Asbestos Legislation Update Snapshot - 2004-07-04
June has indeed become a period of renewed commitment by Senate Democrats and Republicans as well as major labor unions and defendant corporations to achieve a compromise bill. Senate Majority Leader Bill Frist (R-TN) and Minority Leader Tom Daschle (D-SD) have made reaching agreement on a bill a mutual priority. (Parenthetically, as the Congress prepares to recess at the end of this week for the 4th of July holidays, it is now more likely that any agreement on the threshold issues will now have to occur in July.) Significantly, in late May, some of the AFL-CIO member unions and defendant companies jointly sent a letter to the Senate Leaders strongly urging them to compromise and pass a bill this year.
The strategic threshold issue that must be resolved is the overall size of a guaranteed Fund specifically, how much will the defendant companies agree to and will the insurers pay more than the currently proposed $46B. Once there is agreement on the size of the Fund, which must be sufficient for at least 10 years, then a calculation of the various claim award values within that overall Fund size will occur.
Interestingly, in recent weeks, Senate Democrats have taken on a much stronger and broader role in pushing for compromise and resolution. Notably, Senator Feinstein consistently, a strong proponent during the Judiciary Committee mark-up last summer of structuring a bill that can fairly achieve the objectives of restoring certainty of recovery for the victims and financial certainty for the defendant companies and insurers proposed a compromise on May 18th and then an amended one on June 9, convening a six-hour meeting with the AFL-CIO International President and the Chief Executives of several of the major companies. Senator Feinstein's compromise proposes a national Fund of $140 B, consisting of a base of $126B -- $75B from defendant companies and $51B from insurers with guaranteed contingency financing of $14B from defendant companies only. Other Democrats, such as Senators Carper (DE), Nelson (NE), Baucus (MT), Levin (MI), Stabenow (MI), Lincoln (AR), Clinton (NY), Wyden (OR), Dorgan (ND), and Conrad (ND), among others have joined in the effort to foster compromise.
Conversely, more Senate Republicans sensing the opportunity for compromise and a deal are becoming increasingly energized to support the Majority Leader in his negotiations with the Minority Leader. Notably, in the week prior to Senator Feinstein's June 9 meeting between staff counsel to Senate Majority Leader Frist and Minority Leader Daschle, the Majority Leader's office offered a $131B Trust Fund with no contingency payment and which would be composed of: $127 B from companies and insurers; and $4 B from the existing bankruptcy trusts.
While this $131B is clearly not at the $140B level deemed essential by the unions, it is a significant increase of $21B in the base from Frist's earlier proposal, which contemplated a base of $110B (including the transfer of bankruptcy trust assets) plus up to $20B in contingent calls from defendants. Moreover, Senator Frist's $131B base Fund is $5B more than Senator Feinstein's proposed base of $126B, to further illustrate the movement.
Notable as well is organized labor's movement in indicating a willingness to work with a $140 B fund a significant change from the $154B+ range earlier. Defendant companies are wrestling with the $140B Fund target, how financable it is, and whether that will be the outside limit of their long term liability. They are divided. Some are willing to accept a $140B Fund, but want more than $46 B from insurers, which have been increasing their reserves over the last year. Other defendant companies think the size of the Fund is too large at $140 B. Moreover, the oil companies are very concerned that if they pay here, they will also be subject to plaintiff bar suits over silica and thus face double liability.
Many companies also are concerned that the claims values proposed by organized labor and in Senator Feinstein's compromise remain too high and will bankrupt the Fund. In particular, the fear of oversubscription by the Lung Cancer Smoker category of claimants not Ex-Smokers and Never Smoked Lung Cancer claimants is at the base of the concern that (a) the Fund will be consumed rapidly and (b) a return to the current tort system will be forced in a few short years. In that connection and to avert exhaustion of the Fund by this single subcategory of claimants, Senator Feinstein has suggested at the point Lung Cancer Smoker cases exceed 150% of the number of projected cases for that subcategory, the remaining cases revert back to the courts and out of the Fund. However, the companies (a) believe that the 150% level should be lowered, and (b) are concerned about the wholesalers who didn't like the size of the last defendant company proposal of a Fund of $114B and fear an alliance between oil, wholesalers, and insurers could sink the bill.
In closing, the present time is an intense period of internal negotiations among: The defendant companies on what they will agree to pay in both the base and contingency funding, the insurers as to whether they will increase their contribution above the $46B on the table, and Labor on ensuring that the both the Fund size and claims values are adequate and fair and whether the rank-and-file their constituency will agree.
In conclusion, if and only if -- agreements can be forged before the August recess on both (1) size of the Fund, and (2) claims values, and particularly the treatment of the lung Cancer Smoker subcategory, the rest of the issues can be resolved and legislation could indeed pass this year.
As a further caveat, it is key that the Senate Leadership be able to hold intact its agreements when legislation is brought to the Senate floor in order to defeat efforts by those aligned with the plaintiffs bar to attach killer amendments amendments that vitiate the bill or destroy the bipartisan coalition that is required to pass it.
About the AuthorAuthor: Tim Woods (Navigant Consulting)
Tim Woods of Navigant Consulting
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