assets are sold,
Chapter 11 bankruptcies allow the company to continue operations while
paying creditors over an extended period of time.
Johns Manville Leads the Way
One of the first asbestos companies to file for Chapter 11 bankruptcy was
Johns Manville Corporation which, at the time, was the largest producer
of asbestos-containing products. Johns-Manville filed Chapter 11 in 1982.
Six years later, it emerged from bankruptcy, having shifted its asbestos
liabilities to a new entity called the Manville Personal Injury Settlement Trust.
The Manville Trust planned to pay claimants 100% of the settlement value
of their claims (or the same value a claimant would have received if Johns
Manville was sued in court). It was anticipated that no more than 100,000
claims would be submitted. However, by 1992, nearly 200,000 claims had
been submitted and the trust was insolvent only four years after it was formed.
In 1995, the Manville Trust was restructured via a settlement. Through
the settlement, a number of significant changes were made regarding the
operation of the trust. First, a new compensation plan was established
giving priority to persons with the most serious illnesses (i.e. mesothelioma
and lung cancer). Second, procedures were established for resolving disputes
between claimants and the trust without resorting to the courts. Third,
an administrative role was created for a “future claimant’s
representative” to ensure that trust assets were handled in such
a way that future claimants’ rights would be preserved.
New Rules Based on the Revised Manville Trust
In 1994, Congress amended the Bankruptcy Code to require many of the revisions
which were part of the Manville Trust settlement. Under existing law,
once a company files for Chapter 11 bankruptcy protection, it is immediately
entitled to a ban on all personal injury lawsuits. The company is then
required to propose a bankruptcy plan, including the details of a trust,
which satisfies the requirements of sections 1129 and 524(g) of the Bankruptcy
Code. This can be a lengthy process which involves negotiations by representatives
of various groups that will be affected by the trust. Once a plan is reached,
it must then be certified by the bankruptcy court and thereafter approved
by a Federal District Court.
Once all of this is accomplished, which can take anywhere from one to more
than ten years, the temporary ban on lawsuits becomes permanent and the
newly reorganized company is able to emerge from bankruptcy. The company’s
bankruptcy trust then begins accepting, reviewing and paying qualified
claims of asbestos injury victims. Trust personnel monitor the status
of the trust and make adjustments, such as reducing the percentage of
claim values paid to claimants, designed to ensure that funds will be
available to compensate future victims.
Asbestos Bankruptcy Trusts as of 2010
Who’s Left?
According to a report issued by the RAND Corporation in August 2010, since
1982, a total of 96 companies have filed for Chapter 11 bankruptcy protection
in which asbestos tort liabilities are addressed. After an uptick in the
1980’s, the number of bankruptcies filed remained modest in the
1990’s. The bankruptcies surged in the first part of the 2000’s,
peaking at 15 in 2002.
Of the 96 companies which filed for Chapter 11 protection, a total of 54
bankruptcy trusts were established. Ten of the trusts are no longer active,
having stopped paying claims for lack of assets or other reasons.
Forty four trusts are currently active or still paying claims. These trusts,
and the date of formation, are listed below. However, of these 44 active
trusts, it is estimated that 26 of the trusts account for 99% of total
claim payments through 2008.
I. Active Trusts |
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Trust Name
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Year Established
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A&I Corporation Bodily Injury Trust |
2005 |
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A-Best Asbestos Settlement Trust |
2004 |
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AC&S Asbestos Settlement Trust |
2008 |
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API, Inc. Asbestos Settlement Trust |
2006 |
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Armstrong Word Industries Asbestos Personal Injury Settlement Trust |
2006 |
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ARTRA 524(g) Asbestos Trust |
2007 |
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ASARCO LLC Asbestos Personal Injury Settlement Trust |
2009 |
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Babcock and Wilcox Company Asbestos Personal Injury Settlement Trust |
2006 |
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Bartells Asbestos Settlement Trust |
2001 |
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Brauer 524(g) Asbestos Trust |
2007 |
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Burns and Roe Asbestos Personal Injury Settlement Trust |
2009 |
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C.E. Thurston and Sons Asbestos Trust |
2006 |
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Celotex Asbestos Settlement Trust |
1997 |
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Combustion Engineering 524(g) Asbestos Personal Injury Trust |
2006 |
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DII Industries, LLC Asbestos Personal Injury Trust |
2005 |
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Eagle-Picher Industries Personal Injury Settlement Trust |
1996 |
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Federal Mogul U.S. Asbestos Personal Injury Trust, Fel-Pro Subfund |
2007 |
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Federal Mogul U.S. Asbestos Personal Injury Trust, FMP Subfund |
2007 |
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Federal Mogul U.S. Asbestos Personal Injury Trust, T&N Subfund |
2007 |
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Federal Mogul U.S. Asbestos Personal Injury Trust, Vellumoid Subfund |
2007 |
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G-1 Asbestos Settlement Trust |
2009 |
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H.K. Porter Asbestos Trust |
1998 |
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J.T. Thorpe Company Successor Trust |
2004 |
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J.T. Thorpe Company Settlement Trust |
2006 |
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Kaiser Asbestos Personal Injury Trust |
2006 |
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Keene Creditors Trust |
1996 |
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Lummus 524(g) Asbestos Personal Injury Trust |
2006 |
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Lykes Tort Claim Trust |
1997 |
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Manville Personal Injury Settlement Trust |
1988 |
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NGC Bodily Injury Trust |
1993 |
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Owens Corning Fibreboard Asbestos Personal Injury Trust, Fibreboard Subfund |
2006 |
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Owens Corning Fibreboard Asbestos Personal Injury Trust, Owens Corning Subfund |
2006 |
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Plibrico Asbestos Trust |
2006 |
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Porter Hayden Bodily Injury Trust |
2006 |
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Raytech Corporation Asbestos Personal Injury Settlement Trust |
2000 |
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Shook and Fletcher Asbestos Settlement Trust |
2002 |
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Stone and Webster Asbestos Trust |
2004 |
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Swan Asbestos and Silica Settlement Trust |
2003 |
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T.H. Agriculture and Nutrition, LLC Industries Asbestos Personal Injury Trust |
2009 |
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United States Gypsum Asbestos Personal Injury Settlement Trust |
2006 |
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United States Mineral Products Company Asbestos Personal Injury Settlement Trust |
2005 |
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UNR Asbestos-Disease Claims Trust |
1990 |
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Utex Industries, Inc. Successor Trust |
2004 |
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Western Asbestos Settlement Trust |
2004 |
Who’s Next?
As of August 2010, there were nine additional trusts which had been proposed
but are at various stages in the confirmation process. It often takes
many years from the time a company files bankruptcy until the trust is
confirmed and begins accepting claims. According to the RAND report, the
average time from filing to confirmation is 3.9 years. However, this average
is likely to increase due to the fact that, of the 9 companies with proposed
trusts pending, one has been in bankruptcy for over ten years, two over
nine years, and another two for over six years. The nine pending trusts
are listed below.
II. Proposed Trusts (pending approval) |
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Trust Name
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Bankruptcy
Filed
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APG Asbestos Trust |
February 2002 |
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Congoleum Plan Trust |
December 2003 |
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Flintkote Co. & Flintkote Mines Ltd. Asbestos Personal Injury Settlement Trust |
May 2004 |
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North American Refractories Company Asbestos Personal Injury Settlement Trust |
January 2004 |
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Pittsburgh Corning Corporation Asbestos PI Trust |
April 2000 |
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Quigley Company, Inc. Asbestos PI Trust |
September 2004 |
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Skinner Engine Co. Asbestos Trust |
April 2001 |
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Thorpe Insulation Company Asbestos Personal Injury Settlement Trust |
October 2007 |
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W.R. Grace and Co. Asbestos Personal Injury Settlement Trust |
April 2001 |
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There are also at least seven additional companies that filed Chapter 11
bankruptcy from October 2008 through July 2010 which are expected to propose
new trusts in the coming years.
III. Anticipated Proposed Trusts |
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Company Name
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Bankruptcy Filed
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Bondex International, Inc. |
May 2010 |
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Christy Refractories Co. LLC |
October 2008 |
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Durabla Manufacturing Co. |
April 2010 |
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Garlock Sealing Technologies |
June 2010 |
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General Motors Corp. |
June 2009 |
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Leslie Controls, Inc. |
July 2010 |
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Plant Insulation Co. |
March 2009 |
What’s Left?
According to the RAND report, the initial assets of all of the 54 trusts
that were either formed or proposed from 1986 through 2010 are approximately
$44 billion. Through 2008, the total amount of claims paid to asbestos
injury claimants was approximately $11 billion. When accounting for additional
claims made though 2010, administrative expenses incurred by the trusts
and trusts which have not reported claims payment information, it is estimated
that the current combined assets of all of the existing and proposed asbestos
bankruptcy trusts still exceed $20 billion. This amount is expected to
rise as assets are added to the current and future proposed trusts.
As indicated above, one of the ways in which trusts seek to ensure that
funds are available for future claimants is to reduce the percentage of
the claim value which is paid to the claimant. For many trusts formed
in the 1980’s and 1990’s, the amount of funding believed to
be sufficient to compensate victims turned out to be woefully insufficient,
as the number of asbestos disease victims proved to be far more than anticipated.
As a result, the payment percentages for many of these trusts have been
lowered on many occasions.
According to the 2010 RAND report, the payment percentages run from a low
of 1.1% for the Unarco Trust, to a high of 100% for the newly-formed THAN
trust. The median payment percentages for the 29 trusts which were reviewed
was 25%, with a sizeable group of trusts with payment percentages less
than 25% and another sizeable group with payment percentages of 40% to 60%.
How Does the Asbestos Bankruptcy Claims Process Work?
Determining Which Claims to Submit
The first stage of submitting bankruptcy trust claims involves identifying
the trust or trusts in which to submit a claim. A person’s work
history—the places and products he or she worked with or around--determines
the trusts to which a claim may be submitted. A claimant can only recover
from a trust if he or she was exposed to asbestos that was produced, supplied
or used by the trust’s debtor company.
For example, a person who worked with products manufactured by Johns-Manville
could file a single claim with the Manville Trust. However, a person who
used products made by Johns-Manville, Kaiser, U.S. Gypsum and J. T. Thorpe,
could file with each of these company’s trusts. There is no limit
on the number of trusts to which a person may submit claims; nor is there
a monetary cap or limit to the amount a person can from asbestos bankruptcy trusts.
Furthermore, recovery of funds from asbestos bankruptcy trusts does not
prevent claimants from recovering funds from solvent companies through
a lawsuit. Many persons who submit claims to asbestos bankruptcy trusts
are also parties to civil personal injury lawsuits.
Each trust has separate exposure requirements which must be met in order
to qualify for compensation. Asbestos attorneys with experience in submitting
asbestos bankruptcy claims can quickly determine whether a person will
qualify for compensation from any of the 44 active bankruptcy trusts.
Determining the Level of Review for Each Claim
Next, a determination must be made regarding the method or level of review
to be sought with respect to each trust in which a claim will be submitted.
Almost all trusts have two main methods of review: expedited review and
individual review. With some exceptions, a claimant may choose to proceed
under either method.
The
expedited review process is designed to pay claims quickly at a fixed value. Different
diseases (such as mesothelioma and asbestosis) are valued differently,
with the more-severe diseases valued more highly. The payment amount,
known as the scheduled value, is published by the trust and known in advance.
In order to qualify for the quick, fixed payment available through expedited
review, the claimant must meet a set of criteria for medical evidence
and work history published by the trust. Claims supported by documentation
meeting these criteria are presumed by the trust to be valid.
The alternative
individual review process gives claimants with certain diseases the opportunity to receive
individual consideration of their specific medical condition and work
history in hopes of justifying an assigned value in excess of the scheduled
value available through expedited review. In addition, individual review
is mandatory in cases where the claimant cannot meet the medical or exposure
criteria required for expedited review as well as for certain medical
conditions such as lung cancer in a claimant who was a smoker.
Under individual review, there are no presumptively valid claims. Because
individual circumstances are taken into account, individual review claims
typically require additional medical and work history evidence and take
longer to process than expedited review claims.
Individual review claims do not have a scheduled value. The trust’s
claims processing facility determines the liquidated value, or payment
amount, based on the individual circumstances. The assigned value may
or may not be greater than the scheduled value for a similar disease.
What Medical and Exposure Evidence Must be Produced?
Asbestos exposure has been linked to a variety of diseases. The Bankruptcy
Code mandates that asbestos bankruptcy trusts equitably compensate claimants
with similar diseases. To do this, trusts have established disease levels,
or categories of asbestos-related disease. The trusts generally recognize
eight disease levels. The most severe of the disease levels is mesothelioma
and the least severe is asbestosis or pleural disease without significantly
restricted pulmonary function.
For each disease level, there is a separate set of medical and exposure
criteria. For mesothelioma, the typical medical requirements are diagnosis
by a pathology report from a board certified pathologist or a pathology
report from a hospital accredited by the Joint Commission. The criteria
for non-mesothelioma lung cancer as well as non-malignant conditions are
much more extensive, requiring such proof as a pulmonary function test
with specified findings, medical documentation establishing asbestos as
a contributing factor of the disease or a physician’s statement
that at least ten years have elapsed between exposure to asbestos and
diagnosis.
Evidence of an asbestos-related disease alone is not sufficient to entitle
a claimant to compensation. Trusts also require credible evidence that
the claimant worked with or around asbestos at the company’s facilities
or worked with or around the company’s products during the time
when they contained asbestos.
This evidence may provided in the form of a written statement from the
claimant or a witness confirming that the claimant worked at a site or
sites where the trust acknowledges that the company’s asbestos products
were used. Many trusts publish a list of confirmed exposure sites which
a claimant can review and determine if he or she ever worked there during
the relevant time.
Other exposure evidence may consist of an affidavit, employment records,
invoices or other business documents, or other evidence that the trust
deems reliable. Certain disease levels may carry a higher standard for
exposure criteria.
Trusts do not require a claimant or witness to appear personally or face
questioning from trust personnel. In addition, trusts do not require specific
evidence about the amount of asbestos dust that the claimant inhaled while
working with the company’s products. Accordingly, the level of evidence
necessary to receive compensation from trusts is often much less than
what would be required if the claims were being presented in a personal
injury lawsuit. The ability to recover compensation (albeit typically
in a lesser amount) without the time, expense and personal involvement
which is required in a lawsuit, are the primary advantages which bankruptcy
trust claims offer to claimants.
How is the Claim Value Determined?
Once the trust determines that a claim is valid, through either expedited
or individual review, the claim must be liquidated, or assigned a monetary
value. Liquidating a claim is treated differently under expedited and
individual review.
For expedited review, claims are liquidated according to the scheduled
value published by the trust for the claimant’s specific disease
level. It is a one-size-fits-all amount, as specific aspects of a claimant’s
work history or medical situation are not used to tailor an award beyond
classification by disease level. Trusts set the scheduled value at a level
to encourage most claimants to choose expedited rather than individual
review. Because individual circumstances can vary greatly, the scheduled
value may or may not be significantly less than the amount a claimant
would receive under individual review.
Individual review claims are assigned a value on a case by case basis based
on factors including, among others, age, disability, number of dependents,
noneconomic damages, and the settlement and verdict history of the claimant’s
law firm. Trusts seek to assign a value to an individual review claim
which resembles the amount which historically would have been awarded
if the claim had been asserted in a lawsuit. Regardless of individual
circumstances, however, the value assigned to the claim may not exceed
the maximum value, or upper monetary limit, published by the trust.
How Much is Paid to the Claimant?
As explained above, most trusts do not have sufficient assets to pay the
full amount of the claim value. This is the case whether it is the scheduled
value for an expedited review claim or an assigned value for an independent
review claim.
Ever since the reorganization of the Manville Trust, asbestos bankruptcy
trusts have wrestled with the question of how to pay future claims out
of the limited trust assets. If predictions regarding the number of future
claims are too low, a trust runs the risk of insolvency (as was the case
with the Manville Trust). To manage this problem, the trusts establish
a system of pro rata discounts to the value of a claim offered to a current
claimant. This pro rata share is known as the payment percentage. The
payment percentage is the percentage of either the scheduled value or
assigned value which is actually paid to the claimant. For example, if
the claim value (either scheduled or assigned) is $100,000 and the trust’s
payment percentage is 20%, the payment to the claimant would be $20,000.
As discussed above, the payment percentage varies a great deal across trusts
and can change over time. For example, in 1995 the Manville Trust, which
initially paid 100% of claim values, slashed its payment percentage to
10%. In 2001, as larger-than-expected claims volume continued to tax trust
assets, the payment percentage was dropped to 5%. More recently, the Manville
Trust increased the payment percentage to 7.5%.
Do I Qualify for Compensation From Asbestos Bankruptcy Trusts?
Asbestos bankruptcy claims may be asserted by living victims of mesothelioma
or other forms of asbestos-related disease. Claims may also be asserted
by the living heirs of deceased victims of asbestos disease.
Even if a number of years have passed since diagnosis or death, it may
still be possible to submit claims. This is true even if the statute of
limitations for filing a lawsuit has expired.
The asbestos lawyers at the Worthington Law Firm can quickly determine
whether you are eligible to assert claims with any of the currently active
trusts as well as any of the trusts which are expected to begin accepting
claims in the coming years.
To find out if you qualify, or to learn more about asbestos bankruptcy
trusts, contact us at info@mesothel.com or 800-831-9399.
Asbestos Bankruptcy Trust Update for October 22, 2010
Leslie Controls on the Fast Track to having its “Pre-Packaged”
Bankruptcy Plan Approved Could Begin Paying Claims by Early 2011
Leslie Controls, Inc., a wholly-owned subsidiary of CICOR International,
Inc., filed for Chapter 11 bankruptcy protection in July 2010 citing overwhelming
liabilities for current and future asbestos injury claims.
Since the early 1900’s, Leslie was a major manufacturer of industrial
water heaters and steam control systems. Leslie was a large supplier of
valves and other steam equipment to the United States Navy during World
War I and World War II. Leslie’s products, which were often equipped
with asbestos gaskets, insulation and packing, were responsible for exposing
thousands of Americans to harmful asbestos fibers.