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It’s the litigation equivalent of the perfect storm. The number of asbestos lawsuits is soaring, and that spike is clogging courts and crippling corporations. An estimated 200,000 cases now languish in court, more than 65 companies have filed for bankruptcy, thousands of workers have lost their jobs, and the list of Fortune 1000 defendants is growing. But there may be a way to end this crisis at last. Sensing an opportunity to reach a broad consensus before election-year politics get under way, corporate defendants, trial lawyers, and union representatives have spent nearly a year meeting behind closed doors in the hopes of ending the litigation with legislation. They’ve had some success: Congress has introduced four bills on the subject this year, including a groundbreaking bipartisan proposal by Senate Judiciary chairman Orrin Hatch that would establish a $108 billion nationwide fund to pay asbestos victims in exchange for broad corporate immunity. There are plenty of issues that still need to be resolved, including the ultimate size of the fund, which companies should participate, and who is eligible for compensation. Jonathan Hiatt, the general counsel of the American Federation of Labor and Congress of Industrial Organizations (AFL — CIO) in Washington, D.C., has a prominent seat at the negotiating table. His organization represents more than a million workers who have been exposed to asbestos. At press time, as the negotiations got bogged down over the amount of money in the settlement pot, Hiatt was skeptical that a deal would be struck. He blamed corporate hard-liners for “hijacking” the process. Hiatt, 54, met with senior reporter Krysten Crawford to discuss the asbestos crisis and the legislative effort to resolve it. Corporate Counsel: It’s been six years since the U.S. Supreme Court first called on Congress to find a legislative solution to this “elephantine” problem of asbestos litigation. Lawmakers have tried but failed. Is there reason to be optimistic now? Jonathan Hiatt: There is reason to be cautiously optimistic. You have a situation now where the labor movement, both because of the feeling that the victims are ill served under the existing system and because of the rash of [asbestos-related corporate] bankruptcies, believes that it would be beneficial to reform the system. But it does mean that those in the business and insurance communities that are just trying to do this on the cheap are going to have to rethink [their position] because, yes, this is going to cost a lot, but the current system is going to cost even more. I think it would be too bad if we all lost this golden opportunity. CC: So what’s different about this latest legislative effort? JH: What’s changed is that there are a growing number of businesses and insurance carriers who I think understand that the only hope of getting real reform here is to come up with a no-fault system, where [asbestos] victims wouldn’t have to prove causation. They could be fairly and promptly compensated. In such a system you’d have predictability and certainty not only for these victims, but also for the companies and the insurers. CC: There are also a lot more defendants. The lawsuits are no longer targeting just asbestos makers and their insurers. Now, for instance, sellers of asbestos-containing products, among them General Electric Company and Viacom Inc., are getting sued. Do you think these companies should be held accountable? JH: I think that they should. But there’s no question that their liability is and should be different from that of the manufacturers. What’s helpful is the fact that you now have an expanding universe of businesses and insurance carriers who all see a need to resolve this crisis and hopefully will try to substitute a more rational system. CC: The Republicans are in control of the Congress and the White House. How much leverage do unions have at the negotiating table? JH: The popular wisdom has been that there are three major groups that have a very strong interest in this: businesses, the labor movement, and the trial lawyers. And the popular wisdom has been that if two of those three groups are opposed to a specific reform, then, politically, it’s going to be very difficult to get anything through. It may be that [businesses] can get the 60 votes [needed in the Senate to avoid a filibuster], but it sure is going to be a lot easier if there’s broad consensus. CC: The idea of a national fund to resolve asbestos claims has caught a lot of attention. Some say it would be very complicated to set up and administer. Others say it would actually be fairly simple. JH: I’d say it’s somewhere in between. Everybody’s trying to do this in a very, very fast time frame, which makes it difficult, but it’s probably just as well that that’s happening. If there wasn’t pressure to get this done very quickly, it’s complicated enough that you can imagine it dragging on indefinitely. But there are models that are out there. The Manville Trust is a model that people can look at. I think everybody has problems with it as a complete model, and we certainly do. But it is a model. [The Manville Personal Injury Settlement Trust was set up 15 years ago to resolve asbestos claims against the Johns-Manville Corporation and its affiliates. So far it has paid more than $3 billion to 520,000 individuals.] CC: What are some of the Manville problems? JH: For one thing, because the Manville Trust ran out of money, it had to start making changes in its medical criteria [for claimants], not due to changes in medical science, but just because the trust didn’t have enough money to pay everybody who was entitled to compensation what they deserved. So part of what they’ve done is, they’ve gone down and are only paying [5 cents for every $1 in claims]. And we certainly aren’t willing to accept a system that right from the get-go narrows the categories [of qualified illnesses]. CC: Who’s eligible for compensation and how much they should receive are obviously big hurdles to any resolution of this issue. The American Bar Association and others advocate the use of “strict medical criteria” for claimants, which they say will compensate the seriously ill now and give individuals with nonmalignant claims a chance later on to collect. Why have you opposed this? JH: Under the [ABA's] approach there is one line that’s drawn, one medical criterion, and you’re either in or you’re out. And in our view, it leaves way too many people out. [That said], any approach is going to require there to be medical criteria. For example, we agree that people who have lung cancer with both a smoking history and asbestos exposure as causes would not be entitled to as much compensation as nonsmokers. And we do agree that people with less serious diseases don’t need to be compensated as generously as people with a more serious disease. CC: What if someone came down with one symptom now, and developed another later on? Would that person be precluded from filing a later claim? JH: I think everyone has agreed that they’re not going to be waiving their right to come back later on. Everybody agrees that’s a vital part of the system. CC: I can’t imagine any legislation that doesn’t involve a set amount for a national fund. The dollar amounts I’ve seen range from $90 billion to $120 billion. Yet the AFL — CIO and unions generally have long been opposed to litigation caps. JH: We are okay with the notion of [corporations] putting in a set amount, but it has to be with an understanding that, if they have underestimated, they’ve got enough of a cushion in that set amount that they’re not going to have to reduce the payments that they make to victims three years from now or seven years from now. The victims can’t take a chance on a fund where — if people have underestimated how many claims there are going to be or how much it’s going to cost — in five years the fund turns out only to have enough to pay 50 cents on the dollar or 10 cents on the dollar. CC: How much money should be in a national fund? JH: The criteria should be for each category of disease and the exposure definitions. And then business can cost that out. I’d say it’s safe to assume that $100 billion is inadequate. I think [corporations] understand that it’s very hard to imagine a system that has enough in it to compensate all the people that will need to be compensated, not just today but over the next 30 or 40 years, at $100 billion. CC: How likely is it that funding would be a problem later on? JH: That all depends on the way [business and insurers] decide to manage the risk here. There are various ways this could be done. One possibility would be to get the government to do what they did with terrorism insurance, and to say, “Okay, here’s how much this is likely to cost. Now, business has to put in not only that much, but even another 20 percent as a cushion.” And if even that isn’t enough, then, and only then, the government is going to be the back stop or the last resort. There’ll be a lot of resistance to that. If the government were unwilling to be the insurer of last resort, business and insurers could say, “It looks like this is going to cost $125 billion. We’ll put in another 10 percent on top of that, but then, if even that isn’t enough, we’ll buy insurance on the private market, not from the government, and that will give us the final breathing room.” CC: So if your company put money into this fund, it would then granted immunity from litigation? JH: Right. CC: But what about companies that haven’t yet been sued, but might be future defendants. How would the fund address that? JH: We’ve only been marginally focused on how business and the insurers have been trying to define the scope of responsible companies. As far as we’re concerned, however they want to decide it, and as long as the money is there, that’s sort of up to them. There are companies that haven’t been sued yet that are very much a part of the negotiations and part of the formula [that businesses and insurers are devising to determine which companies would have to contribute and how much]. CC: In your eyes, would the courts need to play an ongoing role even if a fund is set up? JH: There still will be some ultimate right of final appeal to the courts. So if somebody at the end of exhausting all of their administrative rights and appeals under this new system believes that they’ve been put in the wrong medical category, presumably they’d have the right to go to court. But for this to work, it’s going to have to be a very, very limited right of appeal, and the standard of review by the courts would presumably have to be very high. CC: What about the federal government’s role in a national fund? JH: This whole no-fault system will have to be administered by some new entity, whether it’s a new court of claims or an independent government agency. CC: If Congress fails to enact legislation soon and the rate of asbestos filings continues, are there companies that haven’t been sued yet that will find themselves under attack? JH: Businesses and the insurers all certainly claim that, and I don’t think they’re crying wolf. I think there are a lot of companies that are going to be financially affected by this if this doesn’t get resolved. CC: Who doesn’t want this legislative effort to happen? JH: There are individual insurers and businesses that think, “Gee, this comprehensive solution may be good collectively, but for my individual company, insurance or business, I’d do better on my own.” There are individual lawyers who think that this isn’t going to be good for them. (There’s going to be less of a role for lawyers.) And I’m sure there are some individual unions that aren’t going to be wild about this, either. But I think there is enough of a critical mass. CC: So much of the focus is on building predictability and consistency into the system. Yet, asbestos-containing products are still sold in the United States. JH: Yeah, there is an irony there.

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