May 9, 2005
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Approximately 730,000 people have filed claims for asbestos injuries in the United States through 2002. At least 8,400 defendants and insurers have paid $70 billion to settle these claims. The number of claims surged sharply through the 1990s, driven primarily by people who claim noncancerous injuries. Such trends have raised concerns that there may be no funds left to compensate those whose symptoms have not yet surfaced but who will become seriously ill in the future. A number of proposed reforms have been set forth to address these concerns.
Asbestos litigation, the longest-running mass tort litigation in the United States, arose as a result of individuals' exposure to asbestos and the failure of many product manufacturers to protect their workers. Because asbestos is durable and has excellent fire-retardant capabilities, it was widely used in work settings through the early 1970s. Asbestos fibers are easily inhaled and can cause injuries such as a fatal form of cancer called mesothelioma and noncancerous impaired lung function.
There have been sharp increases recently in the number of asbestos-related claims filed annually and in the number and types of firms named as defendants. Plaintiffs' attorneys have expressed concern over whether compensation is being divided fairly among claimants whose injuries vary in severity, and defendants claim that responsibility for paying compensation is not being allocated in proportion to culpability. There is also growing concern that the cost of settling claims now will deplete funds needed to compensate claimants whose symptoms have not yet surfaced but who will eventually become seriously ill.
The RAND Institute for Civil Justice (ICJ) began studying asbestos litigation in the early 1980s. This study provides a comprehensive description of the litigation through 2002, evaluates how well the tort system is resolving asbestos claims, and describes some alternative strategies.
Among ICJ's findings are the following:
The tort system in the United States has three objectives: compensation, deterrence, and individualized corrective justice. The commitment of tort law to "make victims whole," deter injurious behavior, and provide individuals with their "day in court," and its adaptability to change, are generally seen as justification for the tort system's transaction costs, which are higher than the costs associated with delivering benefits through administrative systems such as workers' compensation.
Compensation. Mass litigation strategies have opened the courts to anyone who can prove exposure to asbestos, even if the claims are minor, thus providing increased access to the courts. However, expanded access may jeopardize the ability of the tort system to compensate future claimants, some of whom will have fatal injuries. There is no research that compares the total compensation received by plaintiffs with the plaintiffs' economic loss. It is clear, however, that the personal injury trusts established as part of asbestos defendants' bankruptcy proceedings pay only a fraction of the agreed-upon value of plaintiffs' claims.
Deterrence. As litigation spreads to companies outside of the asbestos and building-products industries, the culpability of defendants is more in dispute. If business leaders believe that tort outcomes have little to do with their own behavior, then there is no reason for them to alter their behavior to minimize tort exposure, and the deterrence objective of the tort system is undercut.
Individualized Treatment. In asbestos litigation, individualized justice is a myth. Most cases are settled with a flat fee negotiated by attorneys. Many cases that go to trial are grouped with as many as 100 other cases, and compensation is similar for all. Consolidated trials are not unique to asbestos litigation, but they are more prevalent, of a larger scale, and more complex.
Many proposals have been set forth as better alternatives than the tort system for resolving asbestos claims. The goals of these reforms are to provide fairer allocation of compensation dollars and more equitable responsibility for payments, and to achieve both ends quickly and at a lower cost. Since the beginning of asbestos litigation in the 1970s, at least 15 reform bills have been introduced in the U.S. Congress, but none has garnered enough support to become law. Those reform bills have typically been of two types. One type would allow claims to remain in the legal system, but limit compensation to only those people whose injuries meet certain medical criteria. Such a system would require the fewest changes, but it would prevent many asbestos-exposed workers—those who are not functionally impaired and do not have asbestos-related cancer—from seeking compensation. Another type would eliminate tort liability and create an administrative compensation system funded by defendant corporations and insurers. This trust fund would make payments to injured workers who meet certain criteria. But such a proposal must address difficult issues such as how much will be needed to pay future claims and how much each contributor should pay.
The states may play a larger role in settling asbestos claims. Some states have introduced statutes limiting compensation to those who meet certain medical criteria. Others have invited consolidation of cases. But such efforts are likely to create a patchwork of tort doctrine and mass litigation procedural rules that promises continuing variation in asbestos outcomes that would do little to mitigate the high transaction costs of asbestos litigation.
Finally, the personal injury trusts that usually result from bankruptcy proceedings may resolve claims quickly and with lower costs. But the trusts may be unfair to some classes of asbestos plaintiffs and may lead to lengthy appellate processes and ancillary litigation.
In 2005, Congress was again debating the details of a bill to establish a universal trust fund for asbestos victims. As of this writing, the fate of the bill is still uncertain.
This research brief describes work done for the RAND Institute for Civil Justice.
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