| |
 |
| April 19th, 2004 |
|
Media Contact(s): Margarita Tapia, 202/224-5225 |
|
Printable Version |
|
|
HATCH STATEMENT ON THE ASBESTOS LITIGATION CRISIS
|
| |
Statement of Sen. Orrin G. Hatch
before the
United States Senate
On Consideration of S. 2290
The Fairness in Asbestos Injury Resolution Act of 2004
I rise in strong support of S. 2290 -- the bipartisan Fairness in Asbestos Injury Resolution Act of 2004 – appropriately called the FAIR Act.
Mr. President, I think I am stating the obvious here but it bears repeating: Our country is faced with an asbestos litigation crisis of unparalleled magnitude. Something is terribly wrong when asbestos victims who suffer from debilitating injuries recover mere pennies on the dollar while people who are not sick recover millions. Something is terribly wrong when scores of companies – many of which never produced nor sold a shred of asbestos fiber -- are forced into bankruptcy, triggering lost jobs and depleted pensions. And something is terribly wrong when the only real winners in the current system are the handful of personal injury lawyers who walk to the bank with billions of dollars in fees.
You may have heard the statistics before, but I’ll say them again so that everyone knows the scope of the problem facing this country. According to the RAND Institute for Civil Justice, more than 730,000 people have filed claims, with a sharp increase in filings in the last ten years. More than one million claims are expected to be filed in the future. The RAND study tells us that the reason for this dramatic rise in claims is that through the 1980’s, claims were filed only by the manifestly ill. But beginning in the 1990’s, about two-thirds of the existing claims were and still are filed by the unimpaired.
You heard correctly. Astonishingly, the great majority of asbestos lawsuits are brought by those who are not even sick. This has lead to an unacceptable diversion of resources to the wrong people. Non-malignant claimants take over 60% of the compensation, leaving mesothelioma victims with only 20%.
Worse yet, many mesothelioma victims aren’t able to recover any money at all because the companies they would have sued are insolvent. The fact is that unscrupulous personal injury lawyers are abusing the system and getting a windfall. They know that companies, even ones with the most remote connection to asbestos, are fearful of runaway verdicts. They exploit the uncertainty these tangential companies face in the current system by overwhelming them with huge numbers of unimpaired claims in order to force massive settlements.
The result is that the personal injury lawyers reap huge fortunes for themselves – over $20 billion in attorney fees alone in asbestos litigation so far. One actuarial firm estimates that personal injury lawyers are expected to siphon more than $60 billion out of asbestos litigation before it is over. It is no wonder that these personal injury lawyers are fighting tooth and nail to keep their golden goose alive.
But their tactics aren’t just about buying private planes and sports teams. While the personal injury lawyers are busy making themselves into millionaires, they are depriving the truly sick of available resources.
Mr. President, let me tell you about a pipe fitter from Illinois. I learned his story from his daughter, who lives in Washington State.
A World War II Navy veteran, he joined the Pipefitters Union in Chicago and worked at several locations in the Midwest, including sites in Illinois, Indiana, Michigan, and Wisconsin. It was during this period that he was repeatedly exposed to asbestos.
Eighteen years ago, at the age of 61, he learned he had mesothelioma. Understanding the medical nightmare he faced and the consequences for his family, he quickly filed suit against those he believed were responsible for his exposure. Sadly, just months later, he died.
His case was lumped together with others, many of whom were not as sick as he was and some of whom weren’t sick at all. For years, nothing happened with his case. It simply gathered dust in the dockets. Eventually, it was transferred from Illinois to Pennsylvania.
It has now been 17 years since his case was filed. He never got to have his day in court. His widow is still waiting.
What would happen in his case if S. 2290 is enacted? First, because he had mesothelioma, his estate would be paid $1 million dollars, and it would be paid on an expedited basis. Second, his claim would have been evaluated and processed in a matter of months, not decades. And third, he wouldn't be forced to give up to half of his award - monies desperately needed for medical bills, treatment, and all of the economic and personal loss that afflicted his family - to his lawyer.
And then there’s the case of Rick Napier, who suffers from asbestosis. He has trouble breathing; he can’t even walk without great difficulty. Because of his disease, he no longer has the lung capacity he needs for physical labor, let alone normal every day activities.
Rick Napier worked for W.R. Grace for three and a half years until he was laid off. He was a skip operator, someone who ran the small cars that carried ore up and down the hills of Libby, Montana. He has lived in Libby for 55 years and knows – as do his neighbors -- that asbestos is everywhere in the area. It is in the gardens and yards, at places of work, in homes, playgrounds – everywhere.
Four years ago, Rick was diagnosed with asbestosis. He filed a lawsuit but was told that despite his illness, there was really nothing that could be done. W.R. Grace has gone bankrupt. There is no one left to sue, no one left to compensate him for his illness. The current tort system has failed Rick Napier. Unless we pass this legislation for a national privately funded trust to compensate based upon illness and not the solvency of the defendant company, we continue to fail Rick Napier and many others like him. Without it, we leave Rick Napier and the rest of the victims in Libby, Montana with no recourse, no relief, and no hope.
Mr. President, it's high time we put the victims first.
I would be remiss not to mention the staggering toll that the asbestos litigation problem has also inflicted on our economy. As the number of claims continues to rise, at least 70 companies to date have been forced into bankruptcy. Meanwhile, the number of companies pulled into the web of this abusive litigation is on the rise, many of whom have little, if any, culpability.
These business bankruptcies translate directly into lost jobs, lost pensions and weaker financial markets. According to a letter from the non-partisan American Academy of Actuaries, “bankruptcies of corporate asbestos defendants have affected 47 states, resulting in the loss of 52,000-60,000 jobs, with each displaced worker losing $25,000-$50,000 in wages and 25% of their 401(k).” RAND estimates that this litigation eventually will result in 430,000 lost jobs.
It is because of these very serious problems that I stand here today to express my steadfast support for the legislation that we are on the verge of considering.
Let me turn for a moment to a comparison between the current tort system and the FAIR Act.
It’s hard to imagine that anyone can’t see the benefits of the FAIR Act over the current system.
S. 2290 will provide fair and timely compensation to asbestos victims and certainty to American workers, retirees, shareholders, and the U. S. economy. It would establish a privately funded, no-fault, national asbestos victims compensation fund to replace the broken tort system and ensure that individuals who are truly sick receive compensation quickly, fairly and efficiently.
The legislation retains the bipartisan agreement on medical criteria that was approved by a unanimous vote in the Judiciary Committee. These criteria form the basis of a no-fault victims compensation fund that will stop the flow of resources to the unimpaired and ensure that the truly ill will be paid quickly and fairly. S. 2290 also contains improvements made to its predecessor, S. 1125, that have been developed over the last several months during extensive negotiations by the stakeholders.
S. 2290 includes a number of new provisions that ensure the Fund will be set up, processing and paying claims quickly. First, it places the office within the Department of Labor in order to utilize its existing infrastructure and experienced personnel to facilitate a faster startup. In order to allow the office to begin accepting and processing claims in short order, the legislation requires the enactment of interim regulations and procedures within 90 days after date of enactment, including the expedited processing of exigent claims. To avoid potential delays associated with the appointment process, the legislation grants interim authority to an existing Assistant Secretary of the Department of Labor until the new Administrator is appointed. To ensure that adequate initial funding will be available to meet demand, the bill provides for upfront funding from Fund participants, as well as increased borrowing authority. These new provisions address concerns that claimants must have speedy access to the Fund while halting the admittedly broken tort system that continues to divert scarce resources away from the sick to the unimpaired.
S. 2290 also includes revised funding provisions. It establishes a Fund that can pay $114 billion in claims, with an additional $10 billion in contingent funding available from defendant companies. Money required to go to the Fund from defendants and insurers is assured over a period of 27 years.
Defendant participants, for example, guarantee their funding obligations through a grant of authority to the Administrator to impose a surcharge in any year where monies received fall short of the annual requirements. In addition, S. 2290 provides up to $300 million annually in hardship and inequity adjustments that may be granted by the Administrator among defendant participants. Money from insurers is front-loaded for the early years of the Fund where the most stress on the system is anticipated. Enforcement provisions have been strengthened to help the Administrator go after recalcitrant participants. Additional safeguards to insure the funding have also been added, such as establishing a priority for payment obligations to the Fund in State insurance receivership proceedings.
Based on the funding now available under S. 2290, increased compensation will go to claimants. Claims values have been increased in several disease categories over the levels approved by the Judiciary Committee in an overwhelmingly bipartisan vote. Furthermore, S. 2290 now provides reimbursement for out-of-pocket costs of physical examinations by claimants’ physicians, as well as costs for x-rays and pulmonary function testing for Level I claimants.
Unfortunately, some members on the other side of the aisle want to block us from even proceeding to the bill. While I am not surprised by these obstructive tactics, I find it truly regrettable given the tremendous importance of this legislation to our country.
I find this obstruction particularly troubling because without the FAIR Act, more and more Americans are certain to lose their jobs. Anyone who is serious about preserving jobs should be actively helping us move forward to consideration of this bill, not standing in its way. But the personal injury lawyers are a powerful force, and some on the other side of the aisle are willing to hear the voice of the personal injury bar over the voices of hardworking Americans who want to keep their jobs and pensions.
To legitimize their obstructive tactics, opponents of this bill argue that the legislation is completely different from the one that we reported from Committee last year. This argument lacks merit because the bill retains the core features of the legislation that was introduced as S.1125 and subsequently marked up in Committee.
Again, we have taken steps to ensure the solvency of the fund. As I mentioned, we replaced some contingent funding by calling for more up-front funding, extended borrowing authority, and guarantees for funding, among other added funding safeguards.
The fact is that this bill continues to create a fair and efficient alternative compensation system to resolve the claims for injury caused by asbestos exposure. The fund is still capitalized through private contributions from defendants and insurers, and compensates victims under the very same medical criteria that we reached on a bipartisan basis last year. The bill still brings uniformity and rationality to a broken system so that resources are more effectively directed towards those who are truly sick.
Indeed, this bill still preserves no less than 53 compromise measures demanded by the Democrats last year when this bill moved through Committee. In fact, it adds many more provisions requested by Democrats and labor unions. And while this bill contains certain modifications from earlier versions, the modifications represent dramatic improvements to controversial measures that all interested parties had ample opportunity to discuss and work out after S.1125 was reported from Committee.
While the Judiciary Committee reported S.1125 favorably from Committee on a near party-line vote, the Markup produced some measures that required retooling. These measures jeopardized any meaningful chances of getting the bill passed into law. If not for the tireless efforts of our distinguished Majority Leader and Senator Specter, this bill would have achieved what its opponents have yearned for all along – a dead bill.
But through the stewardship of Senator Specter and Chief Judge Emeritus of the Third Circuit, Edward R. Becker, we were able to provide a forum through which the major stakeholders provided invaluable expertise and solutions with respect to the remaining controversial issues left on the legislation, such as fund reversion, start-up and administrative process. This group, which included representatives from labor unions and industry, among others, met dozens of times in the last 8 months. This process proved to be not only insightful, but also very helpful in resolving many of the key differences on this legislation.
And through the leadership of Senator Frist, we were able to get the insurers and defendants to agree on an equitable funding allocation and, among other things, provide for more flexible borrowing authority and front-loaded funding to address the anticipated flood of claims that would come through the fund during its early years.
Opponents of this bill have also justified their obstructive tactics by passing misinformation about the bill. First, some members on the other side of the aisle have stated repeatedly that this bill does not provide enough money. I find these statements to be misleading and in stark contrast to several studies of future asbestos-related costs under the current system.
For example, one study that shows the highest reasonable estimate of prospective costs – the Milliman study – would result in approximately $92 billion for victims, after attorney fees and expenses. And in yet another study commissioned by Tillinghast-Towers & Perrin, future amounts to compensate victims are estimated at $61 billion after attorneys fees and expenses.
Under the FAIR Act, it is estimated that claimants will receive 95 percent or more of the total funds under the no-fault, non-adversarial system. This means the FAIR Act fund – which will be able to pay more than $120 billion in awards– will allow claimants to take home well over $100 billion. This is more total money than they are projected to receive under the current tort system.
But it is not just more money in the pockets of victims, it is faster and more certain compensation as well. We anticipate that claimants will not have to endure years of discovery battles and endless litigation before they get paid. Currently, whether some victims get paid depends on the solvency of businesses. But under the FAIR Act, these victims will no longer have to go without payment. It is time to end the current system of Jackpot Justice where only some win and many lose.
Opponents of this bill have also argued that there aren’t adequate safeguards to ensure solvency of the fund. My response to this is quite simple: Baloney. This fund – which is funded at the highest reasonable claim-rate scenario – is equipped with many mechanisms to ensure that the pay-in and pay-out requirements are met. Once again, this includes more flexible borrowing authority against future contributions, front-loaded contributions from insurers, and contingency funding of $10 billion.
To be absolutely certain, the bill also includes guaranteed surcharge and orphan share reserve accounts which set aside money to grow and pay for unexpected shortfalls, and empowers the Attorney General to enforce contribution obligations. On top of all these safeguards, if the fund still becomes insolvent, claims would revert back to the tort system – a provision, by the way, which Democrats insisted be part of the bill.
Given that this bill is a clear net monetary gain for legitimate victims, and provides payments faster and with more certainty, I am at a loss as to why anyone could object to this bill. The unions that continue to oppose the bill risk throwing away the last, best chance to compensate fairly those who are truly sick and provide some protection to those whose jobs and pensions are at risk because of the asbestos litigation crisis.
Quite frankly, the only entity that stands to lose under this bill are the handful of personal injury lawyers who have guzzled more than $20 billion of the costs incurred on this issue as of the end of last year. If the improved FAIR Act is passed, they will not be able to leverage unimpaired claims to squeeze a projected $41 billion more for themselves from remotely-connected companies by abusing a broken system. I am all in support of compensating attorneys for the value of their work. But when the lawyers get rich while diverting valuable resources away from sick victims, something is wrong with the system. But you don’t need me to tell you this – the Supreme Court, think tanks, and other non-partisan commentators have been saying it for years.
Mr. President, we have a serious problem on our hands that demands this body’s full attention. I applaud our distinguished Majority Leader for bringing this bill to the floor because the time to act is now.
We have studied the asbestos problem at length for decades. We have held numerous hearings, considered various legislative proposals, and even underwent several marathon markups in the Judiciary Committee last June.
Over the past year, we met extensively with our Democratic counterparts to assuage their concerns about the bill. We have provided a meaningful 8-month mediation forum through which the major stakeholders could bridge their differences on issues critical to the bill. To the extent we were able to reach consensus on issues, the appropriate language is embodied in the bill now before us. To the extent there are issues that remain unresolved we can openly debate them here on the floor of the Senate.
The time has come to stop talking about doing something and take decisive action. Every day that passes is a day that we withhold meaningful recovery to truly sick victims. Every day that passes is a day in which hard-working Americans at companies that had little or nothing to do with asbestos face decreased pensions and an uncertain employment future. Every day that passes is a day that we deny consideration of a comprehensive solution to one of the most plaguing civil justice issues of our time.
Thank you Mr. President.
|
| |
| ### |
| |
| |
| |
|
|
|
