The New Asbestos Bill, Part One:
Why It Is Imperative That It Pass

This is Part One of a two-part series on the Fairness in Asbestos Injury Resolution Act of 2003. - Ed.

On May 22, Senator Orrin Hatch introduced the "Fairness in Asbestos Injury Resolution Act of 2003" ("FAIR" for short). On July 10, the Senate Judiciary Committee voted to send a modified version of FAIR to the full Senate. The vote in Committee was 10-8, with one Democrat, Senator Diane Feinstein, supporting the bill, and one Republican abstaining.

The bill's survival in the Judiciary Committee was remarkable. Asbestos reform has been an impossible dream for a decade in Washington. Now, it is looking less impossible. Why? In part, it is due to the hard work of the members of the Judiciary Committee. In part, it is due to the threat now posed by the current asbestos litigation system - a threat that cries out for a remedy such as the one proposed, which would compensate victims through a fund, not through the court system.

For the bill to become law, it will have to overcome threats from both parties. The Democrats have the power to kill the bill through the filibuster. Meanwhile, the Republicans might abandon the bill if they think it becomes too expensive or otherwise fails to put a final end to the asbestos litigation monster.

FAIR is a radical step. It is the largest government compensation scheme ever proposed in the history of United States, and perhaps the world. But a radical solution is necessary for the disaster asbestos litigation has become.

A Brief History of the Asbestos Crisis

The story of the asbestos crisis is so familiar to many of us, that we may have become numbed to its shocking dimensions. A brief recap therefore may be in order.

Asbestos was once viewed as a "wonder mineral" for industrial application because of its flame-retardant qualities. Unfortunately, it also proved to be very toxic. Many in the industry learned of the risks of asbestos during the period after the Second World War. But it was not until the 1970's that its dangers were acknowledged--and its use curtailed.

No one really knows how many workers and non-workers were and are still being exposed to asbestos. Over 30 million Americans - both workers and others - were, and still are, being exposed to asbestos. The exact number, which may be higher, is unknown.

The number of people who have been, or will be, made sick by asbestos is also unknown. Asbestos causes "signature" diseases for which it is the unique cause - mesothelioma and asbestosis, a disease caused by the presence of asbestos fibers in the lung. But it also causes lung cancer, which may have other causes (such as smoking cigarettes).

Most of the plaintiffs who sue for injuries arising from asbestos exposure are not suffering from serious illnesses. Mesothelioma is an extremely serious, painful terminal illness. Lung cancer is often fatal, and quite serious even if overcome. But asbestosis ranges in seriousness depending on many factors, including length of exposure.

To complicate matters even further, most people who have asbestos in their lungs do not currently suffer from asbestosis, although they might in the future. And most people who have asbestosis are not significantly impaired, although they might become more impaired in the future.

The Reason for the Asbestos Litigation Disaster

As a result of all these factors, asbestos exposure is a tort that has some current victims and many potential victims - many of whom are not yet seriously ill and may never become ill. That leads to odd questions: When can these potential plaintiffs sue? How ill must they be? Is fear of becoming ill itself an injury?

Under the current tort system, hundreds of thousands of exposed individuals can sue virtually every company that may have produced the asbestos to which they were exposed. As a result, there are currently over 600,000 asbestos suits pending in the United States against approximately 6000 defendants.

Only a very small percentage of plaintiffs in these suits are currently suffering a serious illness. Most have suffered exposure, and do not want to wait until they develop a serious illness to sue.

No one expects these plaintiffs to get the "individualized justice" that we claim the tort system is supposed to provide. In fact, between 1993 and 2001 there have been a total of 527 trials disposing of the claims of 1598 plaintiffs. In other words, asbestos litigation has already become a bureaucracy, except that is run by private attorneys outside of the public eye.

The Problems with the Current Asbestos Litigation Bureaucracy

This current, bureaucratic system has several crucial flaws.

First, it is very expensive: According to the RAND corporation, in the 1990's only 43 cents of every dollar spent in asbestos litigation went to the victims--the rest, 57 cents, went to the cost of lawyers. When lawyers are receiving more money than plaintiffs themselves, that's a serious problem.

Second, it is unfair to those with current, serious injuries. Plaintiffs' lawyers "package" the settlement of their most serious cases--such as cases of workers with mesothelioma--with scores of cases of plaintiffs who have much smaller claims because they are exposed but not sick. Defendants are told to take or leave the whole package. The result is that plaintiffs with severe illnesses are shortchanged in order to boost the amount of money that plaintiffs who are not - and, indeed, may never become - sick will recover.

Third, it precipitates bankruptcies of the defendant companies - thus leaving many who are, or will become, seriously ill out in the cold. A logical system might pay the seriously ill first; reserve money for the subset of exposed people who will, in the future, become seriously ill; and pay nothing to those who never become ill. But that is far from the system we have.

Our system, instead, pays those who win the race to the courthouse; does not prioritize the severely ill over the somewhat or slightly ill; and does nothing to prevent bankruptcies that will end up being devastating to those who subsequently become ill.

What FAIR, If Enacted, Would Accomplish

That brings us to the pending legislation, FAIR, which offers a far better solution. The point of FAIR is to take what is, in practice, a privately managed compensation scheme and make it truly public. It does so by passing sweeping federal tort reform.

First, FAIR would eliminate private tort liability for asbestos exposure. In exchange, it would offer victims government benefits, through a program that would cost between $108 billion and $145 billion.

The benefits would be granted, according to a compensation schedule, to all those eligible - regardless of whether the particular defendant that caused a given individual's asbestos exposure was legally at fault.

In this respect, FAIR is like the September 11^th Victims Compensation Fund compensation scheme. (As I will discuss in more detail in my next column, there is a difference between the two schemes, however: the money for FAIR will come not from taxpayers, but from a specially targeted consortium of corporations and their insurers.)

The Controversy Over Particular Awards Should Not Prevent the Bill's Passage

FAIR's schedule sets out 10 levels of compensation, ranging from free medical monitoring to $1 million (for those people with mesothelioma). In the Senate Judiciary, the amounts were controversial: For instance, at the last minute, Sen. Hatch won Sen. Feinstein's support in part because he agreed to raise the some of the awards.

The compensation schedule is likely to remain controversial - but it shouldn't be. It's not possible for the schedules to achieve perfect fairness. The key is that on the whole, it is far, far preferable to the alternative.

Granted, FAIR's categories for compensation are rough - in several respects. But neither provides a good reason to vote against FAIR.

That's not ideal. But consider the alternative. Under the current system, suppose that a jury decides that a victim of asbestosis needs $300,000 in order to be fully compensated (assuming that itself could ever be precisely ascertained). In reality, because fifty-seven percent of every dollar in the system goes to lawyers, it would cost $697,000 to get that $300,000 to the victim. And those who are late to the courthouse will get practically nothing at all.

Perhaps the awards for the hypothetical 40-year-old and 65-year-old should be adjusted. But even if they are not, this smaller unfairness is no reason to return to the dramatic unfairness of the current system.

Here is another variety of complaint: On July 1, 2003, The Wall Street Journal complained that FAIR allows "mixed causation" lung cancer victims to participate in the plan. Thus, someone who was exposed to asbestos, and also smoked like a chimney, will still recover.

This criticism again fails to compare FAIR to the alternative - the disastrous current system. Moreover, addressing it would only get us back in the same mess we already are in.

The last twenty years of litigation have shown that it is very difficult, and very expensive, to determine the causal links between asbestos exposure and lung cancer. For FAIR to decide that the game of figuring out causation is not worth the exorbitant candle is therefore perfectly reasonable. (And remember, these are all lung cancer victims. At worst, someone who is dying a horrible death will get money despite the fact that asbestos was, in fact, not the cause of it - hardly a cosmic injustice.)

Congress should not get bogged down in comparisons with the tort system that FAIR replaces - which offered a more exact justice to the few, at far too great a cost to the many. Instead, Congress should judge FAIR like a tax scheme that takes money from some, and gives it to others, in order to achieve some public good. Viewed as such a scheme, FAIR is a success, and should be enacted.

In my next column, I will examine in greater detail both the sources of FAIR's funding, and how FAIR distributes the benefits and burdens of the compensation program.