Rising somewhat like the Phoenix, an alternative bill that would provide compensation for workers injured by exposure to asbestos clawed its way through Congress in mid-October.Accepting a proposal drafted by Senate Majority Leader William Frist, R-Tenn., and his aides, insurers and defendants accepted a proposal on Oct. 16 to seed a trust fund projected to have enough capacity to settle $115 billion in claims over 27 years.
There are strings attached to the acceptance, and organized labor and Democrats in the Senate must still sign on, but the Frist proposal breathed new life into a deal that had died a thousand deaths since work on it began in a Senate committee in January.
If a deal can be worked out in the Senate, it's expected that the House and the Bush Administration will accept it.
The proposed legislation could still suffer an untimely death for any number of reasons. But, if it doesn't, the deal would be a boon to insurers and companies alike. Frist has said that a deal before the end of October was essential if Congress was going to act on the asbestos issue this year.
For insurers, it would settle outstanding asbestos claims effectively for the money they have already set aside for it, approximately $30 billion. Because the money would be seeded into the fund over 27 years, its value over that time would rise to $46 billion.
One catch is that the reserves set aside by insurers include funds from reinsurers. It's expected that reinsurers will battle efforts to force them to pay, but the bill will likely contain language giving primary insurers the legal authority to go after reinsurers if they have assets in the United States, or plan to continue doing business here.
A bottomless pit
The implications of the latest bill for insurers are huge. It would end uncertainty that asbestos claims are a bottomless pit, and aid insurers trying to recover from low investment income and the huge cost of paying off claims from the Sept. 11 terrorist attacks.
Under the proposed deal, insurers would accept 46% of the burden of paying claims for exposure to asbestos, while defendant companies would pay the remaining 54%.
Defendant companies would still be liable for contributing up to $10 billion more in years 24 to 27 of the trust fund if a shortfall exists, but insurers wouldn't have to pony up additional funds.
Frist agreed to remove an amendment to the bill reported by the Senate Judiciary Committee that would have allowed victims to return to the tort system if the fund ran out of money.
The proposal calls for asbestos litigation to be diverted from the tort system to an administrative system within the federal judiciary.
Under the plan, companies such as General Electric, Ford, General Motors and U.S. Gypsum would have to contribute $35.4 billion to the fund over 27 years, enough to pay $57.5 billion in claims over the 27-year life of the fund. An additional $1.5 billion would come from existing trust funds already established to pay asbestos claims.
Legal experts expected that organized labor and Democrats in Congress would demand more; their "line in the sand" was expected to be the $136 billion that the Congressional Budget Office projected would be needed to pay claims arising from worker exposure to asbestos over the next 50 years.
However, the Oct. 16 deal gave everyone optimism that if a little flexibility was shown, organized labor's demands could be met. The deal isn't a cure-all. As a sweetener to insurers, Frist offered to include shunting claims for injuries incurred while exposed to silica into the program, but Democrats and tort lawyers objected.
Arthur D. Postal is Washington, D.C. bureau chief for Insurance Chronicle, a Thomson Media publication.
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