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[109 Senate Hearings]
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S. HRG. 109-350
S. 852: A FAIR AND EFFICIENT SYSTEM TO RESOLVE CLAIMS OF VICTIMS
FOR BODILY INJURY CAUSED BY ASBESTOS EXPOSURE, AND FOR OTHER PURPOSES
HEARING
BEFORE THE
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS FIRST SESSION
____________
APRIL 26, 2005
Serial No. J-109-2C
____________
Printed for the use of the Committee on the Judiciary
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COMMITTEE ON THE JUDICIARY
ARLEN SPECTER, Pennsylvania, Chairman
ORRIN G. HATCH, Utah PATRICK J. LEAHY, Vermont
CHARLES E. GRASSLEY, Iowa EDWARD M. KENNEDY, Massachusetts
JON KYL, Arizona JOSEPH R. BIDEN, JR., Delaware
MIKE DEWINE, Ohio HERBERT KOHL, Wisconsin
JEFF SESSIONS, Alabama DIANNE FEINSTEIN, California
LINDSEY O. GRAHAM, South Carolina RUSSELL D. FEINGOLD, Wisconsin
JOHN CORNYN, Texas CHARLES E. SCHUMER, New York
SAM BROWNBACK, Kansas RICHARD J. DURBIN, Illinois
TOM COBURN, Oklahoma
DAVID BROG, Staff Director
MICHAEL O’NEILL, Chief Counsel
BRUCE A. COHEN, Democratic Chief Counsel and Staff Director
TUESDAY, APRIL 26, 2005
STATEMENTS OF COMMITTEE MEMBERS
Page
Coburn, Hon. Tom, a U.S. Senator from the State of Oklahoma ..................... 29
Cornyn, Hon. John, a U.S. Senator from the State of Texas ....................... 26
Durbin, Hon. Richard J., a U.S. Senator from the State of Illinois .............. 31
Feingold, Hon. Russell D., a U.S. Senator from the State of Wisconsin ........... 34
Feinstein, Hon. Dianne, a U.S. Senator from the State of California ............. 27
Kennedy, Hon. Edward M., a U.S. Senator from the State of Massachusetts ......... 23
Leahy, Hon. Patrick, a U.S. Senator from the State of Vermont .................... 2
prepared statement ............................................................. 175
Sessions, Hon. Jeff, a U.S. Senator from the State of Alabama ................... 21
Specter, Hon. Arlen, a U.S. Senator from the State of Pennsylvania ............... 1
WITNESSES
Becker, Edward R., Judge, U.S. Court of Appeals for the Third Circuit,
Philadelphia, Pennsylvania ........................................................4
Berrington, Craig A., Senior Vice President and General Counsel, American
Insurance Association, Washington, D.C........................................... 15
Crapo, James D., M.D., Professor of Medicine, National Jewish Medical and
Research Center, University of Colorado Health Sciences Center, Denver,
Colorado ......................................................................40
Engler, John M., President and Chief Executive Officer, National Association
of Manufacturers, Washington, D.C............................................. 11
Gober, Hershel W., National Legislative Director, Military Order of the Pur-
ple Heart, McLean, Virginia .................................................. 43
Green, Eric D., Professor of Law, Boston University Law School, Boston,
Massachusetts ................................................................ 42
Landrigan, Philip J., M.D., Professor of Occupational and Environmental
Medicine, and Chairman, Department of Community and Preventive Medi-
cine, and Professor of Pediatrics, Mount Sinai School of Medicine, New
York, New York ............................................................... 45
Morgan, Carol, President and General Counsel, National Service Industries,
Inc., Doraville, Georgia ..................................................... 47
Peterson, Mark A., President, Legal Analysis Systems, Inc., Thousand Oaks,
California ................................................................... 48
Rabinovitz, Francine, Hamilton, Rabinovitz & Alschuler, Carmel, California ...... 50
Reuther, Alan, Legislative Director, International Union, United Automobile,
Aerospace & Agricultural Implement Workers of America (UAW), Wash-
ington, D.C................................................................... 52
Seminario, Margaret, Director, Safety and Health Department, American
Federation of Labor and Congress of Industrial Organizations (AFL-CIO),
Washington, D.C............................................................... 13
QUESTIONS AND ANSWERS
Responses of Edward Becker to questions submitted by Senator Durbin ............. 73
Response of Craig A. Berrington to a question submitted by Senator Cornyn ....... 79
Responses of James D. Crapo to questions submitted by Senator Kyl ............... 80
Responses of Eric D. Green to questions submitted by Senator Cornyn ............. 86
Responses of Carol Ellis Morgan to questions submitted by Senator Specter ....... 92
Responses of Mark A. Peterson to questions submitted by Senators Coburn,
Cornyn, Specter and Kyl ...................................................... 97
Responses of Francine Rabinovitz to questions submitted by Senators Cornyn
and Kyl ..................................................................... 114
IV Page SUBMISSIONS FOR THE RECORD
Admiral Zumwalt & Consultants, Inc., James G. Zumwalt, Vice President,
Reston, Virginia, statement ................................................. 118
Asbestos Disease Awareness Organization, Linda Reinstein, Executive Direc-
tor, and Co-Founder, prepared statement ...................................... 120
Asbestos Study, Group, Barry B. Direnfeld, Counsel, letter...................... 123
Berrington, Craig A., Senior Vice President and General Counsel, American
Insurance Association, Washington, D.C., prepared statement.................. 124
Blinded Veterans Association, Thomas H. Miller, Executive Director, Wash-
ington, D.C., letter......................................................... 128
Center for Justice & Democracy, United Church of Christ Justice & Witness
Ministries, USAction, and U.S. PIRG, joint letter and attachment............. 130
Chemerinsky, Erwin, Alston & Bird Professor of Law, Duke University School
of Law, Durham, North Carolina, letter........................ ..............134
Crapo, James D., M.D., Professor of Medicine, National Jewish Medical and
Research Center, University of Colorado Health Sciences Center, Denver,
Colorado, prepared statement ................................................ 136
Engler, John M., President and Chief Executive Officer, National Association
of Manufacturers, Washington, D.C., prepared statement....................... 142
Gober, Hershel W., National Legislative Director, Military Order of the Pur-
ple Heart, McLean, Virginia, prepared statement.............................. 147
Green, Eric D., Professor of Law, Boston University Law School, Boston,
Massachusetts, prepared statement ............................................ 151
International Association of Heat and Frost Insulators and Asbestos Workers,
James A. Grogan, General President, Lanham, Maryland, press release .......... 164
International Association of Machinists and Aerospace Workers, R. Thomas
Buffenbarger, President, Upper Marlboro, Maryland, prepared statement ....... 166
Landrigan, Philip J., M.D., Professor of Occupational and Environmental
Medicine, and Chairman, Department of Community and Preventive Medi-
cine, and Professor of Pediatrics, Mount Sinai School of Medicine, New
York, New York, prepared statement........................................... 168
Leaders of major asbestos victims’ and advocacy groups, joint letter ........... 173
Morgan, Carol, President and General Counsel, National Service Industries,
Inc., Doraville, Georgia, prepared statement................................. 179
Olson, Theodore B., Gibson, Dunn & Crutcher LLP, Washington, D.C., letter
and attachments ............................................................. 184
Peterson, Mark A., President, Legal Analysis Systems, Inc., Thousand Oaks,
California, prepared statement............................................... 192
Phillips, Carter G., Sidley Austin Brown & Wood LLP, Washington, D.C.,
letter....................................................................... 202
Reuther, Alan, Legislative Director, International Union, United Automobile,
Aerospace & Agricultural Implement Workers of America (UAW), Wash-
ington, D.C., letter and prepared statement.................................. 212
Seminario, Margaret, Director, Safety and Health Department, American
Federation of Labor and Congress of Industrial Organizations (AFL-CIO),
Washington, D.C., prepared statement and attachment.......................... 219
Strauss, David A., University of Chicago Law School, Chicago, Illinois, letters .235
Veterans of Foreign Wars of the United States, Robert E. Wallace, Executive
Director, Washington, D.C., letter........................................... 248
A FAIR AND EFFICIENT SYSTEM TO RESOLVE
CLAIMS OF VICTIMS FOR BODILY INJURY
CAUSED BY ASBESTOS EXPOSURE, AND
FOR OTHER PURPOSES
________
TUESDAY, APRIL 26, 2005
UNITED STATES SENATE,
COMMITTEE ON THE JUDICIARY,
Washington, D.C.
The Committee met, pursuant to notice, at 9:00 a.m., in room SR-325,
Russell Senate Office Building, Hon. Arlen Specter, Chairman of the
Committee, presiding.
Present: Senators Specter, Hatch, Kyl, Sessions, Cornyn, Coburn,
Leahy, Kennedy, Feinstein, Feingold, and Durbin.
OPENING STATEMENT OF HON. ARLEN SPECTER,
A U.S. SENATOR FROM THE STATE OF PENNSYLVANIA
Chairman SPECTER. Good morning, ladies and gentlemen. It is precisely
9 o’clock, the time scheduled for this hearing by the Senate Judiciary
Committee. We meet in one of the most historic rooms on Capitol Hill,
the Senate Caucus Room, where hearings were held on Teapot Dome,
Army-MacArthur, Kefauver Crime Commission, McClelland Committee.
President John F. Kennedy announced for the Presidency in this room.
During fairly recent tenure, highly celebrated hearings with Judge
Bork and Justice Thomas. And today we approach a subject of, I think,
great importance to the United States for tens of thousands of asbestos
victims who are suffering without compensation because their companies
have gone into bankruptcy, and some 74 companies in bankruptcy are a
tremendous drag on the economy.
Senator Leahy and I, on April 19th, introduced Senate bill 852,
joined by a group of Democrats with Senator Leahy and a group of
Republicans with me, after working on a very, very carefully crafted
bill to achieve certain core principles, and as previously stated,
those principles will be maintained on the agreement that Senator
Leahy and I have. They are subject to modifications on improvements
which we can agree to.
The discussion draft on this bill was circulated on February 7th,
and an updated draft on April the 12th incorporating a great many
changes, and the discussion draft was formulated after very, very
extensive proceedings on legislation which was reported out of Committee
by Chairman Hatch, who deserves an enormous amount of credit for
moving forward on the trust fund concept. And that bill was reported
out largely along party lines. Senator Feinstein joined Republicans at
that time. And the bill had a great many problems, and I voted for it
but said it was necessary to move the bill along. And I then enlisted
the aid of the former Chief Judge of the Court of Appeals for the
Third Circuit, Judge Edward Becker, who had taken senior status a
couple of months before. Judge Becker convened a meeting of all the
so-called stakeholders--the manufacturers, the AFL-CIO, the insurance
industry, and the trial lawyers--in his chambers for 2 days in August.
And that has been followed by a series of meetings totaling some 39,
all counted, in my conference room where we have worked through many
of the issues. Those meetings have been attended by some 27 Senators’
representatives, and discussions have been ongoing.
I called Senators yesterday to see if there were any additional
witnesses which they would like to have heard today. Yesterday we
worked through many of the issues with representatives of AFL- CIO in
the morning and sat down with a group of my Republican colleagues in
the afternoon. And we have worked through many, many of the issues,
and we are prepared to consider other modifications which will
supplement and be consistent with the core provisions.
Our Judiciary calendar is very, very heavy, and it is well known
generally we anticipate a Supreme Court nomination in the course of
the next several months. This bill is a longstanding product, and it
is not possible to satisfy everybody on everything. And on the four
interested stakeholders, we have interested parties who have great
strength and great courage in the political world of the United States
Congress. If we are not successful, I do not see any time in the
reasonably near future when we will again revisit this issue.
I am going to yield back the one second and turn to my very
distinguished colleague, Senator Leahy, who I want to compliment
specially. He has taken on a very, very difficult job and a courageous
job in dealing with many people on his side of the aisle. I have had
a few on my side who do not like everything he has done. A lot of
people do not like everything I have done. We are having a hard time
finding people who like anything we have done.
[Laughter.]
Chairman SPECTER. Senator Leahy?
STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR
FROM THE STATE OF VERMONT
Senator LEAHY. Mr. Chairman, I like what you have done, if that is
any help. But this is a bipartisan bill. It is the result of years of
conscientious work, and the Chairman, who has worked so hard on this,
called this one of the most complex issues he has ever tackled. I
agree. I think in that regard we have been very fortunate to have Judge
Becker join with us on this, and, Judge, I salute you for all the work
you have done. But, Mr. Chairman, I salute you because I do not think
we would be this far if you had not persevered as hard as you have.
Among the other hearings held in this room which the Chairman did
not mention was the hearing on the sinking of the Titanic. Now, in this
case, we are bringing the ship back up. We are not putting it down.
And we are bringing up a ship well worth saving.
It is not the bill that I would have written if I was the only one
to write it. It is not the bill that Senator Specter would have if he
were the only one writing it. But you have to get consensus. Nobody
should be surprised here that the interested groups--the labor
organizations, industrial participants in the trust fund, the insurers,
the trial bars--are each less than pleased with some portion or another
of the bill. But that is the essence of legislative compromise. We
either compromise or we have no bill. It is as simple as that.
And this is a good compromise. We have tried to protect the ultimate
goal of fair compensation to the victims. That is the lodestar of our
efforts. We have all had to make sacrifices on a group of subsidiary
issues as we moved forward. But what we have achieved is a significant
step toward a better, more efficient way to compensate asbestos victims.
This is the most lethal substance ever to be widely used in the
workplace. Between 1940 and 1980, more than 27.5 million workers were
exposed to asbestos on the job. Nearly 19 million of them had high
exposure over long periods of time. We even know of family members
who have suffered asbestos-related diseases just because they lived
with the person, because they washed the clothes of loved ones.
The economic harm caused by asbestos is real. The bankruptcies that
resulted are a different kind of tragedy for everyone, for workers and
retirees, for the shareholders, and for families who built these
companies. In my own State of Vermont, the Rutland Fire Clay Company
is among more than 70 companies nationwide to have declared bankruptcy.
Now, I am encouraged by the favorable reaction this bill has generated
among many. In the past week, we have received letters of support from
United Automobile Workers, the UAW; the Asbestos Workers Union,
certainly a union that has a great deal of interest in what happens;
the Veterans of Foreign Wars of the United States, the VFW; the Asbestos
Study Group; the Blinded Veterans Associations; and others, and I ask
consent that all these letters be put in the record.
Chairman SPECTER. Without objection, they will be made a part of the
record.
Senator LEAHY. The UAW notes in its April 13th letter to us, ‘‘This
will provide more equitable, timely, and certain compensation to victims
of asbestos-related disease, and I am pleased that Alan Reuther, their
legislative director, will be here today.’’
The VFW letter of April 14th says, ‘‘The national trust fund you
are proposing offers our members who are sick and dying the opportunity
to secure timely and fair compensation for the injury they suffered in
the course of serving their country.’’
The National Association of Manufacturers also released a statement
expressing their hope that the legislation will engender broad support.
And I thank Governor Engler for NAM’s support, and I look forward to
his testimony today.
All unimpaired asbestos victims are eligible for medical monitoring,
and unlike last year’s bill, the bill provides for medical screening
for high-risk workers, a relatively low-cost way to help
make sure that those most likely to be harmed as properly diagnosed
and treated, and I thank the AFL-CIO for their help in this.
Organized labor strongly supported the provision ensuring that
victims’ awards under the new trust fund would not be subject to
subrogation by insurance companies. The initial funding of the trust
is more realistic and more substantial than the bipartisan bill that
passed last Congress.
And unlike the earlier bill, this bill ensures that all contributors
in the fund will be a matter of public record, as are their obligations
to the fund. And we guarantee that court cases that have reached
judgment or attained verdicts will not be upset by the new trust fund,
unlike last year’s.
I want to thank the senior Senator from California, Senator Feinstein,
for her tireless efforts. Under her approach we adopted, exigent cases
may receive an immediate lump sum payment. The history of asbestos use
in this country must come to an end. Senator Murray’s provision does
that.
So these are very complex things. I will close with this, and I will
put my whole statement in the record. But Chairman Specter and I know
that what we are attempting here rates off the charts in legislative
degrees of difficulty. Neither of us were born yesterday. We have
served a long time in the Senate. We have worked on compromises,
Republican legislation, Democratic legislation, legislation that
passes--not legislation that is put in to score points for one interest
group or another, one party or another. But we have worked on
legislation that passes because it benefits Americans, first and
foremost. This is one of those pieces of legislation.
[The prepared statement of Senator Leahy appears as a submission
for the record.]
Chairman SPECTER. Thank you very much, Senator Leahy.
We turn now to Judge Edward R. Becker, former Chief Judge of the
Court of Appeals for the Third Circuit, who wrote the opinion on the
asbestos class action case, which was affirmed by the Supreme Court
of the United States. He has had a very extraordinary judicial record,
served on the United States District Court for the Eastern District
of Pennsylvania for 12 years and for 23 years after that has been on
the Court of Appeals for the Third Circuit. He last year received the
Devitt Award as the Outstanding Federal Jurist in America. His academic
background is extraordinary: Phi Beta Kappa of the University of
Pennsylvania, where I first met him; Yale Law School graduate, where
we attended at the same time. And he has undertaken a labor of love
here in tackling this issue in addition to his regular judicial duties.
The only major point where he and I have a substantial disagreement
on what has happened is that he will not take reimbursement for travel
or hotel lodging.
Judge Becker, the floor is yours.
STATEMENT OF EDWARD BECKER, JUDGE, U.S. COURT OF AP
PEALS FOR THE THIRD CIRCUIT, PHILADELPHIA, PENNSYL
VANIA
Judge BECKER. Thank you, Mr. Chairman, for the privilege of appearing
again before the Committee, and I thank you and Senator Leahy for your
kind words about me and about my stewardship.
S. 852 is different in many important respects from the discus-sion
bill about which I previously testified. As a result of many, many hours
of negotiation in recent months, most of the loose ends that I identified
in my previous testimony have been tied down. I do not represent that
they have been tied down to the satisfaction of all the stakeholders any
more than that the bill as a whole is satisfactory to all stakeholders.
As you and Senator Leahy have said, a bill completely satisfactory to
any one stakeholder or any on Senator could probably never pass. S. 852
represents a compromise.
In my testimony, I will focus on the changes from the previous draft,
the areas that have provoked the greatest controversy in recent months,
and the issues that we are still working on. I will, however recapitulate
the salient features of the bill, which, as we know, is a trust fund
bill providing for a $140 billion trust fund.
When I appeared previously, I represented that the financial experts
had demonstrated that trust fund was more than adequate to pay the
projected claims. New figures from Goldman Sachs represent that by
reason of elimination of the Level VIIs, even with the increase in the
claim values, the fund is at least $5 billion more secure than before,
which I hope will give assurance to those Senators who have expressed
concerns about the solvency of the fund. The total program cost in
this current bill is estimated to be $120 billion, and the fund is
$140 billion. The first 5-year outflow is within the up-front money.
Now, the $140 billion is based upon the Goldman Sachs translation
of the projections of future asbestos disease of Dr. Fran Rabinovitz,
which, when I examined them in our marathon sessions last May, impressed
me as correct. I know that there will be testimony today that those
figures are off. That is the testimony of Mr. Peterson, which will be
countered, as I understand, by that of Dr. Rabinovitz. I note for the
benefit of the panel that the recent, very recent figures show a
significant decline in claims. Sangabam, one of the major companies with
asbestos liability claims, are down 70 percent in the last 2 years.
The Peterson and Rabinovitz estimates have been examined in a judicial
proceeding by one of the most experienced judges in the Federal system,
Judge John P. Fullam, of the District Court for the Eastern District of
Pennsylvania, a bankruptcy expert who reorganized the Penn Central. And
with respect to the Owens-Corning estimation, Dr. Peterson’s estimate
of $11 billion in future OCF liability was rejected by Judge Fullam as
not sound, and he accepted Dr. Rabinovitz’s figures, which came up with
a figure of $4 billion less.
So it seems to me that there is at least credible evidence based upon
Judge Fullam’s findings that the Goldman Sachs figures, which are based
upon Dr. Rabinovitz’s projections, are sound and that we should have
some confidence that the fund will be able to meet the claims.
The huge projected numbers of 300,000, according to David Austern,
who is the most experienced man in this field, who has administered
the Manville Trust for decades now, tells me that the bulk of those
figures are either unimpaireds who will not be filing early claims
against the fund because, as you know, they are only entitled to medical
monitoring, or they are people who are maxed out, that is, people who
have already in other lawsuits achieved or secured the maximum amount
that they could get under the fund.
So it seems to me that based on the Manville figures and what I have
talked about, the Peterson projections, which start above the actual
experience, are questionable. The funding seems sound. It is guaranteed
by business as a whole, Section 204(l) at page 162 of the bill, the
guaranteed payment surcharge. I stress, too, that contrary to recent
press reports, the Government and the taxpayers have no obligation to
contribute to the fund. That is made very clear in Section 406 of the
bill at page 287. And the up-front funding appears, as I said in my
previous testimony, to be realistic.
Now, what about getting the money up front first? Business and
insurance will be putting up the lion’s share. The big guys can quickly
determine the amount that they must contribute, and I anticipate that
the bulk of the up-front money will be available within months of
enactment. Section 204(i)(L), pages 148 and 149 of the bill, requires
that Tier II to Tier VI defendant companies must provide the
administrator within 120 days of enactment a good-faith estimate of
past asbestos expenditures, their 2002 revenues, which is the CalPERS,
and an initial payment specified in the bill of very substantial
amounts, for example, in Tier II it must be at least $22 million for
each participant. Besides, the participants want the fund to work and
not to sunset; hence, they have every motive to pay quickly.
Professor Green will testify, has expressed concern about the
companies paying up. For the reasons that I have stated, I think this
concern is misplaced. The companies have every motive to pay up. In
all events, contrary to Mr. Green’s testimony, there are very strong
enforcement remedies in this bill. Section 225 of the bill at page 210
gives the Government liens, and it seems to me that with the availability
of liens and action by the Justice Department, the companies will pay
up, and will pay up when they are supposed to. That will cure the fund.
The great advantage of the trust fund, of course, is that it removes
asbestos litigation from the tort system, where it can languish for
years and years, often with disastrous results for the victim because
the defendants have gone into bankruptcy or the victim cannot identify
the product to which he was exposed 30 years previous. And I know of
cases where there was a mesothelioma case where the meso victim could
not recover simply because the exposure having been 30 years previous,
nobody could identify the product, and they simply could not pin it on
any given defendant. Whereas, under this fund, which is no-fault, you
do not have to get into the product identification.
It also provides an administratively streamlined no-fault system,
telescopes the process into the here and now with the money in place,
and in my judgment this is far superior to the medical criteria approach
under which litigation will continue for decades in the State tort
system, mostly in State courts, attended by endless legal challenges
in the State courts, which the Congress had in mind, would be imposing
tort reforms.
Now, under the bill, priority in payment goes to the exigents, the
very sick people first, which means that they will get promptly paid.
Will this, in fact, happen? I say yes.
Now, I know that concerns have been expressed as to the ability of
the Department of Labor to handle the anticipated volume of claims. The
revised bill addresses those concerns. Senator Fein-stein has offered
a proposal which is in the bill for an offer for judgment,
Section 106(f)(a) at page 38 of the bill. Additionally, to the extent
that someone does not pursue the offer of judgment, the Labor Department
is required to contract out--Section 106(c)(4) at page 33. Contract
out to whom? Contract out to claims facilities. There are claims
facilities, the Manville Fund, the Western MacArthur Trust, the
Fuller-Austin Trust. This asbestos claims process has been in effect
for years, and there are entities, claims facilities like Manville,
which have hardware/software experience, experienced workers who can
be used in connection with processing these claims, who can process
them with great facility. The Manville Trust processed as many as
150,000 claims per year. Based upon my conversation with Mr. Austern
in the early--in the first 9 months, which is the start-up period for
the exigents, there will be nowhere near that number of claims.
So the expertise is out there. The Labor Department can contract
those who want to pursue the offer of judgment and may do so. As I
have said, the fund is solvent. The money will be in place, and I think
that things will work.
A proposal was made as an alternative for a private corporation to
administer it in lieu of the Department of Labor. Careful research has
suggested that there are serious constitutional, non-del-egation problems
with that, which would doubtless lead to litigation. The mandatory
contracting is only for evaluation or settlement of the claims. It would
then come back to the Labor Department for processing. The Labor
Department would sign off on them so you don’t have a non-delegation
problem there.
Now, let me quickly turn to a number of areas where there has been
controversy or disagreement among the stakeholders. One area is medical
criteria. Senator Hatch and Senator Leahy I thought did a magnificent
job of crafting medical criteria. We have not spent a great deal of
time in our deliberations over medical criteria, which we had thought
were untouchable; but, however, a number of points have been raised.
As you know, under the medical criteria, which started with 1125,
those who were unimpaired do not get paid under the bill, as they do
get paid large sums in the tort system. They get only medical monitoring.
The most significant change in this new bill, S. 852, is the elimination
of the Level VIIs.
Insofar as the Level VIs are concerned, there is certainly significant
medical evidence, as Senator Coburn and Dr. Crapo have pointed out, that
there are a number of cancers. This is the Level VIs that are not
caused by asbestos exposure: pharyngeal, laryngeal, esophageal, stomach,
and colon cancer. There has been a proposal that level VI should be
eliminated.
Senator Specter’s proposal was and is, as in this bill, Section 121(e)
at page 87, for the Institute of Medicine of NIH to make a study which
must be completed by April 1, 2006. That study is mandatory. If that
study demonstrates that esophageal, laryngeal, stomach, colon, these
other cancers are not caused by asbestos exposure, then Level VI is
out of the bill.
There was some concern that a lot of money would be paid out between
now and then. The fact of the business is that under Section 121(e),
the proof requirements are very rigorous. My guess is that very few,
if any, people are going to be paid out under Level VI because they
need tremendous medical backup and an opinion from a physician, which
would be against the medical literature, or much of it, that these
particular cancers were caused by asbestos exposure. So I don’t think
that Level VI is a problem.
The claims values have been increased, Section 131, page 92. The
start-up has been modified, Section 106 at page 232. If the fund is
not up and running and paying the exigents within 270 days, they can
go back to the tort system. But as I have suggested, the offer of
judgment and the contracting should solve that problem.
Insofar as subrogation is concerned, Senator Leahy pointed out
Section 134(b) at page 105, there is no subrogation in this bill. A
lot of people are very unhappy about that, but it is a trade-off. As
I said and Senator Specter and Senator Leahy said, this is not a bill
that--no stakeholder or no Senator would write this bill. A bill that
any particular stakeholder or Senator would write could probably not
pass. There has to be a compromise. There has to be a trade-off.
A lot of people are very unhappy about the Level VIIs being out of
the bill, but the Level VIIs are out of the bill, and subrogation is
in. It is a trade-off and, obviously, the Senators will have to decide,
politics being the art of the possible, as to whether this is a fair
compromise.
In my last testimony, the last time I appeared, you will recall
that there was also subsequent to that a hearing on the so-called mixed
dust or silica. Section 403(i) at page 243 seems to have solved the
so-called silica or mixed dust claims, which says that someone who
honestly has a bona fide claim from silica exposure, so long as they
can demonstrate it was not due to asbestos exposure and, therefore,
they are not compensated under this bill, but they can demonstrate
that it was due to exposure to silica, they can proceed in the tort
system. But as a result of the hearing and interim developments, it
seems to me--the situation which appeared in Texas and I believe in
Mississippi seems to have evaporated or been mooted.
An example of the process that we have engaged in here is the issue
with respect to the rail workers. One of the problems that we thought
intractable was dealing with the rail workers. As a result of, I think,
about 12 or 13 negotiating sessions, we have worked out a solution to
that, Section 131(b)(4), page 94, to the satisfaction of the Association
of American Railroads and Rail Labor. I submit that this is probably
the longest-running markup in the history of the United States Senate.
It has been going on for at least a year and a half, and the 13 or 14
sessions which resulted in the special adjustment for rail workers,
which will be a surrogate for the payments they would otherwise get
under the Federal Employers Liability Act, is an example of that.
Screening is another example of a controversial issue. Some want it
in; some want it out. It is, in effect, a compromise, but we have,
however, been able to limit the cost of medical screening, and I do
credit a very wise suggestion of Dr. Coburn, who pointed out that the
way we can control costs--and this is in Section 225(c)(6) at page
221--is to make payments limited by the CPT code, which is what Medicare
pays and which is what private doctors pay for the kinds of procedures
that they do and that would be involved in medical screening.
Insofar as the counsel fee issues, according to the figures, the
plaintiffs’ lawyers have gotten $3 billion in fees already over the
history of asbestos in the tort system. Again a compromise. People on
one side or the other will not be completely happy with it. The previous
amounts have been reduced to 5 percent. Is that too much? Well, it can
be a lot in a simple meso case; it can be too little in other cases
where there may be causation issues.
My concern, frankly, on the counsel fee issue is administrative
convenience. I do not want to see the Secretary of Labor, the
administrator, I don’t want to have to see the administrator get
involved in complicated counsel fee determinations. I know how much
time I spent--I just wrote a 107-page--it ended up a 95-page opinion
on counsel fees. Now, it was in class action cases. I have another
case I am working on right now.
Obviously, these are not as complicated, but determination of
individualized counsel fees can take a lot of time. And we have a
streamlined administrative system, and there are enough burdens on
the administrator that I think that it is preferable to have a fixed
sum, maybe too much in some cases, too little in other cases. But it
seems to me that administrative convenience is important. And, of
course, the client can negotiate. We do have time record requirements.
There are penalties for infractions by lawyers. Indeed, if you look
at Section 401 at page 30, very severe sanctions for misconduct, for
anyone who abused the system by false claims.
There also is an extensive pro bono provision with a notice that
has to be given to the putative client as to the availability of pro
bono representation, and the administrator has to retain a pro bono
roster.
I know Senator Kohl, who is not here, was concerned about the
mesothelioma research and treatment center. Section 222(c) at page
203 provides $1 million for each of the year 2005 to 2008 for each of
up to ten mesothelioma research and treatment centers.
Insofar as the sunset provision, we have a compromise, again, that
was proposed by Senator Feinstein that in the event of sunset, which
we think will not happen, but if it does, after extensive program
review, the reversion goes either to the Federal court or the State
court where the individual was exposed or where the individual lives
so that it cannot go to the bete noire of Madison County, Illinois.
And we are looking at a proposal by Senator Kyl that would tighten
up program review.
There are a number of open issues that we are still working on,
and I am nearing the end of my testimony, Mr. Chairman. Senator Levin
I know, among others, and Senator Feinstein expressed concern about
the little guys. When I say the little guys, I don’t mean the small
business folks, because they are exempt, but the whole sales and others
who are not the real big guys who have been doing the negotiation at
the table, and there is a proposal which is very close that will give
some relief, and this is satisfactory to business, have in mind that
business guarantees the fund. You say, well, what good is the guarantee?
Well, General Electric and Viacom and Dow Chemical, you know, all these
big companies, if they go down the tube, the American economy is down
the tube, and we are all in big trouble. But as long as the American
economy stays healthy, these businesses have guaranteed--and I gave
you the section be-fore--the solvency of the fund and have in mind
that the little guys--the littler guys also have the availability of
an inequity adjustment, Section 204(d) at page 138 of the bill, if
the payments that would be imposed upon them would be inequitable. So
that is still being looked at. We think we are close insofar as the
issues posed.
A number of you are familiar with the issues raised by Equitas,
the Lloyd’s of London runoff, and the problems that some of the insurers
had, or the orphan share issue. That is being worked on. We may be close
to an agreement about that.
There has also been some issue about what happens to the bankruptcy
trust in the event of sunset. There is a proposal for a master trust
that would address that issue, and as I said before, Senator Kyl has
some proposals for more searching program review and a possible revision
of the medical criteria if the fund runs into trouble.
Let me conclude by saying that this is not only one of the most
contentious--one of the most complicated bills, I think, in the history
of the Senate, but one of the most contentious because the stakeholder
groups are not monolithic; rather, individual insurers, businesses, and
unions are affected differently by the bill. Most of the insurers, I
believe, support it. Many insurers oppose. Most businesses, as reflected
by the statistics you have, are for it, but there are some businesses
who think they are adversely affected who are not for it. And the same
is true with respect to the unions. And to the extent that each of them
is motivated and looks to their own pocketbook, any coalition is fragile.
We cannot avoid that.
My hope is that the Senate will rise above the temptation to protect
particular constituents and look instead to the good of the Nation, the
economy, and the victims. The fact remains that asbestos litigation has
wrought more havoc on the American court system, State and Federal,
including the Federal bankruptcy courts, and on American business and
on the economy and on victims than any other species of litigation in
American legal history. The Supreme Court has stated in three opinions
that a legislative solution is needed. As a toiler in the vineyards of
the court system, I have witnessed with my own eyes the grapes turning
sour. I hope that the Senate will summon the political will and courage
to act.
S. 852 is not perfect, but it is the product of years of toil and I
believe a fair compromise, as good as we are likely ever to get, and I
commend it to you.
That concludes my statement. I would be pleased to answer any
questions that any members of the Committee may have.
[The prepared statement of Judge Becker appears as a submission for
the record.]
Chairman SPECTER. Thank you very much, Judge Becker, for that summary,
and thank you for the thousands of hours you have put into this matter.
The bill is a complicated one, and it is our conclusion that we ought
to have an explanation that is not really as detailed as it might have
been, but he has covered all the points and has given you some feel for
the trade-offs, for the complex issues that we have had to wrestle with.
I would like now to call the balance of the first panel. Governor
Engler, Ms. Seminario, and Mr. Berrington, if you would step forward.
We have a custom of having opening statements, as a generalization,
of 5 minutes and 5-minute rounds for Senators, and we will have multiple
rounds to the extent it is practical. We labor under time constraints
in the Senate. The Majority Leader has scheduled a vote for 11:45. I do
not think it is possible to conclude before that time, so Senators will
go and vote, or this Senator will go and vote and come right back. And
it is my hope to avoid an afternoon session because we have briefings
on transparency on this issue. But this is a very, very important
hearing, and we will take whatever time is required to hear the witnesses
and to have Senators with a full opportunity to question.
Our first witness is John Engler, who is the President of the National
Association of Manufacturers. Governor Engler comes to that position
after a three-term status as Governor of the State of Michigan, served
20 years in the Michigan Assembly, 7 years as the Senate Majority
Leader, the youngest man ever elected to the Michigan House of
Representatives.
Thank you for joining us, Governor Engler, and we look forward to
your testimony, which will be at 5 minutes. Thank you.
STATEMENT OF JOHN M. ENGLER, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, NATIONAL ASSOCIATION OF MANUFACTURERS, WASHINGTON,
D.C., ON BEHALF OF THE ASBESTOS ALLIANCE
Governor ENGLER. Thank you, Mr. Chairman.
Chairman Specter, Senator Leahy, members of the Committee, thank
you for the opportunity to testify. Today I am speaking on behalf of
the National Association of Manufacturers’ Asbestos Alliance, a
broad-based coalition of companies and associations committed to
seeking a fair resolution of the asbestos litigation crisis. Last
week’s introduction of the bipartisan S. 852 represents a major step
forward in the decades-long push for asbestos legislation, almost
coinciding with my arrival in the legislature many years ago. It has
been a long time. But I commend you, Mr. Chairman and Senator Leahy,
along with Majority Leader Frist, Senator Hatch, and so many others
who worked so hard on this legislation, for your strong leadership
and incredible persistence in dedicating yourselves to crafting a bill
that compensates victims, provides fairness and certainty to companies,
and delivers a major boost to our Nation’s economy. Today I would like
to focus on why passage of the trust fund legislation is so vital to
our economy.
In the last few years, we have seen numerous studies documenting
the negative economic impact of asbestos litigation. This morning a new
study, being released by NERA Consulting, quantifies for the first time
the tremendous benefits of a legislative solution like S. 852. Here are
some of the key findings:
Enactment of trust fund legislation will reduce administrative costs,
such as legal fees, and bankruptcy costs, including serious impacts on
workers, by $85 billion. According to NERA, these costs and the cost to
the economy of lost productivity have reached a staggering $343 billion.
To date, productivity losses due to litigation represent $303 billion.
This means that companies involved in asbestos litigation pay more to
borrow to expand and create jobs. Companies also have expended
significant resources on the lawsuits themselves, and they have lost
countless opportunities perhaps for acquisitions or mergers, certainly
less attractive to investors. A trust fund bill will eliminate these
drags on productivity and substantially reduce productivity losses that
in the past have been as high as $50 billion a year in these industries
affected.
Another plus cited by NERA is the near elimination of the transaction
costs, such as legal fees, which have eaten up almost 60 percent of the
billions spent on litigation. RAND previously reported that claimants
are only getting 43 cents of every dollar today. NERA reports that the
reduction in transaction costs means that with a $140 billion trust
fund, claimants will receive up to $65 billion more in compensation
than they would if we allowed the status quo to continue.
Finally, NERA quantified the expected value of asbestos reform on
Wall Street using stock market valuation of defendant companies. They
note that Wall Street would value enactment of an asbestos trust fund
bill at as much as $137 billion. By removing the cloud of uncertainty
with the passage of asbestos legislation, stock market gains would
benefit the pensions of millions of workers and retirees as well as
other investors in the market.
These new findings from NERA clearly demonstrate that the passage
of asbestos trust fund legislation will provide an immediate and
long-lasting boost to the economy. And, Mr. Chairman, I brought a copy
of the full study to be made part of the record this morning.
Chairman SPECTER. Without objection, it will be made a part of the
record.
Governor ENGLER. As I said earlier, other studies, Mr. Chairman
and members of the Committee, have also detailed the significant
economic effects of asbestos litigation. The impact on workers and
jobs is particularly worth noting. According to a 2002 study by Nobel
laureate Joseph Stiglitz, about 60,000 jobs, many in the manufacturing
sector, have been lost due to asbestos bankruptcies. Many of those lost
jobs were union jobs, and I note, as you did in your statement, that
the UAW, which represents so many workers across this Nation, strongly
endorsed the draft that formed the basis before the Committee.
Now, the direct losses in the Stiglitz study are only part of the
story. Communities are also affected as laid-off workers tighten up
their spending or move away in search of new jobs and bankrupt companies
cut operations, slash purchases, and, of course, reduce charitable and
community giving. In fact, another NERA study showed that for every
ten jobs lost due to an asbestos bankruptcy, a community loses as many
as eight other jobs.
The scope of the asbestos litigation scourge is quite clear. More
than 8,000 companies have been dragged into this litigation. These are
from the largest to small, family-owned businesses. For 30 years, these
companies have been paying an asbestos tort tax. That is estimated now
to be about $70 billion. That is through 2002. Nearly 60 percent of
that money went to the trial bar, defense lawyers, and court costs.
And, unfortunately, this asbestos tax has been levied quite randomly.
While defendants will certainly pay into a trust fund, these companies
and their Wall Street analysts will at least get a clear picture of
their liability, now and in the future. That certainly, Mr. Chairman,
is a compelling reason for this legislation.
Chairman SPECTER. Governor Engler, your time has expired. Your full
statement will be made a part of the record. If you could summarize,
we would appreciate it.
Governor ENGLER. In summary, a major advantage of the trust fund
solution ends the scandal of asbestos litigation by getting the problem
out of the courts and into a no-fault system; complies at long last
with the Supreme Court--and these are repeated exhortations, I think
on four or five occasions--that Congress step in and solve the problem.
It gets the asbestos issue to a point where the flow of the funds goes
now to the people who are ill, not to the lawyers. It ends this random
assessment of the asbestos tort taxes on certain companies. And, most
importantly--well, let me say it restarts the growth of these individual
companies, but most importantly, it provides for the people who are
sick--and manufacturers acknowledge there are people who are sick--sure,
fair, timely compensation to medical victims.
And, Mr. Chairman, I thank you for the time and for the opportunity
to summarize.
[The prepared statement of Governor Engler appears as a submission
for the record.]
Chairman SPECTER. Thank you very much, Governor Engler.
We turn now to Ms. Margaret ‘‘Peg’’ Seminario, who is the Director
of Occupational Safety and Health for the AFL-CIO, where she has been
a key employee since 1977. She has a master of science in industrial
hygiene from Harvard School of Public Health and a B.A. from Wesley
College. Thank you for being here today, Ms. Seminario, and for
attending so many, many, many long sessions of the so-called
stakeholders. We look forward to your testimony.
STATEMENT OF MARGARET SEMINARIO, DIRECTOR, SAFETY
AND HEALTH DEPARTMENT, AMERICAN FEDERATION OF
LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS,
WASHINGTON, D.C.
Ms. SEMINARIO. Thank you very much, Senator Specter. We do appreciate
the opportunity to testify on S. 852. I would first like to acknowledge
the work that you and Senator Leahy have put forward, your tireless
efforts and the efforts of many others, including Senator Feinstein,
Senator Hatch, and, of course, judge Becker, to attempt to develop a
fair and effective asbestos compensation bill.
As you are well aware, the AFL-CIO has a long involvement in the
asbestos issue, and for the last 3 years we have been deeply engaged
in the discussions and process that have led to the current proposal.
We have done so because we believe that many victims are not being
well served by the current system and that hundreds of thousands of
victims who will develop asbestos disease in the future could be better
served by an alternative system that provides compensation to sick
individuals in a more efficient and equitable manner.
The AFL-CIO has consistently supported the establishment of a Federal
asbestos trust fund to fairly compensate asbestos victims for their
injuries, and we continue to support the establishment of such a trust
fund. At the same time, we have made clear that we cannot accept a
substitute to the current civil litigation system unless it would
provide a means by which victims could obtain fair compensation on
a timely basis.
The legislation introduced last week includes a number of important
improvements over past proposals. These include higher award values,
no subrogation of awards, a medical screening program. And, again, we
want to acknowledge the work of you, Senator Specter and Senator Leahy
and your staffs, in securing these important changes.
Unfortunately, in the AFL-CIO’s view, the bill still fails to ensure
victims just and timely compensation and would leave tens of thousands
of individuals with no remedy at all, and that is why we opposed the
legislation as introduced.
Over the past 3 years, as we have worked on this legislation, we
have listened to the concerns and the proposals put forward by business
and insurers, and we have attempted to be responsive. In the interest
of reaching agreement on legislation, we have compromised on numerous
aspects of the legislation, including accepting the $140 billion in
overall funding, a much lower level of funding for the program than
we think may be actually required to meet anticipated claims.
But on the fundamental issue of insuring that the legislation will
create a system that will, in fact, deal fairly with victims and pay
timely compensation to those who are sick from asbestos disease, we
cannot accept a compromise that does not achieve this basic objective.
It is not in victims’ interest to trade one flawed system for another
that has serious, identifiable problems and deficiencies and threatens
to leave many individuals worse off.
These serious problems include the exclusion of thousands of asbestos-
related lung cancer claims, leaving most victims with no remedy during
the start-up period; the inclusion of restrictions preventing individuals
with both asbestos and silica disease from obtaining access to the courts
or fair compensation from the fund; unworkable statute of limitations
provisions that could bar tens of thousands of worthy claims; and
program sunset provisions that could leave claimants in limbo should
the fund run out of money.
We continue to believe that the major problems with the bill can
still be corrected, and we have put forward proposals to do so. Moreover,
we believe that a primary reason they have not been address is due to
objections by some business and insurer groups who want to limit claims
and costs or make it difficult or impossible for individuals who are
sick to receive compensation.
If the goal is to truly enact a bill that provides prompt and fair
compensation to victims who meet the eligibility requirements, then
there is no valid reason not to fix the problems we identified. We
have prepared detailed comments on the legislation, which we have
included in an attachment to our testimony. For now I would just like
to spend the remaining time that I have just to highlight a couple of
the major problems in the bill.
One of the first major problems is that the compensation for
thousands of asbestos lung cancer victims is eliminated; that with
the elimination of the Level VII lung cancer categories, based on CBO
estimates, 40,000 individuals with lung cancer related to asbestos
are no longer covered specifically by the bill. Provisions have been
added that allow some of these lung cancer victims to use CT scans to
show that they have asbestosis, but that does not apply to victims
with pleural disease. The net result is about 25,000 asbestos lung
cancer victims previously covered may not be eligible for compensation.
The start-up provisions leave claimants in limbo for as much as 2
years. An estimated 60,000 to 80,000 claimants currently pending who
are sick will have nowhere to go for 2 years under the provisions of
this fund, the bill. This is not fair.
As I said, there are also problems with some of the other provisions
related to silica, statute of limitations, and we have provided comments
and proposals on those matters.
Let me conclude by saying that we have spent years working on this
legislation, and we believe that we have played a constructive and
responsible role in the process. We intend to keep working to address
the major problems with the bill, with the hope that changes will be
made that will enable the AFL-CIO to support the bill.
However, in its present form, the AFL-CIO must oppose S. 852 since
it fails to ensure asbestos disease victims the just and timely
compensation they deserve.
Thank you.
[The prepared statement of Ms. Seminario appears as a submission
for the record.]
Chairman SPECTER. Thank you very much, Ms. Seminario.
We now turn to Mr. Craig Berrington, Senior Vice President and
General Counsel of the American Insurance Association, extensive
experience from the Department of Labor, including Deputy Assistant
Secretary for Employment Standards, a law degree from Northwestern,
and a graduate of the School of International Service at American
University.
Thank you, Mr. Berrington, for being a regular attendee at the
numerous, lengthy sessions of the stakeholders and your contributions
there, and the floor is yours for 5 minutes.
STATEMENT OF CRAIG A. BERRINGTON, SENIOR VICE PRESIDENT
AND GENERAL COUNSEL, AMERICAN INSURANCE ASSOCIATION,
WASHINGTON, D.C.
Mr. BERRINGTON. Thank you, Mr. Chairman. I am testifying today on
behalf of the AIA and the Reinsurance Association of America and have
a written statement that I would appreciate having entered into the record.
Chairman SPECTER. Without objection, your statement and all
statements will be made a part of the formal record.
Mr. BERRINGTON. Thank you so much.
As always, we greatly value the opportunity to be here and to work
with you and the Committee on this important legislation and, of course,
to salute Judge Becker for his heroic efforts in this regard, not to
mention his patience.
Mr. Chairman, your bill as introduced makes some very important
improvements in the medical criteria aspects of the legislation, in
removing the Level VII cases, and, in addition, requiring that claimants
establish their asbestos exposure was a substantial contributing factor
to their disease.
Unfortunately, other important problems remain that are critical
to our evaluation of the legislation. I would like to touch on six of
them quickly.
First, litigation leakage from the trust fund. Captured in a phrase,
a national trust fund must provide an exclusive remedy for resolution
of all asbestos claims. Without that certainty, we will find ourselves
paying both substantial sums into the fund and into the tort system for
claims permitted to leak outside of the fund. In S. 852, leakage would
occur before the fund gets operational certifi-cation, while the fund
is fully up and running, and in the event of fund sunset.
We are particularly concerned about leakage during the fund start-up.
If the new law does not have a fast and effective startup, it will
fail. Sure as shooting, it will fail. And with that failure will come
recriminations all around. So this is no small matter. In our judgment,
to make the start-up happen, all of the bill’s incentives must be aimed
toward obtaining that fast, efficient implementation.
S. 2290, introduced last year, met this test by having a legislative
red light/green light approach, with the President’s signature resulting
in an immediate red light for the old litigation system and an equally
immediate green light for the new trust fund. Embedded in this approach
was language giving the Labor Secretary all the authority she would
need to enable the program to review and decide claims quickly,
including the use of outside contractors and a priority for exigent
claims.
Moreover, S. 2290’s red light/green light approach made it crystal
clear to everyone, including the trial bar, that once the bill was
enacted, it was time to quit fighting over it and to get to work
implementing it.
S. 852 adopts a very different approach, therefore jeopardizing
the ability of the new law to quickly and efficiently be implemented.
Indeed, S. 852 actually provides incentives to those who believe that
the loss of the legislative battle on the bill need only be a skirmish
in the longer-term war over keeping the litigation system going. The
result would be stress on this new law of enormous proportions, which
should be avoided at all costs.
This problem did not exist in the trust fund as laid out in S. 2290.
We believe the policy choice in S. 2290 which would have applied the
exclusive remedy provisions to any litigation outstanding upon the
date of enactment was much the better approach. It would have
established an understandable, bright-line test, making it clear
that the moment the President signed the new law, the old litigation
system ended and the new trust fund system began, cutting off the
opportunity for litigation game-playing.
Second, the bill’s handling of exigent claims. Although part of
the broader litigation leakage problem, the new exigent claims
provision raises its own unique questions. Exigent claims are those,
as we know, from individuals who have mesothelioma or whose asbestos
illness is at a critical stage where they are likely with less than a
year to live. We believe the trust fund, not continuing the litigation
system, would work best for these cases. However, S. 852 does not
follow this approach. Instead, it uses an offer of judgment provision
to keep current exigent cases going in the litigation system after
the bill is enacted and even allows new exigent cases to be filed in
court.
While the new offer of judgment provision was obviously done in
good faith to speed review and payment of exigent claims, I don’t
think the provision works. Not only does it provide an opportunity
for new litigation, but with its 200-day litigation process for getting
from beginning to end, it not only is unlikely to speed reviews for
people with critical illnesses, but is also likely to be slower than
the Labor Department’s processing of these very same claims.
While it is unlikely to speed up the process for individuals getting
their money, it does nothing to control attorneys’ fees. So if one
assumes the normal attorney fee of perhaps a third of recover, it will
reduce the amount of money that a claimant will get for himself and
his family.
Other issues that are of concern to us relate to the operational
certification provisions in the bill. The bill’s prohibition on workers’
compensation subrogation, that issue has been well vetted, but we still
do not understand why it is a problem, having the same system here that
exists in the State workers’ compensation systems to prevent double
recoveries. And, of course, the fifth issue is program sunset. We would
prefer that all cases go to Federal court. We think that is what ought
to happen.
Mr. Chairman, we do applaud the improvements made in this version
of the bill, but we have substantial concerns still that prevent us
from being able to support it as currently drafted.
Thank you very much.
[The prepared statement of Mr. Berrington appears as a submission
for the record.]
Chairman SPECTER. Thank you very much, Mr. Berrington.
We will now proceed with 5-minute rounds for members’ questioning.
Ms. Seminario, with respect to the CT scans, which is an issue on
the minds of a number of Senators, Senator Leahy and I worked through
this after our first draft and came to the combination on CT scans for
Category IX and not for Category VIII. And we are going to be hearing
a good bit of medical testimony. We have added some extra witnesses
today after you and I and others sat down in the afternoon and after
consulting with Senator Coburn.
The question that I have for you, on a bill which cannot put its
arms around everything and we do find a major concession, which Senator
Leahy and I worked on a long time on the number VIIs, on the smokers,
and we were able to find a trade-off on some very key items like
subrogation, whether it would not be sufficient under the exceptional
medical claims section, where there can be CT scans submitted in
addition to X-rays, wouldn’t that be a safety valve for the kind of
injured party whom you have referred to?
Ms. SEMINARIO. Well, we are looking for more than a safety valve.
We are looking for a system that actually does, in fact, have criteria
to compensate people that have asbestos-related disease. I will not
go into our views at length on the Level VIIs, but we still believe
that with the 15-year substantial occupational exposure that those
lung cancers are attributable to asbestos. So we start from believing
very firmly that the science supported the Level VIIs.
Chairman SPECTER. We agree with you on moving in to get the lung
cancers caused by asbestos. We really agree with you totally. I think
there is no disagreement. But the question is--I did not mean to use
safety valve in derogation. Coverage--let’s call it that instead of
safety valve.
Ms. SEMINARIO. What we tried to do with the medical criteria, if
you remember, is to set up categories where if an individual had the
diagnosis, they had the exposure, that they were covered. And it was
not the exception, it was he rule. And I think if you do indeed look
at both the epidemiology but also the latest American Thoracic Society
guidelines on diagnostic techniques, you find that indeed the use of
CT scans has become a routine diagnostic method for the non-malignant
diseases. And if they are permitted as a presumptive diagnostic tool
for asbestosis, we do not see why it should not be the same for the
other categories. But I would leave it to the medical experts to have
that more informed and knowledgeable discussion with you about the
use of those--
Chairman SPECTER. Governor Engler--
Ms. SEMINARIO. --techniques.
Chairman SPECTER. I do not mean to cut you off, Ms. Seminario.
Ms. SEMINARIO. That is fine.
Chairman SPECTER. But I want to cover a couple more issues here in
the 5 minutes I have.
The Committee thanks you for the very material assistance which
Pat Hanlon has rendered in the Asbestos Study Group on Gary Slaiman
and thank you for your letter. We are still working through some of
the issues which you have reserved.
Let me turn to Judge Becker at this point on an issue which is
raised by the Chamber of Commerce, Thomas Donahue, a letter dated
April 25th, which is generally laudatory and supportive and we want
a bill and keep working, all of which we intend to do. And the one
issue which is raised is the issue of leakage. Would you address the
Herculean efforts which the stakeholders worked to try to find an
accommodation on that issue?
Judge BECKER. We spent many, many, many sessions, and I think the
leakage is virtually gone. And, frankly, I do not understand the drama
with which Mr. Berrington describes the leakage problem. Anything that
has gone to judgment already, final judgment, well, obviously that is
preserved. If a case is actually on trial before a judge or a jury,
the case may continue. I mean, it just seems to me unfair, you are in
the middle of a case, it has gone to the jury or the testimony has
been going on, and all of a sudden the bill is signed, to say, okay,
jury and lawyers, go home, we are not going to conclude the case. I
mean, it is a very limited number of cases, and it is limited to
individual cases, not consolidations. I mean, there are some instances
where you have hundreds or thousands of cases consolidated. The bill
very precisely says it is a one-on-one case and it is actually on trial.
It seems to me reasonable to let it continue, and with respect to
settlements, if a settlement has been negotiated--not an inventory
settlement, the plaintiff’s asbestos lawyer has a deal that covers
500 or 1,000 cases, the bill says a one-on-one settlement. And if it
has got to be signed by the plaintiff and signed by the defendant or
someone on behalf of a defendant, and there is 30 days after the Act,
there are certain data that has to be supplied, so long as the
settlement has already been signed, well, then there is 30 more days.
And, frankly, I don’t see what the problem is. With respect to
virtually everything else, the tort system is closed down and everything
else goes into the fund. And it seems to me that these minimal examples
with respect to cases actually on trial and settlements and, indeed,
the insurance company can even protect itself or the defendant by
putting in some requirement in the settlement agreement that the
paperwork be submitted sooner.
I just don’t see what the problem is. It seems to me the leakage
issue is virtually gone. We had many, many, many sessions, and we have
come up with provisions which are in the Act.
Chairman SPECTER. Thank you, Judge Becker. The red light went on
during the middle of your answer, so I will now turn to-- my red light
went on. Yours did not go on, Judge Becker. Mine went on.
I turn now to Senator Leahy.
Senator LEAHY. Thank you, Mr. Chairman.
Governor Engler, welcome, and I appreciate all the time you have
spent on this. We did not want you to completely have to forget all
the hours you had to spend with the Michigan Legislature. So we have
tried to make up for that in your life. But I want to thank you for
NAM’s support of this bipartisan legislation. And I agree with your
assessment about the tremendous economic impact of the legislation to
create jobs and get a more efficient compensation system.
A major component of the bill is to ensure that the fund is
operational through higher front-end funding, something you have looked
at closely. In your testimony to the Committee in January and in some
of the follow-up letters to me, you stated that you expect to have
written commitments or letters from financial institutions regarding
the availability of $20 billion in front-end funding once the
legislation was introducing, including estimates of the interest costs
on such potential borrowing.
Now that we have introduced it, when do you expect to receive such
written assurances from financial institutions?
Governor ENGLER. The specificity of the draft makes this easier as
it gets obviously closer, but we think by Thursday that from Goldman
Sachs we may have a letter that gives us assurances. We have been
talking to a lot of the different financial houses about how this gets
done. We think this is clearly bankable, but we are anticipating that
Thursday we would have something, you know, in time for markup, that
you would have a commitment on, you know--
Senator LEAHY. And you have--
Governor ENGLER. It can still be couched, I suppose, as financial
folks do, based on what exactly the mechanisms are, but we think that
the Committee has done a nice job in the draft of trying to put a
framework together that somebody like Goldman Sachs can kind of come
in and say this is what we think it would be.
Senator LEAHY. And, Governor, will you be able to share that with
Senator Specter and me?
Governor ENGLER. Yes.
Senator LEAHY. And the Committee. Thank you.
Ms. Seminario, you have probably felt that you have taken up
residence up here on the Hill, but I appreciate all the work you and
your staff have done with Senator Specter’s staff and with mine as we
tried to craft this bill. So many of the victims of asbestos exposure,
of course, are under the AFL-CIO umbrella. I might want to note, you
have represented them tirelessly in this regard.
I have been pleased we have been able to make many of the
constructive changes that the AFL-CIO has promoted: higher awards
values for victims, no subrogation, proof of exposure, medical screening
program, new criminal penalties for willful OSHA violations and so on.
I appreciate your comments, which have been constructive, on the statute
of limitations and the need for ongoing oversight and planning and
mechanisms hopefully to avoid termination of the fund. I know Senators
Kyl and Cornyn have similar concerns about the drastic nature of the
sunset provisions. I hope we can work out a refinement.
Would you send me and Senator Specter any proposed language,
legislative language you might have on this issue?
Ms. SEMINARIO. We would be happy to, and we would also be happy to
continue the discussions over the next couple days and weeks.
Senator LEAHY. Thank you. If we have time, I am going to come back
to you.
Mr. Berrington, the last time you appeared before the Committee,
in January, your testimony was in support of a medical criteria bill.
I am pleased that you and the American Insurance Association have now
joined the asbestos trust fund bandwagon. I want to welcome you aboard.
I can see by the expression on your face how happy you are to be
onboard.
[Laughter.]
Mr. BERRINGTON. I am just trying to recall my testimony.
Senator LEAHY. I recall it very, very well. I strongly disagreed
with your position of allowing insurers to reduce the awards to victims
through subrogation. We have been very direct with each other on that.
I do want to work with you and the insurance industry to find common
ground on refinements for our bipartisan trust fund legislation. We
need that as it moves forward in the legislative process, and I would
ask you to continue to work with us.
Mr. BERRINGTON. Mr. Leahy, if I might, just for a moment.
Senator LEAHY. Sure.
Mr. BERRINGTON. I believe my testimony in January said that if we
could work out a good trust fund, we are all in favor of doing that,
but if it were not possible to do that, that we would recommend
alternatives to that. And we have been at the table. We plan to stay
at the table, and we are certainly hopeful that we can work out a
good bill. But it has to be a good bill from our perspective.
Senator LEAHY. I understand.
Now, I will include for the record, Ms. Seminario, some questions
on chest X-rays, and that will sort of follow up on what you and the
Chairman have talked about. But, again, I appreciate it. You and I
want to help the Chairman keep to the time, too.
Chairman SPECTER. Thank you very much, Senator Leahy.
Senator Sessions?
STATEMENT OF HON. JEFF SESSIONS, A U.S. SENATOR
FROM THE STATE OF ALABAMA
Senator SESSIONS. Thank you, Mr. Chairman, and thank you for your
leadership on this important issue. Asbestos litigation has been a
colossal disaster for the litigation system in America. I cannot think
of anything that is more embarrassing to me as someone who believes
in a good, efficient legal system than a system that has paid out tens
of billions of dollars, put companies in bankruptcy, but only 40 percent
of the money being paid out going to the people who are sick, and many
of those under this system today receiving money are not sick. Hundreds
of thousands of lawsuits are pending in Federal courts today, and they
have been pending. They are handled in huge groups. Individual
plaintiffs are not often having their day in court. There is just no
way physically to do that, as, Judge Becker, I think you have indicated
now before us.
So I am very concerned about this system. There is no doubt in my
mind that we can create a trust fund that will allow people who are
sick to receive compensation promptly, to receive it fairly, to get
more than they would get under the current system, to relieve the
stress on the courts, to end this aberrational thing where some
plaintiff gets $50 million and some plaintiff gets $500,000 for the
very same illness just because of a different jury and a different
situation. I believe we can make improvements in the way we do that,
and we should do that.
This is not a perfect piece of legislation. It is not even a pretty
piece of legislation. I don’t know how to make it pretty or better.
I know we can get more money to the victims and we can get more
money to the victims promptly. From my experience in the system, victims
receive a check from some defendant, one of maybe 300 they have sued
for $250. The lawyer takes that 30, 40 percent of it, and they get
this little check. Six months goes by, another one, another company
sends in their check. Some fund sends in their check. The idea that
today under the current system victims are getting substantial
compensation promptly is just not so. I know, Ms. Seminario, you know
that, and that is one reason you are interested in having a fund that
would work better for the victims.
Is it a tax? We need to talk about who is paying and how they are
being paid? Is it an allocation of liability or a tax? I don’t know.
Maybe it is a little bit of both, Judge Becker. What do you think? To
assess the companies that are being held liable today in a trust fund,
would you construe that as a tax?
Judge BECKER. Well, to me, a tax is what is paid by the taxpayers,
and under Section 406, nothing can be imposed on a taxpayer or on the
Government. Loosely, you could call it a tax, but basically it is a
contribution in lieu of what they would be paying in the tort system.
It is a kind of fair approximation, and it seems to me within the power
of Congress within the Commerce Clause to make these rough
approximations, rough justice. Rough approximations based on policy
judgments is what you folks do, and I think when you do it, it is not
really right to call it a tax.
Senator SESSIONS. Well, whatever, it is an assessment of some kind.
We need to be careful how we do that and make it as fair as we possibly
can.
Under the attorneys’ fees provision, 5 percent of $140 billion is
$7 billion. At one point this bill was up to 20 percent; that is $28
billion of the fund going to attorneys. And I just do not believe that
is necessary. These are going to be much more akin to workmen’s comp
or Social Security claims where the attorneys follow the processes,
and if they have medical proof that the person is sick, they are going
to be paid.
Mr. Berrington, would you agree with that?
Mr. BERRINGTON. Absolutely. It is absolutely analogous to a workers’
compensation system.
Senator SESSIONS. And they do not get big fees and do not need big
fees.
Mr. BERRINGTON. And, ideally, in the system, which I think is well
laid out in the legislation, most people should not need an attorney at
all. The Labor Department is obligated to provide assistance to help
people work through their claims if they need that. And so attorneys’
fees, if they are necessary at all, should be not very high.
Senator SESSIONS. Well, attorneys have made enough money in these
cases. These attorneys, many of them, have just become incredibly rich
over it. I don’t think even they are proud of the current system, and
I think most trial lawyers know it needs to be fixed.
With regard to exigent cases, such as mesothelioma, Judge Becker,
just briefly how much does the fund contemplate today?
Judge BECKER. $1.1 million.
Senator SESSIONS. $1.1 million. What about the concern that--
normally, would they not be paid promptly, once this fund is up and
running, how soon would it take before a claimant came in with a medical
report that they had meso, they had exposure significantly to asbestos,
and made their claim before they got the 1.1?
Judge BECKER. I think it should not be more than a couple of months
because the everything is going to go up--they are going to use websites,
I assume, and you can download the form from the websites, and there
is instruction, and we have a claims facility to process these. You do
not have causation problems in mesothelioma.
Senator SESSIONS. Right.
Judge BECKER. The only known cause is asbestos exposure.
Senator SESSIONS. Now, what about the concern that as the fund is
coming online, the legislation is passed, there would be some delay--I
have heard as much as 2 years--before the mesothelioma claimants would
get their money? Is that correct?
Judge BECKER. I don’t think that is true. I think you are talking
maybe 60 to 90 days.
Senator SESSIONS. Ms. Seminario, do you have a different view of that?
Ms. SEMINARIO. The different view is that I think for mesothelioma
victims, hopefully the start-up will be very quick. But most of the
victims are not mesothelioma victims, but they are also very sick. And
so the 2 years applies to everybody who is not terminally ill, and
based upon the CBO estimates, you are talking about 60,000 to 80,000
people who fall in that category, who are either pending or claims will
come in in the first 2 years of the fund.
So that I think is the bigger concern, this very large number of
sick people who really will have nowhere to go perhaps up to 2 years
of time. And I would just point out that--
Senator SESSIONS. But right now you would admit that the average
plaintiff that files a lawsuit is waiting 2 years or more before they
begin to receive any substantial compensation?
Chairman SPECTER. Senator Sessions, your clock--
Senator SESSIONS. You are right. I am sorry.
Chairman SPECTER. It has defective wiring. Your red light has been
on from the start, so you have not had a timer. We are trying to get
that fixed. But your time has expired. But if you want to finish up
that last question, go ahead.
Senator SESSIONS. I would just ask--
Ms. SEMINARIO. I think generally for many of them it does, but some
of them can get very quick access right now in the bankruptcy trust.
They can go file a claim and get ready compensation. Those are going
to be extinguished immediately. We think they should remain in place
while the fund is getting up and going and give people at least a place
to go to receive compensation from that source of--from that remedy.
The other thing is a lot of these people have already been waiting
for years because of the stays of Halliburton, Babcock and Wilcox,
and others, and we don’t think it is fair that people who have been
waiting 5 or 6 years have to wait another 2 years. So we think this 2
years is too long and that there can be more work done on trying to
deal with the issues for those victims.
Chairman SPECTER. Thank you very much, Senator Sessions.
Senator Kennedy?
STATEMENT OF HON. EDWARD M. KENNEDY, A U.S. SENATOR
FROM THE STATE OF MASSACHUSETTS
Senator KENNEDY. Thank you very much.
Senator Specter and Senator Leahy have, as we have all noted,
devoted an enormous amount of time and effort to negotiating this
revised asbestos trust fund legislation, and they deserve great
credit for their work. And I want to thank Judge Becker as well.
But the bill before us still contains serious flaws which make it
unfair and unworkable, and it does not provide a reliable guarantee
of just compensation to the enormous number of workers who are
suffering from asbestos-induced disease, as we have just been listening
to.
The problem is that powerful corporate interests responsible for
the asbestos epidemic have fought throughout this process to escape
full accountability for the harm that they have inflicted. The real
crisis which confronts us is not an asbestos litigation crisis; it is
an asbestos-induced disease crisis. All too often the tragedies these
workers and their families are enduring become lost in a complex debate
about the economic impact of asbestos litigation. We cannot allow that
to happen.
The litigation did not create these costs. Exposure to asbestos
created them. They are the costs of medical care, the lost wages of
incapacitated workers, the costs of providing for the families of workers
who died years before their time. Those costs are real. No legislative
proposal can make them disappear. All legislation can do is shift those
costs from one party to another. Any proposal which would shift more
of a financial burden onto the backs of injured workers is unacceptable
to me, and it should be unacceptable to every one of us.
The legislation before us would close the courthouse doors to asbestos
victims on the day it passes, long before the trust fund will be able to
pay their claims, as Peg Seminario just illustrated. Their cases will be
stayed immediately. Seriously ill workers will be forced into legal
limbo for up to 2 years. Even those victims who have less than a year
to live will be forced to stop their cases for 9 months, and many will
die without receiving either their day in court or compensation from
the trust fund.
Experts tell us the asbestos trust created by the legislation is
seriously underfunded. It is $13 billion less than the amount provided
in the Committee’s 2003 legislation, even though many of the award
values have been increased. The funding plan in this bill relies on
very substantial borrowing in the early years as the only way to pay
the flood of claims.
The result of this will be a huge debt service cost over the life
of the trust fund that could reduce the $140 billion intended to pay
the claims by 40 percent or more, according to testimony we will hear
today. The amount remaining would be far too little to pay claims to
cover all of those who are entitled to compensation under the terms
of the bill.
We cannot allow seriously injured workers with valid claims not to
be paid fully in a timely manner by the trust. That would be a shameful
injustice.
I am particularly upset by the change in the way lung cancer victims
are treated. Under the medical criteria adopted by the Committee
overwhelmingly 2 years ago, all lung cancer victims who had at least
15 years of weighted exposure to asbestos were entitled to receive
compensation from the fund. That provision now has been removed. Under
this bill, the lung cancer victims who have had very substantial
exposure to asbestos over long periods of time are denied any
compensation unless they can show scarring on their lungs.
The Committee heard expert medical testimony that prolonged asbestos
exposure dramatically increases the probability that a person will get
lung cancer even if they do not have scarring on their lungs. Deleting
the Level VII category will deny compensation to approximately 40,000
victims suffering with asbestos-related lung cancer, and under that
legislation as now drafted, these victims are losing their right to
go to court but receiving nothing from the fund. How can any of us
support such an unconscionable provision?
The bill also tampers with the agreed upon medical criteria by
raising the standard of proof for each disease category. The new
language requires the workers to prove that asbestos was a substantial
contributing factor to their disease instead of just a contributing
factor. This is a major increase in the burden workers must overcome
to receive compensation, and it is a serious step in the wrong
direction, raising the bar even higher on injured workers.
This bill shifts more of the financial burden of asbestos-induced
disease to the injured workers by unfairly and arbitrarily limiting
the liability of defendants. It does not establish a fair, reliable
system that will compensate all those who are seriously ill due to
asbestos, lacks a dependable funding stream which can ensure that all
are entitled to compensation actually receive full and timely payment.
These are very basic shortcomings. We cannot allow what justice
requires to be limited by what the wrongdoers are willing to pay. Unless
substantial improvements are made in the legislation to the Committee’s
markup, I intend to vote no.
I know my time is just about up, Mr. Chairman. I was just asking
Peg Seminario about the Title 7 provision, if she could just describe
briefly for the Committee why those victims were included in the original
medical criteria and why they should be eligible for compensation in
the trust fund.
I thank the Chair.
Ms. SEMINARIO. The original medical criteria had three categories
of lung cancer. The Level VII lung cancers were those individuals
diagnosed with lung cancer that was related--had 15 years of substantial
occupational exposure to asbestos and a determination made that the
lung cancer indeed was asbestos-related. And so it was a group that
did not have scarring on the lungs that showed up on X-ray. And the
medical studies and the epidemiologic studies will show that people
without scarring, without these underlying markers indeed are at
increased risk. It had a higher level of exposure when you did not
have the X-ray changes than the exposure requirements for those
individuals who had asbestosis or has pleural disease. And so there
was a higher burden on them to show exposure, but they indeed were
covered under this category.
The other provision was in the bill that each of those cases had
to be reviewed by a physicians panel, a three-member physicians panel,
for confirmation. And so we felt pretty comfortable that the evidence
was strong, but also that they would be reviewed and confirmed by
experts before payment was made.
Senator KENNEDY. I thank the Chair. My time is up.
Chairman SPECTER. Thank you very much.
Senator Cornyn? We have the early-bird rule, and I commented to
Senator Cornyn that it was my error in not calling on him earlier.
But now you have the floor, Senator.
STATEMENT OF HON. JOHN CORNYN, A U.S. SENATOR FROM
THE STATE OF TEXAS
Senator CORNYN. Thank you, Mr. Chairman. And let me add my
congratulations to you and the Ranking Member, Senator Leahy, and
all the people on this Committee who have worked so hard with so many
people here in this room to try to get us where we are today.
I regret to say that I cannot support the bill in its current form,
but I am committed to continuing to work with you and the Committee
to try to get the bill to the point where I can support it and to
encourage the legislative process to move forward.
From my perspective, there are two major criteria by which this
bill should be judged: number one, its ability to pay only people
who are sick with asbestos-related disease; and, number two, that it
provide the exclusive means to do so, completely supplanting the
current dysfunctional system. And there are a number of provisions
in this very lengthy bill, and, again, this has been a complex,
contentious process, I think as Judge Becker said, and we have all
tried very hard and will continue to try very hard to deal with
some of the challenges here.
I am concerned that we still do not yet have good, solid information
that allows us to predict the viability of the fund. I would just
note--and I look forward to additional testimony we will have here
later--that the CBO, for example, on a previous version of this bill
estimated that about 76 percent of the people who apply for benefits
will not be eligible for compensation, but will be eligible for
medical monitoring. Other estimates, from Goldman Sachs, for example,
go up to 82 percent they estimate will be not eligible for compensation
but will be eligible for medical monitoring. I think we need to drill
down and understand better the basis for those estimates.
And Judge Becker has said in previous testimony--and I again want
to extend my appreciation to him for his hard work--we really do not
have good information in many respects by which to estimate the number
of claims that will actually be made. There are models that we have
heard about and we will hear more about today which provide some comfort
level, but none of us should be fooled into thinking that we actually
know how many claims will be made and what the composition of those
claims will be.
We have heard in our previous testimony from representatives, for
example, of the Manville Trust that has extensive experience with the
claims composition of asbestos trusts who disagrees with the premise
upon which this particular trust is made and whether it will be enough
money. I worry because there are some who I have heard during the
course of our proceedings who said, well, there is plenty of money and
we have a cushion, so we should not worry about leakage.
I agree with Mr. Berrington that there are still leakage concerns
in this bill. For example, collateral sources, while ostensibly would
be deducted from the bill, it makes clear also that there are significant
exceptions to those collateral sources, statutory funds, and which would
provide an opportunity for double-dipping, which I believe could
potentially jeopardize the fund.
If you look at the 9/11 fund, it was estimated there that if there
were no collateral offset rule there, the fund’s cost would be
decreased--or the fund’s benefits would be decreased by 29 percent.
Now, here we have purported to deal with that, but at the same time
what one page giveth, the other page taketh away. And that is an area
that I think needs to be addressed as well.
I am still concerned about the screening program contained here.
There is, over the life of the fund, $600 million set aside for medical
screening, and there is no area on this subject that has been more
rife with abuse and productive of claims without any real medical or
other justification than the medical screening programs that we have
heard about during the course of these proceedings. This $600 million
will pay for approximately 400,000 medical screenings under the course
of this trust fund.
So those are some of my concerns. I want to compliment again-- I
know it sounds like I am being entirely negative. I am not. I think
there has been substantial movement forward with regard to the
elimination of Category VII and the holding of attorneys’ fees to a
modest amount, which is commensurate with a no-fault, non-adversarial
application and a trust fund process.
Thank you, Mr. Chairman.
Chairman SPECTER. Senator Feinstein?
STATEMENT OF HON. DIANNE FEINSTEIN, A U.S. SENATOR
FROM THE STATE CALIFORNIA
Senator FEINSTEIN. Thank you very much, Mr. Chairman.
Just to kind of relook at history for just a moment, the bill that
came out of Committee sometime ago was $108 billion, with a $45 billion
contingent reserve, but that contingent reserve may or may not have been
triggered.
Then the Frist bill that went on the floor of the Senate was $104
billion, with a $10 billion contingent reserve.
This bill has no contingent reserve. It is a hard $140 billion. And
essentially the affected business communities have pledged to make
good that money. As I’ve said before, it is very important to me that
there be transparency with respect to who is contributing what to this
fund. It has to stand the test of public scrutiny. So I think that is
important.
One of the things that I think Judge Becker knows, and certainly the
Chairman and the Ranking Member know, that has concerned me for some
time is the possibility of a takings or a due process suit against the
bill. There is an ad in this morning’s Washington Times which is put
there by what I understand to be a coalition, the Coalition for
Asbestos Reform, which I am told is a combination of trial lawyers
and businesses that are opposed to the bill. And they make the takings
argument. Also, a good friend of all of ours from the Chicago School
of Law, Professor Chemerinsky makes that argument as well. And he says
that he believes that, ‘‘The Act would violate the Takings Clause by
taking property without just compensation, specifically violating the
Constitution because it abrogates rights secured by valid contracts
of insurance while requiring the firms that held those rights to
contribute to the trust fund. This kind of double exaction requiring
firms to contribute to the trust fund as a substitute for tort liability
while simultaneously taking from firms the very assets they have
accumulated in order to discharge those liabilities cannot, in my
judgment, be squared with basic constitutional principles.’’
As Judge Becker knows, I have had some concern about that and have
proposed that in the start-up, instead of taking the $4 billion from
the asbestos trusts--Libby, Montana, Western-MacArthur, and I believe
two others--that those monies be incorporated on a staggered basis
over a 4-year period of time, a billion, a billion, and a billion each
year, in the hopes to avoid that problem. But my suggestion was not
accepted by others, and I would like to ask particularly the lawyers
here--I have no doubt that there is going to be litigation against the
fund. And it seems to me we ought to do everything we possibly can to
see that the takings and the due process arguments are mooted since
they are now being waged as major attacks against the bill.
I would like to ask anyone who would care to answer, beginning with
Judge Becker, how likely the takings/due process argument is to be
successful, and whether the proposal that I made, which was rejected,
might ameliorate it.
Judge BECKER. Well, as all of you know, the $4 billion that is in
the trusts has to be turned over to the fund. In the event that a
constitutional challenge prevails, business guarantees the $4 billion.
There is only $136 billion plus 4, but if that 4 is lost to the fund,
business in the bill guarantees the other $4 billion. That is just
background.
Now, I have read the briefs, as it were, Senator Feinstein. I have
not heard oral argument yet. I have read the arguments on both sides.
There is a very convincing letter from Carter Phillips, a leading member
of the Supreme Court bar from the Sidley Austin firm who says that
there is no constitutional problem. I have also read Professor Tribe’s
view. As I said, I have read the briefs. I have not heard oral argument.
My inclination is that there is not a takings problem, there is not
a due process problem. These trusts are the creations of the bankruptcy
courts for the most part. To some extent, they are the creatures of
contract. But they are all approved by the bankruptcy court and by
Congress. But Congress has the overarching power under the Commerce
Clause, it seems to me, to abrogate them. And there are benefits to
the victims and benefits to the polity.
Now, will there be a challenge? I suppose there will be a
constitutional challenge. I don’t know how we can avoid it. The
judicial review provisions impose upon the courts, including the
United States Supreme Court, the obligation to give it expedite
consideration, just as they did in McCain-Feingold. They did give
it expedited consideration, and I would assume they would give this
expedited consideration.
My view is that the constitutional challenge will fail, and argument
has been made that the trusts will not have enough money to fund the
constitutional challenge. I don’t know how much the legal fees will be.
I would be very surprised if you could not get lawyers who would take
that case.
Chairman SPECTER. Senator Feinstein has raised an important issue.
You have asked for the other lawyers on the panel--Gov-ernor Engler,
you are a lawyer. Do you want to answer that question?
Governor ENGLER. Well, there are lawyers, and then there are judges
who are retired heads of circuit courts. I do not want to add much to
that, what I have heard.
I would observe I understand that the Supreme Court in one of those
exhortations to the body politic to act on this has even themselves
suggested the possibility of a trust fund. But that is unsupported in
terms of--that is not a legal brief, obviously, for it, but just a
suggestion that came from on high.
Chairman SPECTER. Thank you.
Senator FEINSTEIN. Thank you very much.
Chairman SPECTER. Senator Coburn?
STATEMENT OF HON. TOM COBURN, A U.S. SENATOR
FROM THE STATE OF OKLAHOMA
Senator COBURN. Well, thank you, Mr. Chairman, and thank you for
the work that you and Senator Leahy have done. And I appreciate the
work. I was not here through the other 5 years of working on this bill,
and I would not know that I would want to be here if it is going to
take 5 more years to do this.
I have real concerns about this bill. I have concerns that people
who don’t have disease are going to get compensated under it, which
just means it is going to lessen the compensation that should go to
those people who truly have disease related to asbestos. I can tell
you that the literature does not support the Section VIIs in anyway,
and there will be medical testimony today to that effect.
We have no measure in this bill for--we have exposure, but we have
no measure of exposure in terms of particulate matter, which we know
is important in terms of causation of disease and asbestos. There are
a lot of assumptions in this bill both in Section 6 and in Section 8
where there is not a requirement for particle exposure. And we must
not forget that background basic lung cancer is high in this country,
a lot of it associated with smoking. We are rewarding former smokers
when that most likely was the cause of their lung cancer, and at a
very high level. So, in fact, the bill’s medical criteria still lacks
a lot in terms of where it should be to truly compensate people who
have been injured by asbestos. And that is what we ought to be doing.
I think it puts at risk the fund. I think a lot of the things in
the bill, the presumed exposure, puts at risk in the fund, the fact
that you can have a disease, early disease with asbestos, be compensated
for it, and then if you end up with a major disease or malignancy, we
pay you that, but we do not deduct the early compensation, which I
think is wrong. That is still in the bill. So for a number of reasons,
I am not to the point where I can support this bill yet. And more
importantly, I worry about the small businesses. I know Governor Engler
represents the National Association of Manufacturers. But, you know,
I am not sure they are at the table, the small businesses, that they
are going to be put out of business by this fund, who have not had
any problems but yet might fall into the industry. And who are they?
What are their names? How many people do they employ? And we are going
to take from them, when, in fact, they may not have an exposure.
I think we have to know who those people are before we finish up
anything on this bill, and they need to be informed. And I would love
for Governor Engler to answer the question. Who are these people? And
are they members of NAM? Or are they members of the alliance? Or do
they not even known this is happening to them? Governor?
Governor ENGLER. Thank you, Senator. I think your argument is best
argument for trust fund that has been made to date. The criticism of
the medical criteria, because this is where I started. I thought, Why
couldn’t we use criteria to fix the tort system and let these juries
all over America handle the case? And the problem is we can’t. I mean,
we are struggling with the medical criteria we are writing in this
bill, and I think it is a lot better and becomes more of a uniform
standard to apply across America than simply letting the tort system
work with three-quarters of a million cases.
As to your question about the unidentified businesses, one of the
problems that we have out there, as this thing stays in the tort system,
as the fees go to the--not to the injured people but to the legal
process itself and we get literally hundreds of different standards
being decided by different courts and juries out there, as more companies
--and we are nearly 80 now. The last one was an Arizona company about
2 weeks ago that when into bankruptcy. It pushes out deeper and deeper.
There are 8,400 defendants. We can provide a list of everybody who is
a defendant today that we at least have found and identified. But as
we send more people into bankruptcy, Senator, we get deeper into the
roster of American companies.
And so I am worried about small and large--most of the membership
of the National Association of Manufacturers are small, you know, from
20 employees on up. But there are people we cannot identify, but we
know they are going to get caught if we do not stop the hemorrhaging
on this problem.
Senator COBURN. I want to make another point. Part of my problem
with what Congress does too often is they do not pay attention to what
real science is. I am just going to put into the record--we have had
testimony on pharyngeal and laryngeal cancer associated with asbestos,
and the studies that are represented to take care of that show a slight
increase in risk. But the science stinks there because the number one
cause of both of those in this country is alcohol tobacco, and neither
one of those confounding factors were in any of those studies. So the
studies mean nothing. And yet we are going to try to put forward to
pay people for diseases caused by something else and make those who
are suffering from asbestos today not be compensated because we are
going to pay for a disease that is not there.
There are big problems with the medical criteria and including
expanding that and not compensating--or not deducting for earlier
disease against that. And my time is up and, Mr. Chairman, I yield back.
Chairman SPECTER. Thank you, Senator Coburn.
Senator Durbin?
STATEMENT OF HON. RICHARD J. DURBIN, A U.S. SENATOR
FROM THE STATE OF ILLINOIS
Senator DURBIN. Mr. Chairman, I want to thank you and Senator Leahy
not only for your hard work on this bill but also for your courtesy in
allowing this hearing. When I suggested it last week, you were prompt
to say yes, we should have a hearing, and I am heartened by that. You
have been eminently fair throughout this process, and I thank you for
that.
Senator Leahy, though we may disagree on this bill, you are my
friend and we have had a courteous and constructive relationship, which
I am sure is going to continue even as we debate this bill.
I also want to thank Judge Becker. I know you are not on the payroll,
but you might as well be. You have done an awful lot of hard work to try
to bring us to this day, and though I may disagree with your work
product, I certainly respect your contribution and public service in
so many different ways.
What troubles me about this hearing is that it is so sterile and
so bloodless. It is a hearing about money. Who pays? How much do they
pay? I just see this issue so differently. This is about more than
money. It is about justice. It is about fairness. And as Senator Kennedy
has said, it is about innocent people who, among these victims, knowingly
exposed themselves to deadly asbestos. At best, a small, small
percentage may have. But most of the people who were victims of this
illness did not even know they were being exposed at the time. They
are innocent workers, innocent bystanders, innocent family members
doing the laundry of workers. Through no fault of their own, they have
been exposed to this deadly poison. And we know that companies like
Libby and W.R. Grace knew long ago the danger of asbestos, kept mining
it, kept producing it, kept making profits on it, willing to take the
risk that no matter how much they were sued for, they were going to
make more money selling the product. That is what it was all about.
What is unfortunate in the hearing today is we don’t see the faces
of victims who could tell us stories that may, just may touch the
hearts of some of the members of this Committee to think twice, not
just about how much companies and insurance companies are going to
give to this fund or trust funds are going to give up but, rather,
how much victims and their families will recover as a result of what
we do today, saying to them that they can no longer go to the courtroom,
no longer appeal to their neighbors and friends for fairness and justice
but, rather, be turned into this administrative law system.
A couple of those victims are here today, and since I have not spoken
to them ahead of time, I am not going to ask them to stand unless they
want to. But their stories, one in particular here, Paul Sigelbaum I
believe is here today. Paul, if you want to stand up, you are welcome to.
My friends on the Committee, this is the face of a mesothelioma
victim, and if you look at it, look at Paul standing here, you may not
know that a year ago he went through a surgery in Omaha, Nebraska, that
lasted 10 hours, and as a result of that surgery, removing tumors and
other organs and things from his body, he weighed 33 pounds less at
the end of that 10-hour surgery. He is fighting mesothelioma. His wife
is with him today, I believe. Not with you? But you have said in the
statement that you said to me you think there are possibly four different
exposures in your life that could have resulted in this mesothelioma.
You have recovered some money from some. You are hoping to recover money
from others so that your wife can be taken care of, you can be taken
care of from this point forward.
Understand what this bill does. Paul, thank you for standing up.
But understand what this bill does. It says that whatever Paul has
recovered from those who are culpable of exposure will be set off and
deducted from the maximum amount he can receive under this bill. It
means that even if there are companies still liable to him for what he
has gone through, we are cutting off their responsibility to pay him
and to pay his family.
Ellen Patton is here from Annapolis, Maryland, and, Ellen, I thank
you for standing up. This is the face of a mesothelioma victim, 45
years old. She was exposed to it, she believes, because her father did
home repairs and used materials that exposed her to asbestos. She has
been through five different bouts of aggressive chemotherapy, struggling
at great expense to keep living every day, never knowing if this is
going to come back.
Ellen, thank you for being here today, and thank you for sending
along this little blue band as a reminder that this debate is about
people. Thank you for standing up. It is about what they will recover.
And though $1.1 million seems so large and so generous, it is not.
The medical bills which these people have incurred are in the hundreds
of thousands of dollars.
And so while we are saying that the companies and insurance companies
are going to battle one another now as to who is going to pay into this
trust fund, I would just say to Judge Becker: You said earlier if you
have a meso case in trial, you are okay, finish your trial. But is it
not true, Judge--and you know this for a fact-- if the defendant has
successfully argued to continue the case beyond the date of signing
this bill, you are finished. Your day in court is over. No matter how
much you have been through, no matter how much you have worked to
prepare your case, for companies that are liable for the illness which
is slowly taking away your life, your days are over simply because one
judge in one court has said, ‘‘I will grant the defense motion for a
continuance.’’ That is true, isn’t it, Judge?
Judge BECKER. Yes, sir.
Chairman SPECTER. Senator Durbin, you are well beyond time.
Judge BECKER. Yes, that is correct.
Senator DURBIN. I don’t think there is fairness and justice in that.
Thank you.
Chairman SPECTER. Senator Durbin, I am a little surprised by your
complaint about victims not being called when you asked for three
witnesses and you got three witnesses. If you wanted to call some of
the victims, you had people to call. You chose instead to call Mr.
Mark Peterson from the American Trial Lawyers Association, Dr. Philip
Landrigan from the American Trial Lawyers Association and Professor
Eric Green also on my sheet marked ATLA.
Let the record also show that I personally met with Linda Reinstein
and with Ellen Patton, and I understand their objections to the bill.
And my staff met with them on many other occasions, and if it is to be
testimony from victims, we would have been able to have many, many
more than there are spaces for seats in this room. But it does surprise
me that when you have three witnesses, you complain that no victims
were called.
Senator DURBIN. May I respond, Mr. Chairman?
Chairman SPECTER. By all means. I would like to hear a response.
Senator DURBIN. Well, I would like to give you a response. Thank
you for this hearing. But understand we are planning on spending 3 or
4 hours on this bill in a hearing. We should be spending much more time
because of the gravity and severity of this issue and because it affects
so many people.
I had to choose, and I tried to bring in the expert testimony. But
the point I am making to you, Mr. Chairman, is that there are many
people who could be called, who should be called. It is interesting to
me that the proponents of this legislation are not calling victims
either because you understand, as I do, that many of them are
disappointed with this legislation.
Now, I could have called a victim. Maybe I should have. But I picked
expert witnesses. The point I want to make to you is I wish this was
more than just a 3- or 4-hour hearing. I think this bill and its
importance and gravity require more.
Chairman SPECTER. Well, Senator Durbin, when you say we should be
spending more time on this bill, don’t include me.
[Laughter.]
Chairman SPECTER. Don’t include me. We had about 40 sessions on
this bill. I didn’t see you attend one.
Senator DURBIN. I beg your pardon, Mr. Chairman. When you have had
hearings on this bill and Senator Hatch before you, I have been in
attendance. I sat through the hearings a year or more ago. I will just
wager to say with the exception possibly of the Chairman and Ranking
Member, I spent more time at the table than any other member. And I
wish that you would take a look at the record before you would make a
statement like that.
Chairman SPECTER. Well, the statement I heard you make was that we
should spend more time on the bill. And the last time I looked, ‘‘we’’
was the plural first person. Don’t include me for spending more time.
And I am not going to nitpick about how many hearings there have been,
but this bill has not suffered from lack of analysis and consideration.
And when you ask for a hearing and I give it to you immediately and you
have got a lion’s share of the witnesses, three witnesses, I think it
is just out of line for you to complain about no victims being called.
Senator DURBIN. Mr. Chairman--
Chairman SPECTER. Senator Leahy, do you want recognition?
Senator LEAHY. Just this, and maybe we should get back on the subject
at hand. I know the Senator from Illinois is very concerned about the
victims. Every Senator here is concerned about the victims. We would not
be having these hearings if we were not.
I have met with dozens and dozens of victims, many of whom have
testified in previous hearings. My staff has met with them. We have had
countless meetings with Judge Becker and others. Victims and those
representing victims have been invited and have been in attendance at
most if not all of these meetings, as have the trial lawyers, as have
labor and insurance and industry.
Like any piece of legislation, I suppose we could meet with every
single person involved. We are talking about tens of thousands of
people. But I think throughout I have not heard a single discussion
where the question of the victims, especially those victims who are
facing in effect a death sentence, have been discussed.
Senator DURBIN. Mr. Chairman, may I say a word?
Chairman SPECTER. You may.
Senator DURBIN. I just want to say I understand the time that you
have spent on and put in this bill, Senator Leahy as well. And I am
not being critical of that. I think you will concede the fact that
many of the meetings which you have had have not been open to the
members of this Committee.
Chairman SPECTER. No, that is not true.
Senator DURBIN. Well, I will just tell you that your negotiations
that led up to the presentation of this bill did not--there was not an
open invitation to members of this Committee to come attend those
meetings.
Chairman SPECTER. Well, that simply is not true.
Senator DURBIN. Well, Mr. Chairman, I am sorry, but it is true.
And three weeks ago, we were handed this bill and saw it for the first
time.
Chairman SPECTER. Excuse me, excuse me, Senator Durbin. I am still
the Chairman here.
Senator DURBIN. I understand that.
Chairman SPECTER. And 39 sessions presided over by Judge Becker
and attended by me were open. Let’s move on.
Senator Feingold?
STATEMENT OF HON. RUSSELL D. FEINGOLD, A U.S. SENATOR
FROM THE STATE OF WISCONSIN
Senator FEINGOLD. Mr. Chairman, I want to compliment you and Senator
Leahy and all the hard work--
Senator KENNEDY. Mr. Chairman? Mr. Chairman?
Senator FEINGOLD. Mr. Chairman, do I have the floor?
Chairman SPECTER. Senator Feingold is recognized.
Senator KENNEDY. Could Judge Becker answer the last question that
Senator Durbin asked? He had gone 52 seconds over. Sessions had gone
a minute and a half over. So can’t we have Judge Becker answer Senator
Durbin’s last question?
Chairman SPECTER. Senator Durbin, do you have a question pending
for Judge Becker?
Senator DURBIN. I asked the judge for his comment about the 9-month
hiatus on these mesothelioma cases, and I want to make it clear--
Judge BECKER. Senator Durbin, I don’t really understand Peg
Seminario’s you have got to wait 2 years. These claims are--the exigent
claims, including the meso claims, get priority. And I do not anticipate
that it is going to take 2 years to get around to these claims. These
claims are going to be expedited. They have the offer for judgment
proposal of Senator Feinstein, and there is the contracting out. So
these claims are going to be expedited.
The 9 months is if they are not--if the system is not up and running
and processing the claims in 9 month, then they go back to the tort
system. But that doesn’t mean the claims will wait 9 months. I think
these claims with the contracting and the offer for judgment will be
moved ahead more quickly. And with respect to other sick people who
are not exigents, it does not mean that they will wait 2 years. It
just means that if the system is not up and running and processing
the claim within that period, then they can go back to the tort system.
But I would anticipate with an efficient administrative system, these
claims will be processed well before the 9 months or well before the
2 years.
Senator FEINSTEIN. Mr. Chairman, can I say one thing on this point?
Chairman SPECTER. Senator Feinstein?
Senator FEINSTEIN. If you would allow me, Senator Durbin, because
I wrote this language, we wrote it with the view of trying to get the
quickest consideration for the sickest victims. This was the goal of
this legislative part of the bill. And I started at lesser months, but
the view was that it could not be done, the system could not be gotten
up and running in that period of time. So it is my belief that this is
the shortest period of time in which the system could be up and running.
Secondly, as Judge Becker pointed out, the private contracting out
there is to minimize any chances that a mesothelioma victim will not
be dealt with in this 9-month period. So we have got the shortest
period and then we have got some additional protection for that. I want
it, you know, to be just as soon as possible, and this was my
overwhelming concern. And I just wanted to be able to say that to you.
Chairman SPECTER. Senator Feingold?
Senator FEINGOLD. Thank you, Mr. Chairman. I want to thank you and
Senator Leahy for all the hard work you have put in on the bill. I
know you have put your heart and soul into it and you are trying to
accommodate many competing interests and seemingly irreconcilable points
of view, and I do appreciate that kind of active leadership from a
chairman. And I do want to thank Judge Becker as well for the enormous
effort he has put into these negotiations.
Mr. Chairman, you and I had a good conversation on the phone
yesterday. I support the concept of a trust fund to pay victims of
asbestos disease. I am not unalterably opposed to any asbestos bill
that asbestos bill that might be brought forward. But I do find myself
in much the same position that I was almost 2 years ago, when Senator
Hatch made his proposal and we actually spent 6 weeks marking it up
in the committee. I will only support a bill that in my judgment is
fair to all parties, all parties involved, including most especially
the victims of asbestos disease. That means not only do medical
criteria and claims values have to be fair, but the design and funding
of the system has to be adequate to pay the victims promptly and
completely.
And again, I know you have been working hard on this and so has
Senator Leahy. But now that you have agreed on a bill, I don’t think
that you should rush it through the committee. It is a complicated
bill that varies in significant respects from the bill we saw last
year. We need to examine it, we need time to examine it and propose
changes to it. We need to have a real markup in this committee so that
amendments can be offered. The bill we are considering today, in my
view, is a marked improvement from the bill that was taken up on the
floor last year, but it is also inferior in a number of respects to
the bill that was reported out of committee in July 2003, and I had
to vote against that bill because I didn’t think it went far enough
to fairly and adequately compensate current and future victims of the
horrible diseases that asbestos causes.
Mr. Chairman, I want to ask some questions of our witnesses, so I
won’t discuss all of the concerns I have. But let me mention one.
There has been and will continue to be great disagreement about
whether the trust fund will be adequate to keep paying victims
throughout its life. Everyone is working on estimates and there are
many variables that are simply not knowable with any certainty at this
time. In some ways, it doesn’t really matter whether the fund is $120
billion or $140 billion or $200 billion. Any of these estimates could
be too low or too high. So there are two key things we have to do
absolutely. First, we have to be sure that there is adequate money
right away to pay the approximately 300,000 claims that we know will
almost be filed immediately. And second, there has to be a strong
sunset provision that will allow victims in the future to file suit
if this trust fund isn’t able to pay their claims.
The risk that this trust fund will not work because it is not
adequately funded at the front end cannot be borne by the victims.
I want to say it again: The risk that this trust fund will not be
adequately funded cannot be borne by the victims. I will not vote
for any bill that does not recognize that basic principle of
fundamental fairness.
So let turn to a question that actually relates to the discussion
that we were just having. One concern I have with this bill is the
treatment of currently pending, including exigent, claims. The bill
provides that when the President signs the bill into law, all pending
claims are stayed. There are then differing provisions on how those
claims are treated, depending on whether they were exigent or not,
in other words, if the claimant has a terminal illness. There are
very complicated provisions for cases going back to the tort system
after a certain period of time if the fund is not up and running.
What I don’t understand is why we need to stay any claims where
someone is sick. As this bill currently stands, there will be 50,000
people, who are now sick and who have now filed claims in court or
through a bankruptcy trust, who have nowhere to go. I would like to
hear from everybody on the panel, what would be wrong with a system
that says that all the claims where the claimant is sick can continue
in court or in the bankruptcy trust until the administrator certifies
that the fund is ready for business; that is, that there is sufficient
money available to pay claims and that the administrative structure is
in place to handle those claims? And if the money is paid in settlements
of court cases or by a bankruptcy trust through its claims process
between the time the bill is signed and the day of that certification,
then the entity making that payment gets a dollar-for-dollar credit
against its eventual liability to the fund if the administrator
determines that the payments were reasonable.
If we do that, then it doesn’t matter whether it takes 9 months
or 24 months or 36 months to get this fund up and running. And I would
say Judge Becker’s reassurances of a few moments ago would be consistent
with my point. If he is right, these cases are going to get immediate
attention, fine; then there is not a problem. But why shouldn’t these
cases go forward until we are sure? People whose claims are already
advanced can get paid and the defendants are no worse off in their
overall liability.
So I would start with Judge Becker and like to hear each of the
panelists’ comments on this point.
Judge BECKER. First of all, Senator, with respect to the three-- you
say the 300,000 claims we know will be filed. I addressed that in my
testimony. I have discussed that with David Austern. Not only have the
claims showed a sharp decline, but the vast bulk of the putative
300,000 are either Level I or people who are maxed out. And the number
which, according to the most experienced person in this field, will
be filed is considerably less. But there still will be a lot of claims.
And I will say to you, Senator, that we have discussed this in our
negotiations. And as we all know, this is a compromise. The business
folks said that if we do that, the costs in the tort system and, unless
you impose tort reform and say that the ones who are the unimpaired
cannot get paid in the tort system--
Senator FEINGOLD. You say ‘‘do that,’’ you mean not stay the cases?
Judge BECKER. If we don’t stay the cases, the tort system will
continue. And the predictions as to the cost to the business and
insurance folks in the court system are astronomical in terms of the
verdicts in the tort system. When you say dollar-for-dollar credit,
but the dollar-for-dollar credit would be on the verdicts in the tort
system.
The bottom line is, Senator, that in terms of concept and principle,
what you say makes a lot of sense. In terms of the kinds of
accommodations that are necessary--Senator Durbin says, well, it is a
shame that it is all about dollars. And I understand and respect your
concern, Senator Durbin, but at a certain level, if there is going to
be a bill, it has to be about dollars because there has to be a level
of funding that business pays and insurance pays. And unless this can
be agreed upon, there simply isn’t going to be a bill. And in terms of
the give-and-take and the kind of compromise, although what Senator
Feingold proposes was suggested, it was simply a non-starter and the
negotiations just totally failed.
Senator FEINGOLD. Well, I appreciate that answer. I want to be clear.
I am suggesting that only people who are sick can continue.
Mr. Berrington?
Mr. BERRINGTON. Yes, sir, thank you. We have a little bit different
view, which is that we believe the trust fund is clearly the way to
compensate victims quickly and fairly. Certainly the tort system has
not been a great alternative for most victims; it takes years for them
to get compensation. So we believe the trust fund will get started
quickly, the cases can be taken care of quickly. And to have any
incentives in the bill for litigation to continue afterwards we think
are very troubling, and will indeed encourage those who want to keep
the tort system--want to keep the new system set up in the legislation
from actually taking effect, to have an opportunity to do so. Let me
give you an example.
The Department provides operational certification, which doesn’t
mean that there are not cases being processed prior to operational
certification, it is a judgment under the bill that the program is
operating sufficiently, that all litigation ought to be cut off. When
the Department makes that operational certification judgment, even
under the current bill, my guess is that those who want to keep the
litigation system going will seek to tie up the Department in court.
That is a very big problem with regard to the current version of the
bill. The way that the bill works is that we will pay into the trust
fund and then we will pay on top of that for all of these cases that
will come into the tort system. That just isn’t acceptable.
Your comment about having offsets--I didn’t read the language or
the idea previously as being that the total amount of money that we
would have to put into the trust fund would be reduced, but merely
that the individual insurer or defendant that was paying would have
an offset against its own payments. Well, the result is that that just
gets passed around among everyone and we are paying above the $46
billion. I agree that the issue is about victims and about getting
them compensation. The trust fund, if you let the trust fund concentrate
and this legislation concentrate on getting this thing started, once
the bill is enacted, rather than encouraging everyone to try to continue
litigation in one way or another, the process will go much faster and
victims will get compensation much more quickly.
Senator FEINGOLD. This isn’t about discouraging the concept of--
Chairman SPECTER. Senator Feingold, you are almost 4 and a half
minutes over. I know the answers you have been wanting. If you have
one more question.
Senator FEINGOLD. I am just trying to get answers to the one question
that I asked. I haven’t asked an additional question. But, Mr. Chairman,
if you--I would just like to hear Governor Engler’s response and the
other responses.
Governor ENGLER. The other point that, I agree with Mr. Berrington,
the analysis -- but one point that needs to be made if we stay in the
tort system, we lose half to 60 percent of the awards. So even in the
example the Senator from Illinois used earlier, if you net out at 1.1,
you have actually had to win 1.6 or 1.7 in today’s system because of
the costs going to the lawyers on the other side. Now, maybe if you
are suggesting that once this passes, the lawyers would forego the fees
in order to pay net dollars, the net award, you know, you have a
different ballpark here. But I think you can’t--conceptually, you want
to move to the trust fund away from the tort system so that you are
getting what I think is more money to the plaintiff. If it is about
money, how much do they get? Today more than half of it is being lost.
How fast can we resolve these? I think when it is up and running, it
will be faster. There is that transfer period, but I think it is a bit
unfair to suggest that you fund dual systems during that changeover.
You have to stop one and start the other. And I think all of the concern
about DOL or whatever department--agency, or, if it is independent,
however it is set up--gets this up and going, we are very keen on getting
it started very quick.
Chairman SPECTER. Ms. Seminario, would you like to make a comment
on that?
Ms. SEMINARIO. Yes, I would. I would just point out that when the
bill was reported out of this committee 2 years ago as S. 1125, it
included an amendment that Senator Feinstein had offered and it was
unanimously adopted by the committee, which said--it allowed that all
victims could continue to go in court with their case until the fund
was up and running and that there would be an offset by the defendants
or the insurers against the money paid out. So the committee considered
it, in the interest of justice it was unanimously adopted in the
reported bill. The provisions in S. 2290 were ones that were put in
by the business people, insurers, who didn’t like that provision.
So dealing with the issue of the transition is really, really
important. As you said, Senator Feingold, the idea that we don’t know--
and we don’t know exactly how many claimants will come to the fund,
what will happen 10 years out, 20 years out. We do know right away
that there are thousands and thousands of people who are sick, who
have pending claims, and when this fund is up and running, many of
them will have nowhere to go as it is currently crafted. We think
that is unfair. We think it does make more sense to allow people to
go forward. They can make the choice as to whether it is in their
interest to wait and go to the fund or continue with the litigation.
And so, again, as a matter of fairness here for victims--and think
about it from their perspective. What will they do, how will they
pay their medical bills? You are even extinguishing the existing
bankruptcy trust where people now have a right to go for no reason
at all. And so you are leaving many of these victims with nowhere
to go. We know there is going to be litigation from the bankruptcy
trust, we know there is going to be litigation from the insurers over
their formula of contributions. And so the idea that this will all
get up and going very quickly, while we would all like that to happen,
there is no certainty that that is the case.
Senator FEINGOLD. Mr. Chairman, 10 seconds just to respond?
I just want to say, I am trying to find a way here to resolve some
of my concerns about the bill, and that was a perfect comment we
just heard. My comments aren’t adverse at all to the idea of a trust
fund. It is just at the front end--and these are people that may die
before this thing is up and running. It is just making sure they get
something. And it is no way an attempt to keep the tort system going.
It is just this potential gap. And that is the spirit in which I asked
the question. Thank you for the additional time.
Chairman SPECTER. Thank you, Senator Feingold.
Thank you very much, Judge Becker, Governor Engler, and Ms.
Seminario, Mr. Berrington, thank you very much.
We will turn now to our second panel, Dr. James Crapo, Professor
Eric Green, National Legislative Director Hershel Gober, Dr. Philip
Landrigan, Ms. Carol Morgan, Mr. Mark Peterson, Dr. Francine Rabinovitz,
Mr. Alan Reuther.
Senator COBURN. Mr. Chairman?
Chairman SPECTER. Senator Coburn.
Senator COBURN. I just want to put something in the record to make
sure it is part of our testimony today.
Chairman SPECTER. Go ahead.
Senator COBURN. There is somewhere between 700 and 900 background
cases of mesothelioma a year in this country that have absolutely
nothing to do with asbestosis. And it is important as we consider all
these claims that everybody is aware of that. Because to take away
compensation from those that truly have asbestosis-related mesothelioma
without making sure that we are not paying for the idiopathic cases
that we know are not related to that is important. I just wanted to
make sure that that was in the record.
Chairman SPECTER. Thank you very much, Senator Coburn.
Our first witness on Panel II is Dr. James Crapo, professor of
medicine at the National Jewish Medical and Research Center in Denver,
Colorado. Medical degree from the University of Rochester, magna cum
laude from Brigham Young University.
Thank you for joining us, Dr. Crapo, and we look forward to your
testimony.
STATEMENT OF JAMES D. CRAPO, M.D., PROFESSOR OF MEDICINE,
NATIONAL JEWISH MEDICAL AND RESEARCH CENTER, UNIVERSITY
OF COLORADO HEALTH SCIENCES CENTER, DENVER, COLORADO
Dr. CRAPO. Thank you, Chairman Specter, and members of the committee.
It is an honor to be asked to appear here and comment on this bill. I
testified regarding this bill about 2 years earlier and have taken the
opportunity to reevaluate the new and revised bill being considered at
this time, particularly with emphasis on the medical criteria.
Now, I want to compliment Chairman Specter and Mr. Leahy on changes
that have occurred in this bill that I think have significantly
strengthened it. The deletion of the old Level VII, exposure-only lung
cancers, is a significant improvement of this bill. I also compliment
the addition of the concept of substantial occupational exposure as an
important concept in this bill.
On reviewing this, it is my opinion that the medical criteria still
need to be additionally changed in order to appropriately represent
the best scientific and medical evidence today and design this bill
so that it will compensate those who are truly injured by asbestos
without expending large amounts of the trust fund compensating
individuals who are not injured by asbestos, and thus bringing the
fiscal stability of the bill into question.
So, now, the primary issues that I want to address are contained
in my written statement. I am only going to summarize a couple today.
The two areas that I think are major concerns that need to be addressed
in the markup of this bill are, first, pleural changes. Pleural disease
is really a reaction. Most of it is a small callous on the chest wall
that does not involve the lung and, in the vast majority of cases, is
not associated with impairment or disability. One of the problems I
have with the way the medical criteria in this bill are constructed
is that it allows pleural change to be a marker of impairment or injury
that extends through seven of the nine levels in this trust.
For example, Level I and Level II. The only difference in those two
levels is that pleural disease is present, but in Level II the
individual has evidence of mild obstructive lung disease. That is
caused primarily by smoking. And one of the changes is to compensate
Level II--instead of doing medical monitoring, creating a situation
where a smoker with a pleural plaque then suddenly qualifies for
substantial compensation under this act. At later stages, at Level
IV and V, for example, pleural disease is allowed to be the primary
radiographic marker to indicate the presence of severe or disabling
asbestosis. And in fact, in Level V, with the changes of this bill,
a person with pleural disease only, who smokes and develops a mild
decrease in defusing capacity, could qualify as disabling asbestosis.
These are some incongruities that could be easily and properly
straightened out. For example, on Level V, it is not appropriate to
call disabling asbestosis in the absence of any lung parenchymal
changes on radiographic changes or significant pulmonary function
changes as indicated by total lung capacity. The gold standards for
asbestosis are a significant ILO reading on chest radiographs and a
low total lung capacity with functional disability. Those should be
the criteria used to look for the high levels of compensation that
this trust intends for people with disabling asbestosis.
A second area is in the area of other cancers. The current version
of the bill under, I think, Level VI, would compensate a large number
of GI cancers. And provided in my written report, on Table 4, when one
does a thorough cohort analysis of all the cohorts in which asbestos
and colon cancer have been evaluated, the meta-SMR for that, as you
will see on Table 4 in my report, is only 0.89. Now, what that means
is when you do a meta-SMR, you are looking at all of the cohorts. SMR
stands for ‘‘standard mortality ratio.’’ And a normal or no-change
from control would be 1.0. For colon cancer, that meta-SMR, looking
at all the available best medical data, is less than 1, which means
there is no associated risk between asbestos exposure and colon cancer.
And yet, there are over 50,000 colon cancers in the United States
today, and they would qualify, if they have evidence of exposure and
some pleural disease, to compensation under the trust. I think that
could deplete the values of the trust and I think we should re-look
at that.
And then finally, I have identified several areas that should be
carefully looked at. Enhanced quality assurance, the use of chest CT
scans, for which we don’t have the standards today to apply these to
the field. And I have also encouraged them to look at the issue of
substantial occupational exposure, where our definition is really good
to start, but it defines it by exposure duration, not by exposure
intensity, and it would allow individuals exposed to products where
they have an encapsulated, let’s say, product, with very, very trivial
exposures, to qualify as a heavy exposure under the criteria. We need
to include in the criteria--
Chairman SPECTER. Dr. Crapo, your time is up. Could you summarize,
please?
Dr. CRAPO. Sure. Just one word--we need to include in the criteria not
only duration of exposure, but intensity of the exposure, to define
substantial occupational exposure correctly.
Thank you.
Chairman SPECTER. Thank you very much, Dr. Crapo.
[The prepared statement of Dr. Crapo appears as a submission for
the record.]
Chairman SPECTER. We now turn to Professor Green, who is the
court-appointed legal representative for future asbestos claimants
in the Halliburton case. He is a professor of law at Boston University,
graduate of Harvard Law School and, with honors, from Brown University.
Thank you for joining us, Professor Green. We look forward to your
testimony.
STATEMENT OF ERIC D. GREEN, PROFESSOR OF LAW,
BOSTON UNIVERSITY LAW SCHOOL, BOSTON,
MASSACHUSETTS
Mr. GREEN. Thank you, Senator Specter. You are Senator from my
native State, and Senator Kennedy, Senator from my home State.
I commend the committee for the work it has done, for all the effort
Judge Becker and the rest of you have put in. I am a professor mediator
as well as a law professor, and I have been mediating all kinds of
commercial and personal injury disputes for 25 years and I have been
mediating every aspect of the asbestos litiga-tion--every aspect of
it--from single cases to class actions to insurance disputes to
reinsurance disputes. I have served as a special master for courts.
I recognize the necessity for consensus and compromise in trying to
achieve anything. And I also recognize as a mediator the desire of
the mediator, of the consensus-builders, to get something done. But
one of the criteria for any good result is workability. I am very
concerned that this bill as presently constructed will turn out not
to be workable and we will be back here in a few years with a bigger
problem and we will be sorry that we didn’t address the things that
need to be addressed if this is going to be workable.
I know you want it to work out. I know your motives and intentions
are the highest and honorable. But there is a significant risk in this
bill that the funding will turn out to be illusory or highly contested
in court, that the actual funding will not be in place on time. Whether
claims can be processed in 90 days, Senator Fein-stein, or 9 months is
not the issue, I think. The issue is when the claims will be processed
and paid. And the funding has to be there to pay the claims once they
are processed.
I predict that the litigation that I have been struggling with at
one level for all these years will simply be shifted to another level
once this bill passes, because the funding is not specified and made
clear and the commitments aren’t there. I have friends in industry, I
have friends in the insurance industry, I have friends on the
plaintiffs’ side. I am in the middle. I am a mediator. But I think
this bill presents illusory protection for all of them because the
ultimate responsibilities and amounts are not made clear and transparent
ahead of time. I think the litigation that could ensue could result
in delays of funding of the trust, delays in payment, incurring of
huge debts, and ultimately a downward spiral for the trust that will
then trigger the sunset provisions. Unfortunately, I think the sunset
provisions are subjective, not automatically triggered, as in Senator
Biden’s amendment, which was in a previous version of this bill, and
will create a limbo which will then only ultimately be resolved by
throwing the victims back into a tort system and a trust system that
has been essentially annihilated for the asbestos victims.
So I think these problems must be addressed and fixed. They are
tough problems. The insurance industry deserves to know what they are
going to pay and who is going to pay it. The manufacturers, all of
them, the 1,500 small players as well as the 20 or 40 big players,
deserve to know exactly how much they are going to be assessed. They
deserve to know whether they are going to have to pay supplemental
assessments if this trust falls short. The taxpayers of America
deserve to know whether there is truly a government backstop here,
whether the Federal financing will be backed up by the taxpayers of
the United States. All of these issues, I believe, are swept under
the rug and the risks ultimately are thrown onto the least able to
protect themselves, the individual victims, the people who stood up
behind me, to whom I would gladly yield my time at this podium.
Otherwise, my remarks, Senator Specter, with a great deal of
respect for the work you have been doing on this, I would submit.
Chairman SPECTER. Thank you, Professor Green.
[The prepared statement of Mr. Green appears as a submission for
the record.]
Chairman SPECTER. We turn now to the Honorable Hershel W. Gober,
national legislative director for the Military Order of the Purple
Heart. Mr. Gober served as deputy secretary of the U.S. Department of
Veterans Affairs and then acting secretary for some 8 years, has a
very distinguished military career, cum laude graduate from Alaska
Pacific University, and someone I worked with extensively when I
chaired the Veterans Affairs Committee, a considerably easier job than
chairing this committee.
Welcome, Mr. Gober, and we look forward to your testimony.
STATEMENT OF HERSHEL W. GOBER, NATIONAL LEGISLATIVE
DIRECTOR, MILITARY ORDER OF THE PURPLE HEART,
MCLEAN, VIRGINIA
Mr. GOBER. Thank you, Mr. Chairman. Members of the committee, I
am honored to be here on behalf of the Military Order of the Purple
Heart in strong support of S. 852.
Tragically, the asbestos litigation crisis has hit veterans extremely
hard. Men and women of our Nation’s armed forces were unknowingly
exposed to asbestos due to its prevalent use by the military during
and after World War II, particularly in the insulation products built
into ships for the U.S. Navy, bulkheads, pipes, ceiling, floors, and
machinery, which were all coated with asbestos. Moreover, those who
worked in shipyards and dry docks building and repairing U.S. Navy
vessels were also heavily exposed to asbestos.
Due to the long latency period from the time of asbestos exposure
to the first signs of symptoms of an asbestos-related disease,
veterans who served before the 1980s are still being diagnosed with
life-threatening and terminal illnesses. Individuals with military
service make up a significant number of the total asbestos victims
in the United States. The avenues open to veterans to seek compensation
through the tort system, however, are very limited. The Federal
Government, as you know, has sovereign immunity, thereby restricting
veterans’ abilities to recover from the Government, and most of the
companies that supplied the asbestos to the Federal Government have
gone bankrupt or disappeared, or they are only providing a fraction
of the compensation that should be paid to asbestos victims.
Even if there is a solvent company for a veteran or his family to
pursue, there remains a lengthy, costly, and uncertain ordeal of filing
a civil lawsuit. Moreover, under the current system, far too much money
is being diverted to claimants with no illness or injury. Victims too
often receive widely divergent recoveries depending simply on where
the lawsuit is filed or who their attorney is. And the attorney fees
and other transaction costs are consuming far too much money that
would otherwise be available to compensate those who are ill.
The Department of Veterans Affairs continues to receive claims for
benefits from veterans for illnesses related to asbestos exposure while
serving in the military. However, due to the difficulty of proof, less
than one-third of the known VA asbestos claimants receives
service-connected compensation for those asbestos diseases.
Veterans and their families with asbestos-related diseases desperately
need and certainly deserve relief, as the current system is simply not
meeting their needs or treating them fairly. The Military Order of the
Purple Heart strongly supports S.852, the FAIR Act, because we believe
it will provide an immediate and effective solution to the current
asbestos litigation problem for victims and will provide many positive
benefits for veterans.
First, it will establish a new Federal Office of Asbestos Disease
Compensation for the processing and payment of asbestos claims.
Second, it will preserve the benefits currently available to veterans
and exclude any recoveries under the Veterans Benefits Program from
the requirement that awards under the act be reduced by prior recoveries.
Third, there will be no requirement to prove exposure to a particular
defendant’s asbestos product. And unlike veterans benefits, there will
be no service-related requirement, easing the burden of proof for
veterans. The bill will also include heavily weighing for pre-1976
and World War II shipyard exposures.
Fourth, the bill will expressly apply to exposures to U.S. citizens
occurring on U.S.-owned or flagged ships occurring overseas while
working for U.S. entities.
Fifth, the bill will provide medical monitoring.
Sixth, the bill will establish a claimant and legal assistance
program.
And finally, the legislation will provide for $1 million in grant
for each of fiscal years 2005 to 2009 for each of up to 10 mesothelioma
disease research and treatment centers. These centers will be closely
associated with the U.S. Department of Veterans Affairs medical centers
to provide research and benefits.
Mr. Chairman, the Military Order of the Purple Heart is joined by
18 other organizations in supporting the issues embodied in this bill.
I would like to submit for the hearing record a copy of a letter sent
to the Senate last week by 17 of those veterans organizations in support
of the trust fund solution embodied in S. 852.
In closing, Mr. Chairman, I want to thank you and the members of
the committee for your hard work on this issue. I know that there may
be still some work to do, but you are headed in the right direction.
The current system is broke; it ain’t working.
Thank you, sir.
Chairman SPECTER. Thank you very much, Mr. Secretary.
[The prepared statement of Mr. Gober and the letter appear as
submissions for the record.]
Chairman SPECTER. We turn now to Dr. Philip Landrigan, professor
and chair of the Department of Community and Preventive Medicine, Mount
Sinai School of Medicine, New York City. A very distinguished career.
A degree from Harvard Medical School in 1967 and a master of science
in occupational medicine and industrial health from the University of
London in 1977.
Thank you for coming today, Dr. Landrigan, and we look forward to
your testimony.
STATEMENT OF PHILIP J. LANDRIGAN, M.D., PROFESSOR OF
OCCUPATIONAL AND ENVIRONMENTAL MEDICINE; CHAIRMAN,
DEPARTMENT OF COMMUNITY AND PREVENTIVE MEDICINE;
PROFESSOR OF PEDIATRICS, THE MOUNT SINAI SCHOOL
OF MEDICINE, NEW YORK, NEW YORK
Dr. LANDRIGAN. Thank you, Mr. Chairman. It is a pleasure to be here
and an honor. Senator Leahy and I have worked before on the Food
Quality Protection Act. Senator Kennedy, of the State where I grew
up, all Senators.
I want to begin by commending you for having worked together to
take on a terribly complex issue. Looking at this situation from the
perspective of lung cancer, the issue that clouds the whole debate
and makes it so difficult is the fact that there is a great deal of
lung cancer in the American population. Of course we all know that
the predominant cause of that lung cancer is cigarette smoking. Where
it gets difficult is that there exists a powerful synergy between
cigarette smoking and asbestos in the causation of lung cancer. Let
me give you some numbers.
People who smoke who have no exposure to asbestos have 10 or 11
times the background rate of lung cancer. People who have been exposed
to asbestos, but who never smoked have about 5 times the background
rate of lung cancer. But people who have worked with asbestos and who
have also smoked, who are at double jeopardy, have in fact 55 times
the background rate of lung cancer. So one way to look at this is
you could say that you could prevent 90 percent of those lung cancers
by eliminating asbestos exposure and you could eliminate about 90
percent of those cancers by eliminating smoking. And parsing this out
in issues of causality is fraught with difficulty, as I do not have
to tell you.
Another causal conundrum that confronts you here is the fact that,
contrary to what some have said at this hearing, fibrosis is not on
the critical pathway to the development of lung cancer. Or to say that
in plain English, a person who has been exposed to asbestos, does not
need to have asbestosis, to develop lung cancer. The development of
fibrosis is one pathological process; the development of a cancer is
a second pathological process. The occurrence of asbestosis, either
parenchymal or pleural, is most certainly a marker of exposure, but
it is not an inevitable precursor of the development of cancer. I
will come back to that point in a moment.
Finally, it is important to remind us all that duration of exposure
is only a surrogate for actual exposure. Actual exposure is a multiple
of the duration of time a person was exposed and the intensity of
their exposure. So when we talk about duration, I understand it is
a necessary shorthand because we mostly lack information on levels of
exposure; that is, the lack of exposure information is the Achilles
heel of medical research in this arena. But we have to be mindful of
the fact that when we are talking about duration, we are talking about
an incomplete measure of the total reality.
So that is by way of background.
A couple of specific comments on the bill. First of all, I am
worried about the criteria that have been proposed that discount more
recent exposures. I have put some calculations into my written testimony
indicating that a person who began exposure to asbestos in 1974 would
need 52 years of actual work with asbestos to meet the 12-year weighted
exposure criterion for lung cancer Level VII. For cancers other than
lung, the so-called malignant Level VI, I calculate that for a person
who started exposure in 1976, it is going to take him 105 years of
work to meet the criterion. For some of us that might be possible,
but probably for most of us not. It is a tough barrier to get over.
Finally, coming back to the point that fibrosis is not an inevitable
precursor of the development of cancer, I am very much concerned by
the elimination of what was previously called Category VII, cases of
lung cancer without fibrosis. I feel that setting aside the estimated
40,000 people that fall into that category is going to result in people
who truly have lung cancer that was caused by asbestos being denied
compensation.
Final point, there is a lot of debate about whether cancers other
than lung and mesothelioma are caused by asbestos. The evidence is
certainly not so strong as for lung cancer or for mesothelioma, but
I would certainly not go so far as my distinguished colleague has
done to dismiss those cases out of hand on the basis of one
meta-analysis. A meta-analysis is a procedure that lumps many studies
together and reduces them to the lowest common denominator. Another
way to present those data would be the way that Dr. Crapo presented
the data for multiple studies on lung cancer, actually laying out the
actual data. If we were to look at the data on, for example, pharyngeal
or laryngeal cancer, in that modality we would see that there are
some studies that show quite strong relative risks.
Thank you, sir.
Chairman SPECTER. Thank you very much, Dr. Landrigan.
[The prepared statement of Dr. Landrigan appears as a submission
for the record.]
Chairman SPECTER. We turn now to Ms. Carol Morgan, who is president
and general counsel of National Services Industries. Very distinguished
career with that company since 1981. A bachelor’s degree with
distinction from Rhodes College and a J.D. cum laude from the University
of Georgia.
Thank you for coming in today, Ms. Morgan, and the floor is yours.
STATEMENT OF CAROL MORGAN, PRESIDENT AND GENERAL
COUNSEL, NATIONAL SERVICE INDUSTRIES, INC.,
DORAVILLE, GEORGIA
Ms. MORGAN. Thank you, Chairman Specter, and members of the
committee. I appreciate the opportunity to be here.
I am actually representing the Coalition for Asbestos Reform, and
my focus today is on the issues of concern to smaller businesses. The
coalition is actually made up of a very diverse array of businesses
and insurance companies. But we all share one passionate interest; we
want to reform and resolve the current asbestos litigation crisis.
And we are particularly focused on being sure that funds are directed
toward those who are truly injured, like the people who have been
with us today. We know you share that concern and we applaud your
efforts to date in trying to find a solution to this problem.
We believe, though, that the trust fund, the FAIR Act as it is
presented, is not the right solution and that in fact it will create
more problems than it will solve. I want to cover three main points
as it impacts the smaller businesses.
The first point, as Senator Feinstein recognized earlier, is there
is an issue about the constitutionality of this bill. We believe that
there is an unconstitutional taking of private property. Insurance
assets are private property. And smaller businesses have particularly
relied on their insurance to pay their claims in the past. And the
FAIR Act strips these companies of these assets. Without these assets,
many of these companies will not be able to continue to survive. So
this unconstitutional taking is much more eloquently explained in a
letter that was written to Chairman Specter by Professor Strauss at
the University of Chicago Law School, and I commend that letter to you.
My second point, really, builds on the first one. Not only does the
FAIR Act strip smaller companies of their insurance assets, but it adds
insult to injury and requires disproportionate payments from smaller
companies. These payments will force many smaller companies out of
business, as Senator Coburn expressed concern earlier, and we appreciate
that.
Let me explain this. Because of their prior asbestos expenditures,
many smaller companies are going to find themselves in Tier II. Now,
they may be at the sub-tier, the bottom sub-tier of Tier II, but even
so, their payment will be $16.5 million a year for 30 years. Now, that
single payment in one year is more than many of these companies have
paid out of pocket during the entire life of asbestos litigation. But
more importantly, many of these smaller companies simply can’t afford
to make that payment.
Now, ironically, in the same tier are some of the largest companies
in the world. And these companies will be capped at the top of Tier II
at $27.5 million a year. Well, let’s do the math. A $50 billion company
that pays $27.5 million a year will actually end up paying less than
one-tenth of one percent of their annual revenues. And that is a pretty
good deal. But a smaller company, say one with $400 million in annual
revenues that is paying $16.5 million a year, will pay 4 percent of
their revenues. And in today’s economy, that is more profit margin
than many small companies make. They simply won’t be able to make the
payment and they will go out of business.
My question is, is that the kind of rough justice that Judge Becker
was referring to earlier. It sounds to me like it is more of a bailout
for the larger companies that are maybe less insured, and at the expense
of smaller companies which are better insured. There are efforts in
the FAIR Act to address this problem through the inequity and the
hardship provisions, but they are woefully inadequate. They are
discretionary, and there is no guarantee of funding for them. And as
Senator Feinstein pointed out earlier, we are not really sure exactly
what the source of funds is for the business contribution. We haven’t
seen that data, and that needs to be scrutinized very carefully. But
in any event, we are very concerned there won’t be sufficient funds
for hardship and inequity to address the problem of the small
businesses.
We just don’t think these problems are fixable in the current FAIR
Act. We believe it would be better to tackle the fundamental problem,
which is payments to claimants who aren’t injured, and the medical
criteria bills that are being passed now in States and being considered
by the House of Representatives should address that in a way that
actually cures the problem and doesn’t create more problems.
Thank you.
Chairman SPECTER. Thank you very much, Ms. Morgan.
[The prepared statement of Ms. Morgan appears as a submission for
the record.]
Chairman SPECTER. Our next witness is Mr. Mark Peterson, who has
had 20 years of experience in asbestos litigation and mass tort
litigation; special advisor to the courts on the Manville Trust Fund
and advisor to four district and bankruptcy courts. A Harvard Law
School graduate, and a doctorate in social psychology from UCLA.
Thank you for coming in today, Mr. Peterson. We look forward to
your testimony.
STATEMENT OF MARK A. PETERSON, PRESIDENT, LEGAL
ANALYSIS SYSTEMS, INC., THOUSAND OAKS, CALIFORNIA
Mr. PETERSON. Thank you, Chairman Specter, and thank you also to
Senator Leahy for the work that you have done here. I have to say,
although obviously I have issues with this bill, I think you have
made amazing accomplishments in constructing a matrix and method
for dealing with liabilities. I am impressed with the progress and
the accomplishments, and hopefully that will continue to be something
that can be built upon.
I would also like to thank Senator Feinstein for her interest. She
is my Senator. She is the Senator for Dr. Rabinovitz, too.
I want to clear up one thing you said, Chairman Specter. I am not
associated with ATLA. I am not here as an ATLA member. My work in this
case is--I am not an ATLA member, although I once was because the RAND
Corporation’s Institute for Civil Justice paid my dues because--
Chairman SPECTER. Did ATLA request your presence as a witness?
Mr. PETERSON. No. Not to my knowledge. It was some Senators that
requested my presence here. I have talked with persons from ATLA, but
I have also spent time talking with the staffs of Senator Cornyn,
previously Senator Nickles. My attempt is to speak to anyone that wants
to speak to me.
I would also like to take a bit a discursion and deal with an issue
that Judge Becker mentioned about claims and forecasts and claims coming
in. It is true that the Manville Trust claims experience in the last
year have been reduced substantially because of the new trust
distribution procedures and also, frankly, because of the specter of
this bill--no pun intended. They have received roughly 120,000 claims,
60,000 claims average per year. The most recent forecast of claims by
Manville is that they will receive in 2005 and forward roughly 600,000
claims to 1,600,000 claims. When you add together the claims that they
have already dealt with but which will be put in the billion, that
brings it up to between 1 million and 2 million, which brackets the
numbers that I have used and other people have used. And indeed, the
ASG and proponents of the bill have repeatedly and consistently assumed
that there were 300,000 claims pending prior to 2003, even when you
have taken into account the collateral source rule. Since then, there
have been a number of claims filed in 2003 and 2004.
I would also note that although the Manville Trust recent filings
are down, the number of mesothelioma claims are up greatly. And within
the current claims distribution procedures with which Manville is
dealing, fully 6.2 percent of the claims are for mesothelioma--compared
to about 2 percent historically and 2 percent that I think we have all
assumed here.
So what is happening is that there may be some reduction in the
number--it is different from what the judge said--some reduction in the
number of less serious claims, but there is an increase in the number
of the more serious claims. And there is no evidence that there has
been much payment of collateral source in the last 2 years because
asbestos defendants who are in litigation now have no incentive to
rush to settlement because they are not going to get any credit for
the bill. They are paying money that they don’t have to pay. And the
other consideration is that most of the major asbestos defendants
are now in bankruptcy and not paying anything.
Let me turn to the main point i wanted to make. This bill is a bill
that transfers asbestos liabilities to the Federal Government. That
is what it primarily does. There are going to be a huge number of
claims filed initially, as I have just described, against the fund
and little money initially, or frankly forever in comparison with the
liability, from asbestos defendants in insurance companies. Virtually
all of the money that will be paid to claimants from this fund is
going to be money from the Federal Government. The relatively small
amount of money that will be paid before the fund sunsets, that is
paid by defendants and insurance companies, mostly goes to pay interest.
When you add the debt load, the interest charges, and the indemnity
payments, this fund will fail quickly, probably within 5 years but,
even using optimistic assumptions put out by proponents of the
legislation, within 10 years. It won’t be able to borrow any further
because its liabilities exceed all of the income it will ever have.
The fund will pay only a fraction of the claims of asbestos victims.
It will pay less than half of the asbestos victims. Instead of being
a $140 billion payment to asbestos claimants, only $70 billion will
go to asbestos claimants. This is not a $140 billion payment fund for
victims, this is a $70 billion--it is a lot of money, but it is a lot
different. The remainder will be paid in interest.
The one final thing I want to say is that when this bill sunsets,
there will be obligations owed by this fund to the Federal Government
of probably $60-70 billion, with little prospect that it will ever be
repaid because the companies that will have to pay that over 30 years
will now be subject to a double burden of asbestos litigation plus
payment under the bills, and the companies that are depended upon to
be major providers of funding for the bill, those that are now in
bankruptcy will certainly go back to bankruptcy.
Chairman SPECTER. Mr. Peterson, your time has expired. Could you
sum up, please?
Mr. PETERSON. The only point I have to say is I admire greatly the
liability side of what you have done. If this committee and Congress
want to set up a bill that is funded by the Federal Government, it is
getting that, but it should recognize that it is doing that. And
frankly, if that is the intention, there should be a more careful
scrutiny and determination of how defendants and insurance companies
would pay off that debt, because they are stiffing the taxpayers.
Chairman SPECTER. Thank you very much, Mr. Peterson.
[The prepared statement of Mr. Peterson appears as a submission
for the record.]
Chairman SPECTER. We have about 8 minutes left on the vote, so we
will recess briefly to vote. And I shall return immediately, and that
would be my request of the other members.
We stand in recess for a few minutes.
[Recess from 11:50 a.m. to 12:04 p.m.]
Chairman SPECTER. Our next witness is Dr. Francine Rabinovitz,
executive vice president of Hamilton, Rabinovitz & Alschuler. Extensive
experience as an expert witness in administrative and financial
management, a court-appointed expert in many asbestos-caused
bankruptcies. A B.A. degree from Cornell and a Ph.D. from MIT.
Dr. Rabinovitz, we appreciate your being here today, and the floor
is yours.
STATEMENT OF FRANCINE RABINOVITZ, HAMILTON,
RABINOVITZ & ALSCHULER, CARMEL, CALIFORNIA
Ms. RABINOVITZ. Thank you, Senator Specter.
I am here today to speak about the reasonableness of the claims
projections that support the FAIR Act. I want to address three issues:
the starting point for the claims projections, the adjustments of those
claims projections to conform with the disease categories under the
FAIR Act, and perhaps most important, lessons learned from the claims
filing experience over the last 2 years.
At the outset, it must be said that there is uncertainty in
forecasting asbestos claims under the fund. It stems from two factors
primarily, but not exclusively. First, there is not national database
or registry for asbestos claims, and second, there is no past experience
with the National Compensation Fund employing the medical criteria,
diagnostic standards, and exposure requirements of S. 852. But that
being said, the estimates of future asbestos-related claims expected
to be made under the FAIR Act have been calculated by well-accepted
methods, are reasonable, in my view, and are likely to be conservative
in light of recent experience and changes in the FAIR Act.
First, the starting point. The starting point was the substantial
data and forecasts available from the Manville Personal Injury Trust.
There is general consensus reflected in court rulings that the Manville
Trust will eventually see virtually all of the asbestos personal injury
claims in the current system. Because claims filed against Manville
represent virtually all asbestos claimants, it is the best and most
comprehensive for a future claims estimate.
Second, as to the adjustments of the base figure for the FAIR Act
criteria, because the Manville Trust estimate was not conducted with
the disease levels and medical criteria of S. 852 in mind--in-deed, it
was created through a process completely independent of the legislation
--the question is how did we adjust the forecast to reflect the FAIR
Act’s disease categories.
Two studies allow greater precision in the distribution of the
claims. The first, with respect to non-malignant claims, is a study
conducted by the AFL-CIO of sheet metal workers, which provides
information on how the non-cancer claims will be distributed in
categories I through V of the bill. The approach is conservative, and
by ‘‘conservative’’ I here mean that it produces a higher estimate
than I actually expect experience will produce. Because the sheet
metal workers were more heavily exposed to asbestos than the population
expected to make claims under the act and will be prone to more and more
serious diseases.
As to lung cancer cases, data from a study that I myself conducted
for the Manville Trust was used to distribute claims in the lung cancer
categories. Specifically, that study projects smoking rates and the
degree of underlying asbestos-related disease for lung cancer claimants.
I should add that eliminating the S. 2290 Category VII claims from a
forecasting perspective--that is, the claims for lung cancer without
evidence for underlying asbestos-related disease--removes a substantial
source of uncertainty for the estimate.
Those studies, thing with the existing Manville Trust claims data,
allow us to project the number of claimants who will qualify in each
of the categories under S. 852.
Lessons from the past 2 years’ experience have to be brought to
bear. To me, they suggest that the estimate based on Manville data
will prove to be very conservative. The overall forecasts for those
years are holding up very well against experience, and the claims are
qualifying at Manville now in lower categories than previously.
Comparing the Manville Trust overall projections for 2003 and 2004
against its actual experience indicates that the aggregate estimate
has been accurate. In addition, the experience of the trust and others
in 2004 suggests that overall claim rates may very well be dropping.
As to the distribution of those claims, Manville’s recent experience
demonstrates the effect of more stringent medical and exposure criteria.
In 2002, in the face of escalating claims, particularly by claimants
with non-malignant conditions, the trust revised its eligibility
requirements to strengthen the medical and exposure requirements. The
trust recently completed an analysis of the change in claims filings
under the new requirements, and the results are quite dramatic. Only
one-third of the claims could meet the new requirements of showing
substantial occupational exposure, and there was a significant failure
to meet the more stringent medical criteria under the new eligibility
requirements.
These two factors operate independently and reduce the number of
claimants qualifying in the more severe categories. As an example,
under the old requirements, half of the qualified claimants were at
the lowest categories. Under the new stricter standards, 84 percent of
claimants fall into the lowest categories. In addition, the new
requirements would have reduced the claims compensation outflow from
Manville by 40 percent. These current results provide evidence that
the trust-weighted mean estimate is likely to be conservative.
Chairman SPECTER. Dr. Rabinovitz, you are over time. Could you
summarize, please.
Ms. RABINOVITZ. Yes. I think these current estimates and the basis
for the prior estimates should provide substantial comfort for those
assessing the likely future cost of the FAIR Act.
Thank you.
Chairman SPECTER. Thank you very much, Dr. Rabinovitz.
Our next witness is Mr. Alan Reuther, legislative director of the
International Union, United Auto Workers. Held that position since 1991.
He is a graduate of the University of Michigan Law School. In 1982, he
was transferred to the Washington office here to handle all legislative
matters.
Thank you for coming in, Mr. Reuther. I know you were before the
Health, Education, Labor, and Pension Committee today. It is a busy
day for you testifying.
STATEMENT OF ALAN REUTHER, LEGISLATIVE DIRECTOR,
INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE
& AGRICULTURAL IMPLEMENT WORKERS OF AMERICA (UAW)
Mr. REUTHER. Thank you, Mr. Chairman. The UAW appreciates the
opportunity to testify before this committee on S. 852, the asbestos
compensation legislation introduced by yourself and Ranking Member
Leahy. The UAW supports this legislation and urges the committee to
give it prompt, favorable consideration.
This bill provides $140 billion in private money for compensating
the victims of asbestos-related diseases. Many of those victims would
otherwise get little or no compensation. The bill establishes a system
which promises to provide the money to victims more quickly, more
consistently, and less wastefully than the current tort system. The
bill spreads the cost among defendant corporations and insurance
companies more equitably.
There is widespread agreement that the current tort system does
not fairly compensate asbestos victims. Most unfair are the situations
where victims receive little or no compensation because the defendant
company is bankrupt, the source of the asbestos can’t be identified,
the workers compensation system prevents them from suing their employer,
or where their employer was the government and is immune from any
liability. In addition, there are often years of delay before victims
receive any compensation. Awards to victims are highly unpredictable,
with similarly afflicted individuals receiving vastly different amounts.
Transaction costs, including at-torney’s fees, are extremely high and
reduce the amounts actually received by victims.
The UAW represents over a million active and retired employees in
the automobile and other industries. Some of our members were exposed
to asbestos in plants that produced brakes, in foundries, and among
maintenance and service trades working with process insulation. Those
members who have or will develop asbestos-re-lated diseases as a result
of this exposure may receive some inadequate compensation under State
worker compensation statutes, but are barred by those statutes from
suing their employer.
As a result of the massive lawsuits filed against companies that
produced or used products containing asbestos, a number of auto parts
companies have been forced into bankruptcy. In addition, rising claims
against major auto manufacturers threaten to expose them to significant
liabilities in the future, posing a major long-term threat to their
economic health and the jobs and benefits of hundreds of thousands of
active and retired UAW members.
The Specter-Leahy bill addressed these serious problems by replacing
the current tort system with the National Asbestos Trust Fund to
compensate the victims of asbestos-related diseases. This approach
would ensure that the victims would receive the full amount of their
award regardless of whether a particular company has filed for
bankruptcy. By creating a no-fault administrative system for processing
claims, this approach would provide victims with speedier compensation
while reducing the substantial attor-ney’s fees and other transaction
costs in the current adversarial litigation system. By compensating
victims pursuant to a fixed schedule of payments for specified disease
levels, this approach would also provide predictable awards to
individuals with similar illnesses and ensure that the most compensation
goes to the most seriously ill victims.
The UAW is especially pleased that the Specter-Leahy bill does not
permit any subrogation against worker compensation or health care
payments received by asbestos victims. We believe this is essential
to ensuring that victims receive adequate compensation. The UAW is also
pleased that the Specter-Leahy bill establishes a transparent mechanism
for defendant companies and insurers to contribute to the National
Asbestos Compensation Fund, thereby spreading the cost of compensating
victims across a broad section of the business and insurance community.
Because the Specter-Leahy bill replaces the current adversarial
litigation system with a no-fault administrative system for processing
claims, the difficulties and costs involved in bringing asbestos claims
will be greatly reduced. Thus, the UAW believes the attorney fees
provided under the legislation are more than adequate to attract
competent representation for asbestos victims.
The UAW believes the Specter-Leahy bill can be improved in two areas.
First, while the legislation provides that CT scans showing asbestosis
may be considered as evidence qualifying lung cancer victims for
compensation, it does not expressly allow CT scans showing pleural
disease to be considered. We believe this distinction is contrary to
the current state of medical science, and therefore urge the committee
to make CT scans admissible as evidence for all categories of claims.
Second, the criteria for triggering the statute of limitations for
bringing claims should be clarified to make sure they are workable,
and so individuals with non-malignant diseases that may get
progressively worse are not forced to rush to file their claims in
order to preserve their legal rights.
In conclusion, the UAW firmly believes that the asbestos compensation
system established under the Specter-Leahy bill would be vastly
preferable to the current tort system. We therefore urge the Judiciary
Committee to promptly approve this important legislation.
Thank you.
Chairman SPECTER. Thank you very much, Mr. Reuther.
[The prepared statement of Mr. Reuther appears as a submission for
the record.]
Chairman SPECTER. This is a good point to put into the record the
letter from the International Union of Operating Engineers dated April
20th in support of the legislation and a press release from the
Asbestos Workers dated April 25th in support of the legislation. They
go along with your testimony, Mr. Reuther, from UAW.
Ms. Morgan, I note in this morning’s Hill newspaper there is a
full-page ad for the Coalition for Asbestos Reform, and I note a
representation of representing a coalition of manufacture, construction,
energy, and insurance companies. And in your testimony, you commented
about the unavailable information on who is in what tier. Are you able
to provide to this committee a list of your members and what tier they
fall in?
Ms. MORGAN. We can provide a list of some of the members. Some of
the members are not wanting to be public, just because they are
concerned about being targeted as a defendant. But there are others of
us who obviously are willing to be more public.
Chairman SPECTER. So some of your people want to advertise but not
tell us who they are?
Ms. MORGAN. There are some members who are not willing to be public,
but we are representing them as well.
Chairman SPECTER. Some of them will tell?
Ms. MORGAN. Yes, absolutely. I am here today.
Chairman SPECTER. We would like to know that.
Ms. MORGAN. But as far as knowing what tiers we are in, we really
don’t know exactly where we will end up in terms of the sub-tiers until
we have more information.
Chairman SPECTER. Well, tell us the companies and perhaps we can
tell you the tier.
I note in your advertisement an assertion that ‘‘they will be
creating the potential for liability for the U.S. Treasury to pay
substantial sums in damages.’’ A little hard for me to understand that
when we have a figure of $140 billion--which wasn’t my idea; that is
a figure which was voluntarily suggested by the manufacturers and the
insurers. The AFL-CIO wanted more. And last fall, Senator Daschle, who
was leader of the Democrats, and Senator Frist, the majority leader,
got together and agreed to the $140 billion figure, which met the amount
which had been voluntarily agreed to. Now, if that proves to be
insufficient, the bill is explicit that claimants go back to court.
Once you take away the right to jury trial, which is a very major right
in our society, if the money isn’t there, Senator Feingold made the
point that it shouldn’t be the claimants who bear the burden if the
fund doesn’t hold up--something I agree with him totally--what is the
basis for your asserting that the Government will have a responsibility
here?
Ms. MORGAN. Well, I think there are some provisions about going back
to companies with a guaranty payment surcharge in the event there are
insufficient funds.
Chairman SPECTER. Going back to companies--well, that has nothing
to do with going to the Government.
Ms. MORGAN. Well, the next point is if they weren’t able to get
financing through the Federal Financing Bank that there would be an
effort to go back to companies. And our concern is, though, ultimately
this could fall on the taxpayers because there may not be enough money
generated from the businesses in order to cover this funding.
Chairman SPECTER. Well, that may be a concern, but there is no basis
for it.
Dr. Rabinovitz, your testimony about the amount of the fund, as I
understand it, is that before the Section 7s were eliminated, your
expert projections came in at a total cost to cover all the claims of
$125 billion. Is that correct?
Ms. RABINOVITZ. Yes, although the value side of that equation is
estimated by Goldman Sachs. But you are right that the claims provided
the values.
Chairman SPECTER. And if you took out the Section 7 claimants, it
would be down to $118 billion?
Ms. RABINOVITZ. Yes.
Chairman SPECTER. And if you added in the additional monies which
we have increased at the request of Senator Kennedy and others on some
of the tiers, it would go back to $120 billion?
Ms. RABINOVITZ. Yes, as I understand it.
Chairman SPECTER. Okay, well, we can all do the math. The cushion
of a $140 billion contribution, as compared with a projection of a
cost of $120 billion.
Professor Green, your critique of the bill was scathing. But when
you compare it to the present system, how would you evaluate it? Let
me give you a two-part question, because after my red light goes on I
meticulously observe it. The two-part question is, however bad this
bill is, isn’t it a whole lot better than what we have now? And the
second part of the question is, what is the answer if this isn’t the
best possible answer?
Mr. GREEN. Those are fair questions, Senator Specter. I appreciate
them. I think it is a myth that this is better than the system we have
now, for several reasons. First of all, Congress already established
a system which is working pretty well, not perfect, with § 524(g) of
the Bankruptcy Code.
Let me give you one example, Senator Specter. It is an example of
a company which is kicked around a lot by liberals in my home State
of Massachusetts, Halliburton. But they used Section 524(g) of the
Bankruptcy Code to stand up to their entire full set of asbestos
liabilities, past, present, and future. They negotiated with their
insurers, they negotiated with the asbestos victims, and they
negotiated with me as the representative of the future victims. And
we negotiated a deal which has been completed in less than a year to
pay all of those victims 100 percent using stock and insurance
proceeds. The stock of Halliburton was given to the future claimants
at $19 a share. We sold 59-1/2 million shares at $42.50 a share,
making $2.5 billion, creating new money by lifting the asbestos
uncertainty overhanging that company.
Today that company has fully met and set up a trust for all of
its victims into the future--no delays in payment, Senator Feinstein.
They get paid immediately. The insurers have paid their share, by
agreement. Halliburton has paid its share. And that stock today--I
checked--is trading at $44 a share.
That mechanism is available to lots of companies and would have
been utilized by many more companies, especially these big ones, if
they didn’t have the prospect for 2 years, 3 years of this legislation.
This has put the brakes on that.
Now, in the tort system, for a long time we have been processing
and paying in the tort system exigent cases, mesotheliomas, in one
year from start to finish in most jurisdictions across the country.
California and Massachusetts led the way in courts, advancing the
mesothelioma cases. Now, this bill, if some of the projections are
right, Senator, is going to require $50-70 billion of the $140 billion
to go to debt service, to banks. Is that any better than going to tort
lawyers, which is some of the criticisms? I don’t think we are fixing
the problem.
Chairman SPECTER. My time is up, but provide us documentation on
that point, would you please?
Mr. GREEN. I am sorry--
Chairman SPECTER. Provide us documentation on that expansive debt
service figure you just stated.
Mr. GREEN. It is in Dr. Peterson’s projections, Senator Specter.
Chairman SPECTER. Senator Kennedy?
Senator KENNEDY. Thank you very much, and I welcome you, Professor
Green. Just on this point, you have had extensive expertise in the
field. A number of courts look to you for assistance in highly complex
subjects, and we are fortunate to have your comments. But in your
testimony, to get back to this point, you state that by its fourth
year the fund would need to borrow $50 billion to meet its liabilities,
the fund’s liabilities will outstrip its revenues. Also, Mr. Peterson,
you had a similar kind of a comment. You are telling us the level of
borrowing required will actually be huge. Interest rates will consume
40 or 50 percent of the entire fund. The fund would only have between
70 and 85 left to pay the claims. That is not nearly enough to
compensate the victims.
How do you get there? Maybe just each one of you respond.
Mr. GREEN. Well, very quickly, Senator, it is not enough to just
look at the absolute amounts of funding. You have to look at the cash
flow. You have to look at payments in and what will be available and
then payments out.
Even if the trust is fully funded, all these contributions that
have not been specifically identified to particular insurers or
manufacturers, even if they all came in, if you look at the backlog
of mesotheliomas alone at $1.1 million per and the 3,000 additional
a year that will continue to come, the cash flow is not adequate.
After a few years you have to start borrowing. And the borrowing curve
simply goes up. And then, as we all know, when we are caught personally
with debt that we are trying to pay off, the money is eaten up by the
debt service, and you get further and further into debt.
But it is even worse because the trust is not going to be fully
funded by these companies. The insurers are going to sue. The trusts
are going to sue. The companies are going to sue. It is going to take
time. Even using the liens, Senator Specter, it is going to take--we
know it is going to take time. And so there is going to be a delay
of--what? Six months? A year? Two years? Three years? The debt service
will mount.
Senator KENNEDY. Is there anything you want to add to that, Mr.
Peterson?
Mr. PETERSON. Two things I would say. What Professor Green described,
looking at cash flow analysis, is precisely what we have done, and
we have looked at five different scenarios with regard to claims
forecasts, one of which was the CBO forecast done last year, which we
have updated for present value.
The other thing I want to say is that fully 40 percent of the
liabilities are from mesothelioma, and so when you are looking at this
fund, the biggest chunk of money goes to the mesothelioma victims.
That is great. That is what this bill should do. But it means these
are--when we hear about being expedited claims and pushed forward and
wanting rapid payment, they are going to put heavy pressure initially
on there that need to be funded.
Senator KENNEDY. Professor Green, in your written testimony, you
make the point in the entire history of asbestos, only a handful of
industrial firms and even fewer insurers have voluntarily faced up to
the cost of resolving the full asbestos liabilities. The rest of the
firms and insurers being counted on under this bill to pay their
allocated contributions have by and large fought and resisted every
attempt to hold them accountable.
What makes anyone think that they will now accept their allocated
responsibilities and pay up their shares on time and without any fuss?
Mr. GREEN. Either just willful blindness or hopeless optimism. I
think this is a little bit of a ‘‘Wizard of Oz’’ operation here. And
I think we have to face the realities that the insurers have not
willingly stepped up to pay ever. The companies have resisted for
years and years and years. And we have already heard that the smaller
companies think that the large companies are getting a bail-out. They
are not going to do this willingly.
I know that the trusts are gearing up and have hired Ted Olson to
mount a constitutional challenge to the taking of their assets. So
there is going to be--
Senator KENNEDY. What is the practical effect of this? How long can
this go along? How long can this continued litigation go on?
Mr. GREEN. Well, you know that the American lawyer can continue
litigation as long as he is allowed to. There are provisions for the
administrator to make interim payment allocations on, say, insurers
and so forth, but those can be challenged as well. This can go on
for--it will go on for many years.
Senator KENNEDY. Just finally, Dr. Landrigan, particularly on the
lung cancer VII, could you just expand on this point that asbestos
exposure can be a contributing factor to a patient’s lung cancer even
if there is no evidence of the bilateral pleural thickening or
asbestosis? Can you elaborate on that? Is 15 weighted years of exposure
to asbestos a sufficient level of exposure to cause lung cancer?
Dr. LANDRIGAN. Yes, Senator, I would be glad to. The point here is
that asbestos--the scarring that asbestos causes in the human lung is
typically not symmetrical. Very often it begins on one side and only
subsequently, and not in every case, does it spread to the other side.
And so I am concerned that an insistence that runs through this bill
that evidence of asbestosis be bilateral is creating a very high
standard, a very high criterion that is going to serve as a barrier
to people that clearly have had asbestos disease, that clearly have
suffered lung injury, but by whatever fluke of the circulation of air
in their lungs has not produced damage on both sides.
Senator KENNEDY. My time is up. Thank you.
Chairman SPECTER. Thank you, Senator Kennedy.
Senator Cornyn?
Senator CORNYN. Thank you, Mr. Chairman.
Professor Green’s comments reminded me that I asked former Solicitor
General Ted Olson to write me a letter expressing his concerns with the
takings issue and other constitutional questions that he had with regard
to the asbestos trust funds, which would be swept into this larger
Federal asbestos trust fund, and I would like, Mr. Chairman, if there
is no objection, to make that a part of the record.
Chairman SPECTER. Without objection, it will be part of the record.
Senator CORNYN. Thank you very much.
And I know, Ms. Morgan, you mentioned other constitutional concerns
that you have, and as I understood it, it is essentially for those
companies who have potential asbestos liabilities but who believe they
have adequate insurance to cover it, they would be forced, is it your
contention, to basically give up that coverage and then pay a dollar
figure into this fund in order to meet their allocation? Is that what
your concern is?
Ms. MORGAN. That is correct. The smaller companies are relying on
their insurance assets today to pay their claims, and those insurance
assets under the FAIR Act would be taken away, and they would be
required to pay out of their own pocket for the trust fund payments.
Senator CORNYN. Do you have any concept of how many companies we
are talking about? I know a number of Senators have expressed concerns
about the fairness of the allocation system with regard to smaller
companies. There is a level below which you are exempted and do not
have to pay any money into the fund. But from your standpoint, how
clear is it what that cutoff is? And what kind of impact on those
companies that do have adequate insurance but, nevertheless, would
be forced to pay money under this fund, what kind of impact do you
believe that would have on those companies and their ability to keep
their doors open and employ people?
Ms. MORGAN. Well, I know about those within the coalition who fall
in that category who do have adequate insurance today in the tort
system and would not be able to make payments going forward without
their insurance assets. I know those that have come forward and are
part of the coalition.
We are concerned that there are a number of other companies who
rely on their insurance entirely to defend their claims and really have
no idea about the dire consequences of this Act. So we have not
identified everyone. We certainly know of those that are part of
the coalition. And there are a number of companies that are in this
position.
Senator CORNYN. Well, I know everyone on the Committee and in the
Congress is doing the best they can to solve a very difficult and
challenging problem. But I think that is certainly something we need
more information on, and I would appreciate any additional information
you might have that would shed light on that.
With regard to the adequacy of the fund itself, I know, Mr. Peterson,
you and Dr. Rabinovitz have a different view over the adequacy of the
fund and in terms of the composition of claims that will actually
likely be made against the fund. As I recall, Mr. Peterson, you do not
think $140 billion is anywhere near enough, and, Dr. Rabinovitz, you
think it is plenty.
Part of my problem is that we have to resolve that difference in
this bill and make the best decision we can as to who is right and who
is wrong. At the same time, we have to decide between the physicians
here, who is right here and who is wrong about matters of science and
medicine. And we are not particularly well equipped to resolve those
differences although I assure you we will continue to do the best we
can.
But if you would, Mr. Peterson, could you just speak briefly to
the composition again of the fund? As I recall, you said that we may
see a rate of mesothelioma claims that vastly exceeds the prediction
that Dr. Rabinovitz has given, thus absorbing a lot of this money very
quickly from those very serious claims?
Mr. PETERSON. Yes, thank you. I think that the differences between
the forecasts--I have not seen Dr. Rabinovitz’s forecast. I have seen
earlier ones by ASG consultants and I have seen some by CBO that have
used those. I assume that the numbers of mesothelioma claims would be
fairly similar and they don’t differ much from my forecast. That is
not the area of difference.
The standard forecasting--I mean, this is something we do routinely--
the standard forecasting for mesothelioma is that they are going to
come in at a rate of 2, 2.5 percent of the claims. Manville, even with
the reduced volume of claims they are getting--well, probably because
of that, they are coming in at 6 percent.
So when you multiply that out, the product of multiplying how many
claims they say are going to be coming in, 1 million, 2 million,
suggests that there are going to be something like 60,000 mesothelioma
claims, if you just do the math on that. ASG’s earlier forecasts were
somewhere on the order of 40 to 45,000 mesotheliomas. So there is a
potential there that there may be a third again as much. That is
Manville’s experience.
Generally, the perception of what is going on is that the plaintiffs
lawyers are concentrating on trying to get mesothelioma claims
represented, and indeed they are advertising extensively on the Internet.
Can I comment also on the 140? I think there are two reasons that
are there are differences there. One is the underlying forecasts that
we have distributed. The other is that I don’t believe that Dr.
Rabinovitz takes into account interest costs, and let me give you an
example.
Last year, CBO estimated for the bill current at the time that there
would be $139 billion of indemnity costs and $1 billion of
administrative costs. I have taken the new values of the current bill,
including the elimination of Category VIIs, just CBO’s numbers which
derive from ASG’s earlier work, and now that 139 becomes 147. So they
are already over the 140 just on the liability. You add another $1
billion for administrative costs and that gets in there.
But when you then add in the cost of interest, because the interest
is inevitable--the claims are coming in at a big bulk at the beginning;
the money is not there and they are going to have to borrow. When you
add that in, they get to over $190 billion, with interest.
Dr. Rabinovitz--I mean, I don’t know. If she believes there isn’t
going to be interest, then her number would stick. But if there are
going to be interest charges--it is hard to imagine there wouldn’t be
some--it would add to it.
Senator CORNYN. I know my time is up, Mr. Chairman.
Chairman SPECTER. Thank you, Senator Cornyn.
Senator Leahy.
Senator KENNEDY. Can she answer the question?
Ms. RABINOVITZ. Just if I may--
Chairman SPECTER. Dr. Rabinovitz, if you would like to comment on
that last question, go ahead.
Ms. RABINOVITZ. Thank you. With respect to the mesothelioma
forecasts, I want to straighten out one misconception. The Manville
Trust had 100,000 claims in 2003, and last year, in 2004, it had
14,000. From the first quarter of 2005, it suggests they will only
have 20,000 this year.
Well, of course, the percentage of mesothelioma claimants has given
up. It has gone up because the number of non-malignancy claims has gone
down radically. So more of their resources are going to be devoted to
the mesothelioma claimants.
If there is anything we have more modest uncertainty about, it is
the projection of the mesothelioma claims. Those are projected according
to work originally done at Mount Sinai. They are tracked, in actuality,
from a series, the survey of epidemiology and end results, which shows
what the actual experience of a sample of weighted sample of hospitals
is experiencing with respect to mesothelioma claims.
Those projections have held up extremely well, both based on
epidemiology and also based on real-world experience from hospitals and
a government series. So there is uncertainty about the projections, but
I would say that with respect to the mesothelioma claims, relatively
speaking, there is less uncertainty than about almost any other category
of claims. Of course, the percentage has gone up, and that is good
because the number of non-malignancy claims has gone down.
Chairman SPECTER. Thank you, Dr. Rabinovitz.
Senator CORNYN. Mr. Chairman, could I ask, perhaps, quickly that
Dr. Rabinovitz provide us a table of projections over future years
and across each claims level? That would be very helpful in resolving
some of these questions.
Chairman SPECTER. I think that is a good idea, Senator Cornyn.
Senator CORNYN. Thank you very much.
Chairman SPECTER. Can you do that, Dr. Rabinovitz?
Ms. RABINOVITZ. Yes.
Chairman SPECTER. Thank you very much.
Senator Leahy.
Senator LEAHY. Thank you, Mr. Chairman.
The hearing has been fascinating. In case you didn’t know it, you
are on an internal channel here in the Senate, and I was able to follow
a lot of your testimony even though I was out of the room for a short
while. C-SPAN is carrying it, too.
Mr. Reuther, I want to thank you, and I want to thank you also for
what the leadership of the UAW did. They were the first labor union to
endorse our bipartisan legislation. I agree with the statement in your
testimony where you said, quote, ‘‘It is easy for critics who want to
maintain the current tort system to point out shortcomings in the
legislation.’’ I think we both know that if you craft legislation with
some powerful interests involved, it is never easy, but the Supreme
Court has called on the Congress many times to do just that. I believe--
and obviously you do--that it is time to create a fair and more
efficient compensation system for the thousands of people suffering
from asbestos-related diseases.
Your testimony alludes to the difficulties that many of your own
UAW members face in the current tort system. Can you tell us about
some of those problems and why you feel our legislation is preferable
to the current tort system?
Mr. REUTHER. Yes, Senator. Because of the worker’s comp statutes,
most of our members are barred from suing their employers. So they
have no recourse whatsoever there and they are limited to the inadequate
payments under State worker compensation statutes.
Also, of course, there is the difficulty that they, along with
others, face that defendant companies often go bankrupt. So even if
a lawsuit is filed against some other company that produced the product,
there may be no recourse whatever. Your bill that you and Senator
Specter have introduced would solve both of those problems.
Senator LEAHY. I understand from your testimony that the protection
against subrogation of victim awards is very important to, I guess,
the nearly million members of the UAW. Is that correct?
Mr. REUTHER. Yes. We believe that that is essential in order to
assure that the overall amount of compensation received by victims is
fair and adequate.
Senator LEAHY. Thank you.
Mr. Gober, I am always pleased when I see the Military Order of
the Purple Heart come up here. The members have already proved their
sacrifices. They have been awarded the Purple Heart. They have proved
their service and sacrifices to our Nation.
Could you tell me about the special problems--and I understand from
the material we have received from you the special problems faced by
the men and women of our Nation’s armed forces in the current tort
system if they are trying to seek redress for asbestos-related injuries
that they received while they were in the military.
Mr. GOBER. Yes, sir. The reason we got involved in this is people
were not looking at the veterans, and if you stop and think about it,
all of us served in--particularly people my age served in barracks
where you had asbestos around the pipes and when they got ready to
remodel, they just came in and knocked it off. They didn’t do an
abatement or anything else. So we got involved.
It is interesting because the Wall Street Journal says that 26
percent of all meso cases are veterans, 16 percent of all other lung
cancer cases are veterans, and 13 percent of all disabling lung
diseases are veterans. So we think this is working. I personally
know of cases--one, in particular, where a veteran died on Veteran’s
Day in 2001. The case has not come to court. They haven’t even taken
depositions, and he was diagnosed with mesothelioma.
Senator LEAHY. With this bipartisan trust fund legislation, do you
think we can finally provide our Nation’s veterans with the compensation
they deserve?
Mr. GOBER. Yes, sir. That is why there are 19 veterans organizations
that have signed on. I gave Senator Specter’s staff member a copy of
the letter listing all of the veterans groups that have signed on.
The current system is just not working.
Now, is this the best bill in the world? I am not a lawyer, so I
don’t know that. All I know is that right now it is not working.
Veterans are dying. The World War II guys that were aboard those ships
are dying. Their families are not being compensated, and when they
are, the lawyers are taking 40 percent of it, plus expenses. That
isn’t fair. It is not working, it is broke. It needs to be fixed.
With all due respect to the legal minds in the house, it is just not
working.
Senator LEAHY. Thank you, Mr. Gober, and thank you for your service
to our country.
Chairman SPECTER. Thank you, Senator Leahy.
Senator Sessions.
Senator SESSIONS. Ms. Morgan, you represent a group, but what I am
curious about--I will be frank with you. Are we dealing with a serious
number of individual companies and entities that are openly opposed
to this bill, or are we dealing with some people that are leveraging
at the last minute to try to get the thing a little fairer for problems
that they see in the bill?
Would you be prepared to tell us who objects, who would like to see
this bill fail? And do some in your coalition favor some sort of reform,
but would just like to see it fixed? Who do you represent and how would
you characterize that opposition?
Ms. MORGAN. Well, I think first and foremost, as I said in my
statement earlier, we are passionately interested in reforming the
system. There is no question about that, and we want the focus to be
on making sure that funds and resources are directed to those who are
truly injured. That is clearly our focus.
It is a wide variety of folks who range from business, as I said,
and also to a very significant number of insurance companies. I think
right now our members total somewhere between 30 or 40 different
companies that have come forward.
Senator SESSIONS. Are they willing to put their names out and say
they oppose this bill?
Ms. MORGAN. Well, we have, we actually have. A number of folks have
written letters to this Committee. Exxon is on the list. Du-Pont and
Shell are some of the bigger companies. Some of the smaller companies
are like Oglebay Norton, Hopeman Brothers, Foster Wheeler, Iuna Nosroc.
Senator SESSIONS. The figure earlier was 8,000 companies. How many
do you have on your list that may be paying into this?
Ms. MORGAN. Well, everyone in the coalition would be paying into
this. Everyone is an asbestos defendant.
Senator SESSIONS. Would you agree with that number, about 8,000,
total?
Ms. MORGAN. I have heard that. I don’t know that for a fact, but
I do know that there are a lot of defendants who are being represented
by insurance companies in their asbestos litigation and really probably
are not aware of the impact of this bill. They have just been able to
have all of their claims covered by insurance.
Senator SESSIONS. Well, I have heard that, and this is a serious
question that we have got people out here that unless they have been
paying asbestos claims, or their insurance company has, they are not
going to be covered and have to pay into this fund. Is that correct?
Ms. MORGAN. No. As I understand it, any asbestos defendant, whether
their claims have been paid by insurance or whether their claims have
been paid out of their own pocket, would be subject to this fund.
Senator SESSIONS. But if you haven’t been paying any claims, you
are not going to be dragged into this and have to pay.
Ms. MORGAN. No, I am not referring to those defendants. Those are
some lucky defendants.
Senator SESSIONS. I am serious about this question. We have been
moving this bill for a number of years. The Chairman has had hearings
and hearings and hearings. At the last minute, we have some people
representing certain groups that object. I would like to see what
companies are objecting and precisely what they object to. I think
it is a bit late for some of the groups that have come in here to
start complaining, frankly.
Ms. MORGAN. Well, to your point about being late, we have actually
been very vocal for a long time. In 2003--
Senator SESSIONS. Well, I accept that. Some have not. Who, and what
are their claims, what are their objections? Can you give us objections
that are fixable or is it to the whole bill that you think is hopeless?
Ms. MORGAN. Well, our concern is as long as the premise is that
insurance assets will be taken away, and as long as the premise is that
there has to be a $90 billion funding by industry, mathematically we
can’t get there based on the data we have today.
Now, once we know more about the exact source of funds for that $90
billion, which is not certain right now--that is still a mystery, what
companies, what their shares are, and most importantly whether they
have the ability to pay. We don’t have that information yet. When we
do, then we can talk meaningfully about is there a way to fix this.
Senator SESSIONS. What is it that you lack to allow a company that
knows the formulas and their own situation and how much they have had
to pay so far--why can’t they figure out pretty close what their
liability would be?
Ms. MORGAN. Well, we can. We can estimate, we can guess.
Senator SESSIONS. Okay.
Ms. MORGAN. And based on that, we know what our personal, individual
situations are, and there are a number of us, as I mentioned before,
who would simply not be able to make the payments without our insurance
assets.
Senator SESSIONS. Well, I don’t know how to solve that problem,
except I think we need people to step forward to show what they are
paying and why they think it is too much, why they think it is unfair,
put their names out there, and let’s see if we can fix it, Mr. Chairman.
If they are not willing to do that, they don’t have as much credibility
with me as they otherwise would.
Chairman SPECTER. We have got quite a few good cross-examiners,
former prosecutors, and Senator Sessions comes at the top of the list
today.
Senator Feinstein.
Senator FEINSTEIN. Thank you very much, Mr. Chairman.
Just continuing this line of thinking, Ms. Morgan, I read the ad
today in the Washington Times and I was very much struck by it. Now,
apparently, there are a number of anonymous companies out there that
are prepared to say they won’t be able to make the payments.
I would like to ask each one of you to begin reading the bill from
page 135 onward, and let me just summarize a few things about what the
bill says. The first is that there is a small business exemption. As
I understand it, no company with 500 or less employees would have to
pay into this fund, period.
Secondly, there is a $300 million--and the wording of the bill is
‘‘the aggregate total of financial hardships adjustment under paragraph
2 and inequity adjustments under paragraph 3 in effect in any given
year shall not exceed $300 million, except to the extent additional
monies are available for such adjustments.’’ So there is ample
provision, it seems to me, that the administrator has the power to
make certain adjustments as things go on.
Now, I would like to make the offer that any company that is unhappy
with this come in and see me specifically with the specifics of your
unhappiness. But, frankly, it doesn’t change my mind to read an ad that
is filled with generalities that don’t have a backup in terms of the
wording of the bill. So I would just like to make that statement.
If I might, I wanted to ask a question. Mr. Berrington isn’t here,
but--
Mr. BERRINGTON. Senator, that is not so.
Senator FEINSTEIN. Well, I wanted to ask you on the exigents-- and
I guess maybe somebody on the panel can answer this. In California law,
and I think to some extent in Massachusetts law, exigents can have their
cases heard in court within 120 days, and we have expedited
administrative procedures. Even with those, I don’t know how you can
ask Congress to tell terminal victims that they should be put in a
worse position than they are now and have no place to have their claims
resolved while the Department of Labor performs the necessary tasks to
get the claims facility and the trust up and running.
That was my understanding of what your written comments say, and
this is the most important part of the bill for me to get the sickest
people paid fairly the quickest on a no-fault trust medical judgment.
I don’t know how we could do it any quicker.
Mr. BERRINGTON. May I comment?
Senator FEINSTEIN. If you would, and if anybody else would like to
comment.
Chairman SPECTER. Step to a microphone, Mr. Berrington.
Mr. BERRINGTON. Thank you very much and I appreciate the opportunity
to comment on it. Our goals are absolutely the same. The sickest people
need to be compensated the fastest and the fairest. We spent weeks
putting together the administrative structure in the bill working with
friends from all the stakeholder groups to make sure that the
administrative structure in the Labor Department would do that.
I think Judge Becker said earlier, and I would agree with it, that
the Labor Department can almost certainly be up and running, prepared
to receive claims and to pay claims within just a couple of months.
And I think that those are the easiest cases to decide. Those aren’t
the toughest cases and they should move through very quickly.
I think also I heard earlier that in one of the States--I am not
an expert on the State laws that you have referenced--that you can
move the mesothelioma cases through in about a year. Well, I don’t
think that is acceptable in the court system, and the trust fund
would have these cases move through much, much more quickly.
I was struck in the offer of judgment provision, which I think was
absolutely done in good faith with the effort to move this forward,
that it is a 200-day process in the offer of judgment language dealing
with these exigent claims. Well, the Labor Department is going to be
resolving these cases way before 200 days are up, and I think it
doesn’t work, therefore, to keep the litigation system going. I think
it will work much better for the claimants to have the Labor Department
move quickly and smartly ahead consistent with the processes that we
have put in.
Senator FEINSTEIN. My time is up, but let me just say if you don’t--
Chairman SPECTER. Go ahead, Senator Feinstein.
Senator FEINSTEIN. --if you don’t have this weight over the
companies’ heads, then I think there will be a problem. But I think
the fact that these people can return to the courts immediately, as
quick as possible, if they don’t have satisfaction or if they want
to settle and a settlement isn’t granted--there is a specific process
spelled out here.
Mr. BERRINGTON. I am sorry. Should I respond?
Senator FEINSTEIN. Yes, please, please.
Chairman SPECTER. Go ahead.
Mr. BERRINGTON. The way the bill is set up is that if there is not
operational certification within nine months, which means not that
claims aren’t being paid, but that certification isn’t given, people
can go back to court. The offer of judgment provision continues
litigation. It continues the litigation with regard to the individual
claimants. It also continues litigation among potential defendants
because the process that is laid out has all the defendants, then,
who may be involved with one particular claimant then litigating among
themselves as to their shares.
Then, finally, the offer of judgment process that the bill has gets
kicked off by an individual filing with the defendants exactly the same
information that the plaintiff would file with the Labor Department.
Well, filing it at one place, with all the quick procedures in the
Labor Department, is going to work a lot better.
I should also add, of course, that these are additional monies
outside the trust fund. There is some contribution level, I understand,
but these are funds that add to the $46 billion. And I think that
clearly the fastest way will be through the Labor Department process.
I had some experience with this many years ago.
Senator FEINSTEIN. You are saying don’t allow a settlement? Is that
what you are saying?
Mr. BERRINGTON. I am saying once the--
Senator FEINSTEIN. Are you saying don’t allow--do you favor the
ability to settle for a lump sum within 30 days?
Mr. BERRINGTON. I think the bill has a general provision now with
regard to settlements that occur prior to the enactment date and that
are finalized within 30 days. So I think that is already taken care of
in the bill, Senator.
Chairman SPECTER. Thank you, Senator Feinstein.
Senator COBURN.
Senator COBURN. Thank you, Mr. Chairman. I would note for the record
that the CBO numbers on asbestosis were about a third less than Mr.
Peterson’s estimate, and I think that needs to be in the record.
I also would note that I am not a trial attorney and I am not good
at cross-examination, but I can take a heck of a history from a patient
and I want to do that. I also will note that after we had our hearing in
January, I asked CRS to give me every study done in the world in
relationship to cancers and asbestos outside of the lung. And I spent
the two-week break we had reading 93 scientific articles on that and I
want to say I am flabbergasted that if anybody would actually do the
research and would ever think that there is a connection between any
other area of the body and asbestosis, based on what the scientific
literature is today, I can’t see it and I can’t find it.
I have been accused of not being the best doctor, but I have never
been accused of being a dumb ringer who can’t read a scientific journal.
I want to ask Dr. Crapo to refute some of the things that we have heard
here today because I just flat don’t buy it based on the science I have
read.
But I want to make a point. When you talk about cancer of the larynx
and you look at the meta-analysis of all the studies it has been done
for associated with asbestos, not one of those studies took out the
confounding variables that we know cause cancer of the larynx. So those
studies have no value in terms of telling us whether or not cancer of
the larynx is caused by asbestos.
Now, it may be that we need to have a study, but the fact is that
we can’t rely on the science that is out there. And for us to have
testimony that says that there is a causation when there, in fact, is
not any causation is wrong. When we are going to start moving the
science to what we want rather than what science really reveals, which
happens a lot up here, we are in trouble as a Nation. End of talk.
Dr. Crapo, talk to us about markers, asbestos exposure and lung
cancer, because what I have heard here today is something that I just
don’t buy.
Dr. CRAPO. Well, your question is on markers of asbestos exposure
and lung cancer. There is clearly an association between asbestos
exposure and lung cancer. That has been well demonstrated in the
literature. But it has also been well demonstrated that it is not
just exposure; it is those that are very highly exposed that contain
the highest risk.
For example, if you look at the cohorts of asbestos workers in
which there is not significantly high enough exposures so that there
are no deaths due to asbestosis, so these are the kinds of workers
who have asbestos exposure, but nobody has died from it, there are at
least eight cohorts that have been studied that meet that criteria--no
deaths due to asbestosis. In those eight cohorts, there is no increased
risk of lung cancer. There is actually a zero increased risk, not even
a small one.
What that demonstrates is it is not just exposure that creates the
risk, but rather a substantial exposure that is on the very high end.
And most of the studies have suggested that the association is with
those who have X-ray evidence of fibrotic lung disease that carries
the increased risk, and there are a large number of studies that
demonstrate that. So it is erroneous to conclude that just exposure
alone dramatically increases a person’s risk for lung cancer,
according to the best scientific evidence as I read it.
Senator COBURN. Some of our testimony today states that there is
causation of exposure without evidence of any pleural signs of any
asbestosis, any restrictive lung disease and lung cancer. How would
you go about proving that? I mean, that is the testimony we have today.
Dr. CRAPO. I don’t think you can prove it.
Senator COBURN. I don’t either.
Dr. CRAPO. There is no way to prove that. In fact, the proof is
the other way. The proof is the medical evidence suggests that there
is not an association in the absence of some other marker of lung
disease, and that is only for lung cancer. It doesn’t apply to the
other cancers.
Senator COBURN. Right, and so you feel comfortable telling this
Committee that without signs of significant disease from asbestos
either through a marker or restrictive lung disease, or a combination
of both of those, that it is highly unlikely that you are going to
see--based on the science, you are going to see a primary lung cancer
that is associated with that?
Dr. CRAPO. I would agree with what you just said. Based on the
science, that would be my conclusion.
Senator COBURN. And, remember, we are not distinguishing the types
of lung cancer, are we?
Dr. CRAPO. No.
Senator COBURN. No, and there are multiple types of lung cancer.
So there is no association, and we have done nothing as far as the
amount of exposure in terms of particle load in this criteria, which
is probably something we should do.
Dr. CRAPO. That is true, although in this kind of a trust you
probably can’t assess particle load. But there is good evidence that
the higher the particle load in terms of asbestos particles, the
higher the risk of this type of disease occurring.
Senator COBURN. Thank you very much.
Chairman SPECTER. Dr. Landrigan, would you like to comment on what
Dr. Crapo just said?
Dr. LANDRIGAN. Thank you, sir. I would. One of the nice things about
medicine as compared to economic modeling is you can turn to data. In
our very large occupational medicine practice at Mount Sinai, we have
seen cases--I can’t tell you how many, but I can provide them for the
record--of lung cancer in asbestos workers with many years of
substantive exposure to asbestos, as defined in the bill here, who
have developed lung cancer who had no asbestosis visible on X-ray. I
edit the American Journal of Industrial Medicine. I have for more than
15 years been editor-in-chief, and we have published cases of lung
cancer in asbestos workers who had no radiographic evidence of
asbestosis.
Going beyond our own experience at Mount Sinai, I refer you to the
Scandinavian Journal of Work, Environment and Health, arguably one of
the three or four best journals internationally in the field of
occupational medicine. Back in 1997, they convened an international
expert meeting on asbestos to develop the so-called Helsinki Criteria
for asbestos, asbestosis and cancer, which were published in the
Scandinavian journal in 1997. It says right in here, a direct quote
from page 6 of this article, ‘‘Heavy exposure, in the absence of
radiological-diagnosed asbestosis, is sufficient to increase the risk
of lung cancer,’’ a direct quote.
Senator COBURN. Mr. Chairman, might I respond to that?
Chairman SPECTER. Go ahead, Senator Coburn.
Senator COBURN. It is very important because the statements that
were just made show no association with the disease. You are trying
to prove the negative. The observation that you have seen cases with
lung cancer who have asbestos exposure, but don’t have asbestos disease
does not prove that the asbestos caused the lung cancer. The background
rate on lung cancer, we all know, in this country is high, not counting
for those people who have never smoked and never had any exposure.
So the assumption that it is caused by asbestos, with lack of proof,
is a false assumption. That is the kind of study that we can’t use to
make scientific decisions. Now, I have not seen that. I would be happy
to read that and look at it, but if it is based on the same assumptions,
anecdotal evidence of disease in the absence of true exposure or true
markers of disease, you don’t know that that is not a background cancer
anyway.
Dr. LANDRIGAN. Well, if I may, Senator.
Chairman SPECTER. Go ahead, Dr. Landrigan.
Dr. LANDRIGAN. Senator, in this same article from the Scandinavian
journal that I just cited, a couple of lines above the line that I just
read you, it does say the following. Let me offer you a partial
concession, but by no means a complete yielding to your point of view.
It says, ‘‘Because of the high incidence of lung cancer in the general
population, it is not possible to prove in precise deterministic terms
that asbestos is the causative factor for an individual patient.’’ That
is where the rub is, but what epidemiologists do--and I think having
served for 15 years in the U.S. Public Health Service and directed
epidemiology at NIOSH for 6 of those years, I can tell you that what
we epidemiologists do is when we are looking at a population of people
that have a cancer such as laryngeal cancer, we take into account the
smoking history in those with the disease, the smoking history and
the alcohol history in those without the disease.
Though the exercise is no more perfect than the creation of
legislation, there are techniques for holding the smoking history
and the alcohol history steady and looking at the effect of asbestos.
And what we see is very much what Dr. Crapo said that people with a
heavier exposure are at the greatest risk of disease, and that is a
cause and effect relationship that shines through the inevitable murk
of those confounding exposures.
Chairman SPECTER. Thank you.
Senator COBURN. I just would make one comment. In the studies that
I have seen that CRS gave to me, those confounding variables were not
taken out of the studies to show causation in terms of pharyngeal and
laryngeal cancer. I would love to see your studies that have those
where that has been taken out as a confounding variable and considered
appropriately so that you could see causation.
Senator COBURN. Thank you, Mr. Chairman.
Chairman SPECTER. Thank you, Senator Coburn.
Senator Durbin.
Senator DURBIN. Thank you, Mr. Chairman.
Let me follow up on this, Dr. Landrigan, because even if you concede
Dr. Coburn’s point that there are some cases without scarring and there
is a question as to whether it is related to lung cancer, that is not
what this law says; that is not what the bill says.
I have read your testimony and it goes further. If you have evidence
of asbestos scarring and lung cancer, but only find the scarring in one
lung, then you are disqualified from coverage under this bill. And you
say, and I quote, ‘‘Requiring that the damage be bilateral, both lungs,
has no basis in biology or medicine.’’
So even conceding Dr. Coburn’s point, I don’t see how we came up
with a standard that says one lung is not enough; asbestos scarring
in one lung is not enough. Can you respond to that?
Dr. LANDRIGAN. I would agree with you, sir.
Senator DURBIN. Well, that troubles me because it means a cohort
of people with lung cancer and asbestos scarring in one lung will not
have an opportunity to recover under this bill.
Dr. LANDRIGAN. That is my read of the bill, yes, sir.
Senator DURBIN. That is the way I read it, too.
I also want to go to this question that has been raised repeatedly
about whether there will be enough money to pay the claims. I am going
to offer an amendment here, because it has been stated so often this
morning, which says if this program is not prepared to pay meso victims
in 60 to 90 days, they can return to court. We have heard that over and
over again--60 to 90 days. Judge Becker said that. It has been said by
Mr. Berrington from the insurance industry.
Well, let’s make that part of this law. Sixty to 90 days--it sounds
so simple. But then when I heard the explanations from Ms. Morgan,
representing some businesses--Mr. Olson sent us some testimony
representing others about the fact that this is going to be contested
in court. I mean, it is likely that we are going to have protracted
litigation. Professor Green mentioned that earlier.
We are going to have meso victims who are going to be told you cannot
even take a deposition in your lawsuit; you can’t take your own evidence
deposition if you are near death for nine months while we wait and see
if this is up and running. This 60 to 90 days, to me, seems like wishful
thinking. I think it is going to be, unfortunately, a protracted period
of litigation to determine the liability under this case.
Mr. Peterson, let me go to your point. Are you arguing that in order
for this fund to pay anything, it is going to have to borrow substantial
sums of money at the outset, in the beginning, and start paying interest
on that as the years go on? Is that correct?
Mr. PETERSON. Well, that is not precisely true. It will have
presumably some small billions of dollars to pay a few claims.
Senator DURBIN. If you assume the trust funds worth $4 billion
willingly pay over their money rather than contest it in court.
Mr. PETERSON. Well, they are probably worth $7 billion. That is the
current estimate of the values. But, yes, if they came in, but still
the liability in the first year could be as high as $60 billion in the
first year. Even using conservative estimates the CBO did, I think it
is $35 to $40 billion. So there is going to be a shortfall. I did an
analysis like this two years ago. If you don’t have borrowing, claims
will have to wait decades to get paid.
Senator DURBIN. So look at the situation here. You are telling people
currently with cases pending in court, sick people with mesothelioma,
suspend your court case, take no discovery, no depositions, don’t
schedule a trail and wait. And if they wait, under the best of
circumstances the question is whether or not this fund will have
enough money to ever pay them within their lifetime, or certainly
within the first several years, based on whether or not the money can
be borrowed, whether there is ultimately going to be enough money in
the fund.
Your estimate, Mr. Peterson, is this fund, borrowing this money as
anticipated, may only have a life of eight or nine years, maybe ten.
Mr. PETERSON. I don’t believe that. I think it is too optimistic.
That is using the optimistic assumptions that the proponents of the
legislation were using a year ago. I don’t know what they are using
now. They change from time to time as the law changes.
But using their best estimate, the most optimistic and rosy picture--
the rosy picture is you pay less than 25 percent of the claimants.
That is the rosy picture. But with that rosy picture, you could get
to ten years. If you pay 50 percent of the victims, you can get to
maybe 4 or 5 years.
Senator DURBIN. At which point the trust fund is exhausted.
Mr. PETERSON. Yes. That is with the borrowing.
Senator DURBIN. So four or five years from now, if this is signed
into law, we may be in a position where there is no trust fund, where
people have walked away from their litigation, their right to make a
claim in court. And then I guess the theory is either the Federal
Government steps in and bails out the fund--
Mr. PETERSON. Well, either that or these people go back in and start
litigating again.
Senator DURBIN. Back into the tort system and start all over again.
Mr. PETERSON. More than half of the claimants will be in that
position.
Senator DURBIN. Well, that concerns me as we get into this in terms
of whether or not this is going to be able to make the payouts.
I see my time is expired.
Chairman SPECTER. Dr. Rabinovitz, would you care to comment on the
last exchange?
Ms. RABINOVITZ. Just very briefly, I am not the person who estimates
the borrowing and financial situation of the fund. Goldman Sachs is.
With our claims projections and their estimation of the financial
contributions and the flow of funds based on cash flow analysis,
Goldman Sachs seems satisfied that the fund is sound.
Chairman SPECTER. Thank you very much. Well, thank you all.
Senator KENNEDY. Mr. Chairman, could I just include a statement by
President Sweeney of the AFL-CIO expressing his concerns about this
legislation?
Chairman SPECTER. Without objection, it will be made a part of the
record.
Senator KENNEDY. I thank the Chair.
Senator DURBIN. Mr. Chairman, I have a series of statements I would
like to ask to be part of the record relative to constitutional issues
and rights of victims.
Chairman SPECTER. They will, without objection, all be made a part
of the record.
In conclusion, two of the comments I think might bear special
scrutiny: Senator Feinstein’s comment about reading the bill and finding
a lot of provisions in the bill which have answered many of the
objections which were raised here today, and Senator Sessions’ comments
about who is interested in what, what are the interests behind a good
bit of the testimony characterized by the Coalition for Asbestos Reform,
but other testimony as well.
When we come to the medical evidence, there has been a healthy
exchange here. We have had some very, very healthy exchanges with the
conferences that we have had. We should be able to come to some sort
of terms on what the science portends. We are asking IOM to do a study,
and Senator Coburn, who has very extensive medical experience in the
field, is going to be adding on some criteria there.
What we are facing essentially is whether the current system, which
is racked in ruin, is preferable to go on to what we have in this
legislation. And to repeat, Senator Leahy and I have crafted, after
a lot of very tough work, the core principles, and we are continuing
to work right along to see if we can find accommodations to many, many
interests, and we have and we will continue to do that.
Senator Lindsey Graham couldn’t be here today, but he just sent
some good news. He wants to cosponsor the bill.
Thank you very much, Dr. Crapo, Professor Green, Mr. Gober, Dr.
Landrigan, Ms. Morgan, Mr. Peterson, Dr. Rabinovitz and Mr. Reuther.
That concludes the hearing.
Senator LEAHY. Mr. Chairman, I thank it has been a good hearing.
I think it has moved the legislation forward.
Chairman SPECTER. It is a good hearing, like a good bill, Senator
Leahy.
[Whereupon, at 1:18 p.m., the Committee was adjourned.]
[Questions and answers and submissions for the record follow.]
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