Cost of Asbestos Claims Now Tops $54 Billion

A RAND study reports that more than 600,000 people in the United States have filed claims for compensation for asbestos-related injuries, costing businesses more than $54 billion by the end of 2000.

The study reports that 500,000 to 2.4 million more claims could be filed in the years ahead, costing businesses as much as $210 billion more.

"We found that over the past decade there has been a rapid increase in both the number of asbestos claims and the cost of the litigation," said Stephen Carroll, a RAND senior economist who headed the study. "This surge challenges the notion that the litigation is manageable and raises new questions about whether there will be enough money to pay all the claims that are likely to be filed."

"Asbestos Litigation Costs and Compensation: An Interim Report," found that 65 percent of compensation over the last decade was paid to people claiming non-cancerous conditions. Increasing claims for non-cancerous injuries explain the recent growth in the asbestos caseload.

Although available claims data do not distinguish consistently among different kinds of non-cancerous claims, RAND reports there is widespread agreement that a majority of the claimants without cancer are functionally unimpaired, meaning that their asbestos exposure has not so far affected their ability to perform activities of daily life. Under the laws of most jurisdictions, functionally unimpaired claimants who show clinical signs of asbestos exposure have compensable injuries. Whether the system should continue to compensate these claimants is the central issue in the current policy debate over asbestos litigation.

A 1983 RAND study reported that claimants received only 37 cents of every dollar spent on asbestos litigation, with the rest going to defense and plaintiff attorneys' fees and other expenses. The new study finds that claimants are getting a little more - 43 cents on the dollar - but still less than half of all spending on asbestos litigation.

The first wave of asbestos personal injury litigation, beginning in the 1970s, was confined to about 300 companies that processed asbestos or made heavy use of it, such as in shipbuilding. Now the litigation has spread to more than 6,000 companies that represent nearly all types of industries in the United States, according to the RAND report.

The report found that the typical claimant in an asbestos lawsuit now names 60 to 70 defendants, compared with an average of 20, two decades ago.

By spring 2002, at least 60 companies - among them some of the largest in the United States - had filed for bankruptcy because of their asbestos liability exposure, including 22 since January 2000. Some of these firms have emerged from bankruptcy, establishing trusts to pay people who bring claims against them. The growing asbestos caseload raises questions about whether non-bankrupt defendants and bankruptcy trusts will have the money to pay future claims.

The Manville Trust, for example, which was set up to pay people injured by asbestos after Johns-Manville Corp. filed for bankruptcy, is now paying only 5 percent of the value of claims against it in order to preserve funds for future victims.

"The fact that the trusts pay only pennies on the dollar is one of the reasons why the litigation is spreading to greater numbers of defendants," said report coauthor Deborah Hensler, a RAND fellow and a professor at Stanford University Law School. "If claimants cannot get adequate compensation from the former deep pockets, they must look for greater compensation from other defendants or pursue additional defendants."

Asbestos is a group of silicate minerals used in many industrial processes because of their fire-retardant properties. Asbestos fibers, which are easily inhaled, can cause a number of injuries including a fatal, incurable cancer called mesothelioma. Asbestos can also impair lung function without causing cancer.

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