Senate Judiciary Committee Approves Feinstein/Kohl Amendment to Strengthen Solvency of Asbestos Trust Fund

Senate Judiciary Committee Approves Feinstein/Kohl Amendment to Strengthen Solvency of Asbestos Trust Fund
June 26, 2003

Washington, DC - The Senate Judiciary Committee today approved an amendment sponsored by Senators Dianne Feinstein (D-Calif.) and Herb Kohl (D-WI) to help ensure that the asbestos trust fund can deal with unexpected surges in asbestos claims.

"According to proponents of the bill, the money set aside by business and insurers should cover all future claims, and I am hopeful that we will not need more money than that proposed under this legislation," Senator Feinstein said. "I am concerned about what happens if the estimates are off."

"As a whole, this amendment would give greater certainty to individuals exposed to asbestos that they will one day get compensated for their injuries. And if incidence rates go as predicted, the amendment may not cost defendant companies a dime. If, however, incidence rates do not go as expected, this amendment provides victims a way to recover compensation for their injuries."

The underlying asbestos legislation, the Fairness in Asbestos Injury Resolution (FAIR) Act, has no provisions to deal with an unexpected surge in costs at the beginning of the Trust or after all scheduled payments are completed in Year 27.

To address this problem, the Feinstein-Kohl amendment would give the Trust Administrator limited authority to request additional funds from contributing insurers and defendant companies throughout the life of the fund.

From year 1 through year 27 of the Fund, the Trust Administrator would be able to delay scheduled step downs in payments by defendant and insurer companies.

Under the FAIR Act, step-downs are scheduled in

year 6 (from $2.5 billion to $2.25 billion);
year 9 (from $2.25 billion to $2 billion);
year 12 (from $2 billion to $1.75 billion);
year 15 (from $1.75 billion to $1.5 billion);
year 18 (from $1.5 billion to $1.25 billion);
year 21 (from $1.25 billion to $1 billion); and
in year 26 (from $1 billion to $250 million).

The Feinstein-Kohl amendment would give the Trust Administrator the authority to delay or decrease any of these step-downs in contribution levels. For example, suppose it is year 9 and defendant companies aggregate contributions are supposed to go down to $2 billion from $2.25 billion. The Administrator can allow the step down to go forward as projected to $2 billion, he can reduce the contribution partially to $2.1 billion, or he can keep the contributions at the year 8 level of $2.25 billion.

The amendment also deals with scenarios where there are unexpected surpluses. If after delaying a step down, the Administrator determines that there is a surplus of funds during the next certification period. Then, the Administrator can give a company a credit for any excess payments the company has made. Delaying step-downs is an easy way to raise money because, except for year 27, a company will never have to pay more in any year than it did in the previous year. For example, in year seven, a company cannot pay more than it did in year six.

The amendment would also allow the Trust Administrator, starting in year 28, to request an aggregate of $1 billion from defendant companies and an aggregate of $1 billion from insurers each year.

If the Administrator makes this request, defendants and insurers can volunteer to pay their pro rata share. So long as they volunteer to pay into the Fund, the companies are protected from the tort system. But if the participants don't choose to volunteer to pay into the Fund, they are returned to federal court to pursue their tort claims.

The amendment also adjusts the statute of limitations for claimants to reflect the company's return to the tort system. If a claimant has filed a timely claim with the Trust Fund and has not received a full award from the Trust Fund, the statute of limitations will not bar them.

"Without this amendment, claimants would simply have no opportunity to receive compensation if the Trust Fund runs out of money," Senator Feinstein said. "I don't think we can justify depriving an asbestos victim with malignant cancer - a person whose very life was destroyed by asbestos - any means to recover for his or her injuries."

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