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Explosion Of Unimpaired Claims, Uncaring Congress And Legal Loopholes Accelerate Asbestos Company Bankruptcies


On Valentine's Day, 2002, A.P. Green and Harbison-Walker Refractories Company filed for bankruptcy protection, citing asbestos-related liabilities. This filing follows close on the heels of the bankruptcy filing by Kaiser Aluminum Corporation two days earlier. North American Refractories Company (NARCO) filed on January 4, 2002, Federal Mogul on October 1, 2001, U.S. Mineral on July 23, 2001, U.S. Gypsum on June 25, 2001 and W.R. Grace & Co. on April 2, 2001. For a complete list of bankruptcy filings, click here.

Many feel that the current bankruptcy tide began with the bankruptcy filing by Owens-Corning Fiberglas on October 5, 2000. Owens-Corning, which manufactured pipe covering and block insulation called Kaylo, used to pay a sizable share of the settlement and verdict monies in asbestos cases. Some point as far back as the February 22, 2000 filing by Babcock & Wilcox, a manufacturer of huge boilers widely used in the US Navy, powerhouses and industry. B&W also paid a sizable share of settlement monies.

The above was taken from a Los Angeles Times Article,
Firms Hit hard as Asbestos Claims Rise',
December 17, 2001, by Lisa Girion

Each new bankruptcy filing ratcheted up the pressure on remaining, solvent, former asbestos manufacturers, as plaintiffs' lawyers asked them to "make up the difference" for what the recently bankrupt would have paid. Armstrong World Industries and G-I Holdings, the parent company of GAF-Ruberoid, fell into bankruptcy after Owens-Corning, and the companies have continued to fall like dominoes.

As the bankruptcies mounted, plaintiffs' attorneys looking to make their clients whole started to follow the paper trail from the asbestos company -- which is often a subsidiary of a larger company -- to its parent company, such as Honeywell, PPG (Pittsburgh Paint & Glass), and Halliburton, the oilfield services giant formerly run by Vice-President Dick Cheney. These successors or parent companies commonly acquired asbestos liabilities with the purchase of a smaller asbestos company.

Now, most of the former manufacturers of asbestos-containing pipe covering, block, insulating cement, and refractory cement are in bankruptcy. Many insulators, pipe coverers, sailors, powerhouse workers and others must turn to the bankruptcy courts and hope that some day in the future, their families will obtain a small measure of justice. The B&W bankruptcy, which was the first in time, has after close to two years yet to produce a penny of compensation to the injured, despite the expenditure of around $50 million in legal fees by B&W's attorneys, Kirkland & Ellis. (This is the law firm of Kenneth Starr, who ran up quite a bill as the Whitewater/Travelgate/Monica Lewinsky special prosecutor). Kirkland & Ellis is reported to be billing the BW debtor about $2 million per month -- money which otherwise would be available to compensate asbestos creditors.

The past three years have seen an explosion of asbestos claims by those who have signs of asbestos exposure on x-ray, but are otherwise asymptomatic. These claims, called unimpaired claims, are commonly solicited by law firms sponsoring mass screenings, which can produce thousands of claimants who otherwise might not have filed suit. While the individual value of unimpaired claims can be very small, collectively the claims can have a large impact -- not only on the defendants, but also on the state and federal court systems.

Currently, there is no economic disincentive for these "mass filer" law firms to continue screening exposed workers and unloading thousands of unimpaired claims in the court system. In 2001, of the approximately 70,000 claims filed with the Manville Personal Injury Trust, only about six percent were for malignancy claims, and of that only a fraction were for mesothelioma claims. The Manville Trust claims filing history for the last five years looks about like this:


Number of New Claims

Percentage of Cancer Claims














70,000 (estimate)

approximately 6

Currently, most of the money paid by the asbestos manufacturers goes to unimpaired claims, and there is little doubt that the increase in filing of these claims has been a major factor behind the spate of recent bankruptcies, as well as the current drain on established bankruptcy trust funds for those with asbestos diseases.

For example, the standard Manville Personal Injury Trust offer of compensation for a mesothelioma claim is $200,000, and for years that offer was "discounted" to a present, 10 percent payment ($20,000), along with a "promissory note" to pay the remainder in the future. While the levels of mesothelioma and lung cancer claims lodged against the Trust have remained relatively constant over time, the levels of unimpaired claims have exploded over the past three years. Because of the torrent of claims against the Trust, the promissory notes issued to mesothelioma claimants will never be paid. In fact, last year, citing the rise in nonmalignant claims filed against the Trust by a handful of law firms, the Trust cut its discount rate in half. TheTrust now pays victims of the worst form of cancer on the planet a pitiful $10,000.

In a perfect world, unimpaired claimants would be entitled to fair and immediate compensation. No sane person would want asbestos in his body. The mineral is an indestructible, disease-causing time bomb; once lodged in the lungs, only surgery will remove an asbestos fiber. But there is no surgery which will remove all asbestos from the body, short of removal of both lungs and the abdomen, which, for obvious reasons, is not an option. Nobody can credibly argue that the asbestos companies deserve our sympathy or our mercy, since it was their greed that created this epidemic in the first place.

However, in this climate of bankruptcy, I very strongly feel that the very sick should be paid first, and paid in relative proportion to their injury. For example, the ratio of payouts by the Manville Personal Injury Trust for malignant versus nonmalignant claims currently is four to one. Many feel that a ratio of 100 to one would be more appropriate. As the MARF doctors advised the court, after offering their expert services:

Although there is no universal standard for measuring "suffering," we submit that on a scale of 1 to 100, mesothelioma patients -- who experience severe suffering not only of a physical nature but also form the emotional trauma due to inadequate and uncertain therapies -- typically are at the highest range of this scale. We are not certain whether pleural disease claimants without lung impairment -- proved objectively via spirometry, lung volume measurements and diffusion tests -- rate at all.

My firm is fighting in the bankruptcy courts for those with mesothelioma and other asbestos-related cancers by seeking to prioritize payment to the seriously ill. One of the issues in the bankruptcy courts will be the appropriate compensation formula, and there is some good news. The bankruptcy court for Pittsburg Corning Corporation, former makers of Unibestos pipe covering and block insulation, recently approved a ratio of just over 40 to 1. This ratio in my view does not fairly account for the vast differences in damages between mesothelioma victims and unimpaired asbestotics, but it is a step in the right direction. Further, a Federal Court Judge in Philadelphia recently ordered that all unimpaired asbestosis claims be transferred to an inactive docket where they must reside until such time (if ever) the claimant produces a verifiable disabling injury, such as cancer. The ruling flows from the principle that the courts should give priority to the needs of those who suffer the most.

While there is hope that the bankruptcy courts will try to preserve dwindling compensation resources, there appears to be little hope that Congress will act this year to stem the tide of bankruptcy. There is reform legislation which would establish a registry for unimpaired asbestos claimants. Such claimants would only be able to file suit if they developed symptoms of asbestos disease defined by objectively verifiable criteria. This legislation would effectively stem the flood of nonmalignant claims and re-direct compensation to those with the direst need.

Unfortunately, despite broad support from former asbestos manufacturers, the insurance industry, and plaintiffs' attorneys who represent only those with asbestos-related malignancies, the prospects for reform legislation in 2002 are bleak -- perhaps because of the enormous wealth and political influence of the handful of law firms which represent tens of thousands of unimpaired claimants.

Even today, the "mass filer" law firms continue to saturate newspapers, television and radio with advertising soliciting more unimpaired claims. While Congress slumbers, the torrent of unimpaired claims continues to strain the assets of former asbestos manufacturers, and the odds of meaningful compensation for the seriously ill diminish with each passing day.

It was no coincidence that as soon as the "not this year, maybe next year" message from Congress hit the streets, three companies (again, Kaiser Aluminum, A.P. Green and Harbison-Walker) filed for bankruptcy protection within a week. More bankruptcies are certain to follow, as bankruptcy protection increasingly looks like a viable, attractive alternative, particularly to Halliburton, Dresser Industries, Honeywell, PPG, and other solvent corporations seeking to escape liability for their acquisition of asbestos corporations.

These and other solvent parent corporations have turned to a provision of bankruptcy law which permits them to avoid filing bankruptcy while obtaining full protection from the bankruptcy courts. The subsidiary asbestos company will file for bankruptcy and simultaneously file for temporary injunctive relief, prohibiting suit against the parent, non-filing company, supposedly to preserve funds for payment to asbestos claimants. This legal legerdemain places a premium on corporate shell games intended to rob asbestos claimants of compensation from responsible parties, and will continue as long as the bankruptcy courts permit it.

In each of the new bankruptcy proceedings, there are deadlines, called bar dates, for the filing of proofs of claim. You must be vigilant and expeditious in filing proofs of claim if you feel you have been exposed to a product manufactured by a company in bankruptcy. Time is also of the essence in pursuing claims against the remaining solvent defendants, as we foresee the trend of bankruptcy filings continuing.