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A new study on asbestos trusts and their relationship to the current U.S. tort system raises questions about the way settlement amounts are being determined, the costs shouldered by some defendants, and the availability of funds to settle future asbestos-related claims. “Asbestos Bankruptcy Trusts and Tort Litigation,” prepared by the RAND Institute for Civil Justice, explores how trusts and torts are linked together in six different states: California, Illinois, New York, Pennsylvania, Texas, and West Virginia. The report finds a tension that lies in the degree to which financially solvent defendants should be held responsible when bankrupt firms bow out of the tort system, and how information on the practices and products of bankrupt firms can be uncovered. The RAND report, funded in part by a group of defendants and insurers, examines the compensation system for asbestos exposure that has arisen over the past 30 years. It is estimated that 730,000 people filed asbestos-related lawsuits between the early 1970s and 2002, drawing $49 billion in paid compensation. Bankruptcy trusts now occupy a key place in that compensatory scheme. Last year, RAND released a study of how these trusts are structured and of the $10.9 billion paid by the 26 largest such trusts to settle 2.4 million claims through 2008. “The impetus for this line of research is that the number of trusts has been growing, and the amount paid by these trusts has been growing, since the mid-2000s,” says Lloyd Dixon, the lead researcher on the study and a senior economist at RAND. A rise in bankruptcy trusts should be reducing the amounts paid by other defendants and insurers, these groups claim. But, they say, that’s not happening. More than an issue for plaintiffs, “this is really a concern of the defense side and the insurers,” Dixon says. When defendants in asbestos claims began filing for bankruptcy in the mid-1990s, they disappeared from the tort system, Dixon explains. Then, solvent defendants found themselves filling the gap and, consequently, paying more in settlements. The bankrupt firms began to set up trusts in the early 2000s, from which settlement claims could be doled out. Despite those additional pools of money, solvent defendants contend, they still aren’t seeing reductions or offsets in their own settlement payments. Other issues that emerged in the study are the extent to which plaintiffs can, in essence, collect two settlements—one in the tort system, and one from the trusts—and how the current system might affect the pool of funds available to future claimants. Ultimately, the study did not collect empirical data on whether defendants are, in actuality, paying more than they should be. Nor does the study identify policy solutions or goals. Both of these subjects are slated to be the subject of future research, Dixon says. The issues identified in the study also have relevance for other industries in which bankruptcy trusts and litigation come into play. “One of the lessons from the study is there’s not explicit coordination between the bankruptcy courts that set up the trusts and the state courts,” says Dixon.

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