August 18, 2011
A new study by the RAND Corporation explores the way that asbestos bankruptcy trusts—created to compensate people injured by the mineral—may be influencing tort cases.
The study finds that the current way that the trusts and the tort cases are linked together may result in payments that are not consistent with the basic principles of the tort liability system.
Researchers say that, in some cases, the trusts may allow some plaintiffs to receive more compensation than if all of the companies involved in asbestos litigation had remained financially solvent. In addition, the study finds that payments by defendants that remain solvent might not be fully adjusted to account for the payments available from the trusts.
"Asbestos-related litigation is expected to continue for some time," said Lloyd Dixon, lead author of the study and a senior economist with RAND, a nonprofit research organization. "Both plaintiffs and the defendants that remain solvent have a great deal at stake with regard to how payments from trusts enter into the determination of injury awards."
Asbestos litigation in the United States began in the 1970s and grew rapidly. As payments for injuries mounted, many of the primary asbestos defendants declared bankruptcy, leaving behind personal injury trusts that pay future asbestos claims. During the past three decades, 56 asbestos personal injury trusts have been established; the largest 26 of these paid $10.9 billion to settle 2.4 million claims through 2008.
Over the past 10 years, payments by the asbestos bankruptcy trusts have played an increasing role in compensation for asbestos injuries, but there is no standard system to coordinate payments from trusts and lawsuits. The RAND study examines how the asbestos trusts may influence the tort case and how trust payments may be factored into tort awards in different states.
Researchers selected six states to examine closely, most of them with high numbers of asbestos cases: California, Illinois, New York, Pennsylvania, Texas and West Virginia. The statutory laws and court procedures vary considerably across the states examined.
Dixon, who wrote the study with Geoffrey McGovern, an associate behavioral/social scientist at RAND, said the potential effects of the trusts vary across states, depending on the type of legal principles used to determine liability, as well as court rules and procedures. A state's liability standard determines who can be sued and for what share of the total harm.
Researchers say the key to determining how trusts affect compensation in asbestos lawsuits is whether evidence is developed about a plaintiff's exposure to the asbestos produced or used by the bankrupt companies. If this sort of information is developed, then a plaintiff's compensation will not be inflated and payments made by the solvent defendants will be adjusted to reflect compensation available from the trusts.
When such information is not developed, plaintiffs in some circumstances can recover, in effect, once for their injuries in the tort system and then again from asbestos trusts. Under some circumstances, solvent defendants may be required to pay more than their share of the harm.
"The development of evidence about a plaintiff's exposure to the products and practices of the bankrupt firms is an important determinant of the effect of the trusts on the total plaintiff compensation and payments by the remaining solvent defendants," Dixon said. "The creation of the trusts poses a new challenge to the tort system and courts have responded in very different ways."
Researchers say an increase in total compensation would benefit current plaintiffs, but reduce the trust resources available to future plaintiffs. This reduction in trust resources is particularly of concern to plaintiffs who were exposed only to the products and practices of bankrupt companies, and are thus solely reliant on the trusts for compensation.
The study, "Asbestos Bankruptcy Trusts and Tort Compensation," can be found at www.rand.org.
Research for the study was funded by the RAND Institute for Civil Justice and contributions from the following asbestos defendants, insurers and others: Bondex International; Coalition for Litigation Justice; Crane Company; Dow Chemical Company; E.I. Dupont De Nemours and Company; Exxon Mobil Corporation; Garrison Litigation Management Group; General Electric Company; Georgia-Pacific; The Hartford; Herzfeld & Rubin; Owens-Illinois General; Saint-Gobain Corporation; Swanson, Martin & Bell; and the U.S. Chamber of Commerce.
The RAND Institute for Civil Justice helps make the civil justice system more efficient and equitable by supplying government leaders, private decision-makers and the public with the results of objective, empirically based, analytic research.