Fairness in Asbestos Injury Resolution Act of 2005--Continued

FAIRNESS IN ASBESTOS INJURY RESOLUTION ACT OF 2005--Continued -- (Senate - February 08, 2006)

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Mr. CORNYN. Mr. President, I want to spend the next 20 minutes or so talking about the asbestos reform legislation that is pending before the Senate.

During the 3 years I have been in the Senate, I have had the great honor and privilege of serving under two great chairmen of the Senate Judiciary Committee, Chairman ORRIN HATCH and Chairman ARLEN SPECTER. This bill that has come to the floor is the product of a Herculean effort, starting with Senator Hatch as chairman of the committee, and now in the able hands of Senator Specter. Along with our ranking member, Senator Leahy, they are cosponsors of this bill.

I am one of 18 members of the Judiciary Committee who voted to get the product out of the committee and to the floor of the Senate because I believe it is imperative we find a solution to the scandal-ridden asbestos litigation crisis facing this Nation. But I was one of seven Senators who expressed some strong reservations about the bill in its current form, and I think I owe it to my colleagues to explain what we were thinking, what at least I was thinking, and what some of those reservations are.

First, to address the problem confronting this country when it comes to the asbestos litigation crisis, the RAND Institute has documented that out of every dollar that goes into this asbestos litigation compensation system, only 42 cents actually goes to the claimant. A person who may have mesothelioma--a terrible and fatal cancer that is caused by inhalation of asbestos fibers--gets only 42 cents on the dollar. The rest of it is consumed in what might sort of innocuously be called transaction costs; that is, the costs of a lawyer to pursue that claim in court, as well as the lawyer hired by the defendant or defendants, as the case may be, together with court costs and other associated expenses of litigation.

Well, obviously, with an override of 58 cents on every dollar paid, the transaction costs are steep indeed and cry out for some redress.

The other problem in the current system is that over the years there have been so many claims brought on behalf of individuals who may have been exposed to asbestos but who have no current impairment--in fact, may never get sick as a result of that exposure--that dozens, indeed, I think the number is somewhere in excess of 80 different companies in this country, have been bankrupted. What happens when companies get bankrupted is people lose their jobs, and retirees lose their pension benefits or may perhaps receive only pennies on the dollar for what they believe they were entitled to and which they may have expected to depend upon during their later years in life.

Because of the huge volume of claims of people who are not sick and who are not impaired but who may have been exposed, that means people who have bona fide claims that are clearly traceable to asbestos-related disease may end up undercompensated as well or even left without an adequate remedy.

In fairness, the people who have made claims and who are not presently impaired are kind of in a catch-22 scenario because under our laws, and under the laws of most States, you usually have--for example, in my State of Texas, you have 2 years--if you have been damaged, but you do not yet know the extent of your damage but you have a claim, you are required under our laws, under the statute of limitations, to bring that claim within 2 years or else you will be forever barred.

So in all fairness to those people who have brought claims, while they have been exposed but may not yet have manifestations of the disease, they are in a box with no way out unless we reform the law. And, obviously, people who are very sick and may die of asbestos-related disease, from mesothelioma or some other type of cancer related to asbestos, being left with virtually pennies on the dollar, perhaps recovered from a bankruptcy trust, is not justice either.

So this has been an issue that cries out for reform. Some have said--and I think they are correct--this is not tort reform; this is scandal reform. It is an outrage and an injustice that cries out for a solution. Indeed, the U.S. Supreme Court, on three different occasions, has said this is an issue that is beyond the power of the judiciary to solve and asked Congress to come up with a solution to this problem.

We have worked to try to come up with a solution, but until this week no proposal has come so far as to get to the Senate floor to help address this problem. So I want to give credit where credit is due to Senator Specter, the chairman, and the ranking member, Senator Leahy, and all the members of the Judiciary Committee who tried to keep this process moving so we could have a bill ultimately that we could send to the President, that we could be proud of, and that would address this terrible injustice.

My observation has been that everyone involved in this process has been, in good faith, trying to find a solution to fix this situation. But it is important to note that while Congress has debated this issue and tried to come up with a solution, a number of States, including my home State of Texas--notably, Ohio and a handful of other States--have stepped in and passed what are commonly called medical criteria bills, which, simply stated, allow people who are sick to bring their claims, and people who have been exposed but are not currently sick--have no impairment--to toll the statute of limitations so that if and when they become sick they can bring their claims to court. That seemed to have worked pretty well.

That is not what this bill does. This bill makes a different choice. I want to explain in the few minutes that follow the concerns I have about this particular bill.

Here again, Senator Specter has led the way, along with Senator Hatch and Senator Leahy and others, to bring us to where we are today.

This is not easy.

The bill before the Senate today is vastly better and more improved as a result of the work done in the committee and the negotiations and the services of people such as Judge Edward Becker, senior judge on the Third Circuit Court of Appeals, who has acted as a mediator among the stakeholders to come up with a solution.

My fear is that we would replace the current broken litigation system for asbestos injury claims with a complicated, expensive, and ultimately unsustainable entitlement program. Let me explain what those concerns are in particular.

Asbestos liability reform, whether it is a trust fund or medical criteria legislation such as some States have, whatever the type, requires sound medical criteria to filter out fraudulent claims. My conviction is that the criteria employed in S. 852, the current legislation before us, are faulty and would unnecessarily include payments to individuals whose illnesses are not connected to asbestos exposure. There are two examples I can think of. One has to do with cancer claims. This trust fund would purportedly compensate those with cancer claims yet without evidence of asbestos-related disease. Obviously, we know this is not designed to be a cancer trust fund; it is designed to be an asbestos trust fund. We have to have sound medical criteria which would distinguish between cancer and asbestos because if we open up the criteria too broadly, chances are the claims are going to overwhelm the fund and it will be unsustainable and unsuccessful.

My second concern, beyond the medical criteria that are not tight enough to filter out fraudulent or unrelated claims, is that the $140 billion, which is the current amount of the trust fund, will not be adequate to meet the claims. This admittedly is an area in which there is no scientific precision because we are looking out years from now and trying to estimate how many people are going to have claims, what the mix of those claims is going to be. For example, if you have more mesothelioma cases than you think, then it will drain the fund precipitously and make it unsustainable.

Chairman Specter and the Judiciary Committee have heard from a number of experts, including the Congressional Budget Office, as well as independent estimates, that conclude--I am sorry to say--that the $140 billion fund will likely be too small to cover the cost and, ultimately, will render the fund insolvent. The CBO estimates that the trust fund would be presented with claims totaling between $100 and $150 billion, but it also projects that total costs would be higher because the fund must also cover administrative expenses and any financing costs.

I heard the Democratic whip, Senator Durbin, talk about the financing costs associated with the cash-flow requirements of this fund. I share some, but not all, of his concerns in that regard. The CBO makes clear that ``there is a significant likelihood that the fund's revenues would fall short of the amount needed to pay valid claims, debt service, and administrative costs.''

It gets worse, not better. An economic consulting firm by the name of Bates White has estimated that the trust fund will generate far more claims than the tort system and the existing trust and will result in claims perhaps ranging from $300 billion to $695 billion. In other words, the trust fund proposed by this legislation would be $140 billion, but Bates White, in a different analysis, has said they think the claims could reach $695 billion, ultimately forcing the fund into insolvency and sunsetting the fund within 1 to 3 years of its inception.

Even if you agree with the CBO estimate, it is clear that $140 billion will at least, under their estimate, not satisfy the claims made on the fund in administrative costs and the like because the CBO cost estimate does not include potential dormant claims, possible take-home exposure claims by family members, exceptional medical claims, claims from people living near Libby-like sites--and I will explain what I mean by that in a moment--as well as the impact of allowing CT scans to serve as documentation of pleural abnormalities. In other words, the diagnostic test used to determine impairment from asbestos-related disease is important to screen out people who are impaired from people who are not impaired. All of these additional factors that CBO's cost estimate does not take into account could add billions of dollars of cost to the trust fund.

Even more troubling, the CBO's own analysis provides that 1.2 million claimants will be deemed to have qualified for medical monitoring. In other words, they have been exposed. They are not impaired. Yet under the trust fund, they would be monitored to see if they do become impaired and thus qualify for a claim under the fund.

Unfortunately, the CBO misses the fact that if we apply standard epidemiological statistics, as many as 200,000 of the 1.2 million claimants who qualify for medical monitoring will one day develop cancer of some form, and thus the total cost of the fund could be as much as $90 billion more than the CBO has estimated.

Just a footnote here, another problem. I don't mean to have a laundry list of criticisms of the bill because, as I said, miraculously we have reached this point, but there remains some of the hardest issues we need to find solutions to if we are going to solve this scandal that otherwise goes by the name of the asbestos litigation crisis.

This trust fund--here again, I don't know whether all of our colleagues have had a chance to look at the bill in the kind of detail I am discussing, so that is the reason I wanted to identify these concerns, to see if we can find some solution--also provides $600 million, not to pay claims, not for administrative costs, but for additional screening to find new claimants. In other words, it is basically a marketing program to go out and try to find individuals who might also make a claim to the fund rather than those who have self-identified or have been referred to the fund.

I don't have to tell my colleagues; all they have to do is read the newspaper or current court cases that are pending. For example, in the Southern District of Texas, in front of Judge Janis Jack of Corpus Christi, fraudulent medical screenings have produced an enormous number of bogus cases that have created a huge burden on the current civil justice system. It is beyond me why we would want to go out and shop, in essence, or market to try to find more claimants to the fund over and above the ones CBO or Bates White or other educated guesses estimate will be made against the fund. That is a problem, too.

My point is that with regard to the number of claims and the demands made upon the fund, one of the concerns I have

is that if the trust fund sunsets in 1 to 3 years the way Bates White says it might do, or 5 years or 10 years, it forces reversion; that is, claims go back to the same broken tort system that brings us here today. So what might happen is that companies would have to pay into the fund, but the fund would be overwhelmed and thus leave people without a remedy under the fund. Then it would revert to the same broken tort system, with all of the scandal associated with it, with all of the injustice associated with the status quo.

It is also worth noting--and this ought to caution us--that previous attempts to establish national trust funds largely have failed because total costs have exceeded those originally predicted. I am thinking particularly about the General Accounting Office report on black lung and similar funds.

We know there have been many bankruptcies associated with the current asbestos litigation system. Indeed, there is currently about $7.5 billion of bankruptcy trust funds that would be swept into this bill by the Federal Government to help make the $140 billion total proceeds available under the fund. These are existing bankruptcy trust funds which are currently paying claimants, people who were exposed to asbestos fibers and who are sick. But what this fund does--this is part of the problem--in an effort to get up to the $140 billion, it basically is a Federal confiscation of existing bankruptcy trust funds to the order of $7.5 billion. Noted constitutional lawyers, whose names are very familiar to the Members of the Senate, have come to me, as I know they have others on the committee, and said: How can it be that the Federal Government can take $7.5 billion in existing funds that are currently paying claims to sick asbestos victims and scoop it into this $140 billion fund? So at minimum, we would have to concede there will be litigation, and likely successful litigation, challenging the constitutionality of this taking by the Federal Government.

I mentioned earlier that Libby-like issue. Let me explain the challenge we have. In Libby, MT, a number of residents were apparently exposed to asbestos fibers generated from a W. R. Grace plant located in that city. What the Senators from Montana have done in this bill--and I congratulate them for their advocacy on behalf of their constituents--is establish an automatic qualification and a floor of $400,000 for any individual who qualifies living within 20 miles of that town. Why is that exceptional? Most of the claimants under this fund have to be those exposed in the course and scope of their employment. The Libby exception is not an occupational exposure but one because you happen to be a resident of that town and establishes an automatic qualification of a $400,000 floor to anyone who lives within 20 miles.

Whatever the merits of that special treatment for Libby, the problem we have is that there are as many as 28 other sites in the country, including my State of Texas, that may well deserve to be eligible for the same or similar special treatment. In other words, if we say people who are exposed not occupationally but environmentally because of the release of asbestos fibers due to an asbestos company operating in their State, if we are going to say Libby, MT, residents are entitled to that, I don't know how we cannot, in fairness, say that other similarly situated persons are not entitled to the same benefit.

The challenge, though, the problem that presents is it threatens to render the fund insolvent because of the volume of claims that will be made under this provision if expanded to include other individuals in these 28 other sites. I don't know how this fund can remain solvent unless the Libby, MT, provision is removed.

The challenge the chairman has had is, every time he has someone ask for a change in the bill, he risks losing someone else who is on the bill and vice versa. So I know he has tried his best to try to balance this wobbly entity known as the asbestos trust fund. That creates an anomaly and potentially an unfairness, one which would render the trust fund asunder.

The next issue that I have concerns about is this. There is no question that some very large companies in this country that have been exposed to almost endless asbestos litigation are desperate to bring that to a conclusion, to be able to cap off their liability and be able to put that behind them and get back to work providing jobs and contributing to the engine of the American economy. So there are some companies that are desperate to bring this to a conclusion. They are so desperate, they are willing to accept this trust fund on the faith, hope, and wish that it will be made better through this process--the amendment process and in conference.

But there are others who have come forward and demonstrated to me and other Senators that if they are forced to contribute to the trust fund under the current allocation system, it exceeds the profit of their ongoing business. In other words, if forced by the Federal Government to contribute to the trust fund at the current amount created in this allocation scheme, we will, in effect, render a number of companies--no one knows how many--bankrupt, and they will go out of business; and the people they employ, the hard-working Americans they employ, will be out of work. Potentially, the pensions of the retirees will be put in jeopardy.

Now, that is not the intention of the trust fund designers. Believe me, the work is ongoing to try to find an equitable allocation scheme. But I point out that in trying to effect a cure, we need to make sure the cure isn't worse than the underlying disease for many of the companies and individuals affected.

Let me end my remarks on a couple of other final matters that I think call out for resolution or improvement in this bill. I have told Senator Specter that I want to be part of the solution to this problem; I don't want to be an impediment to trying to reach some equitable and fair resolution because this scandal should not continue a minute longer than it has before we come up with some good solution to this terrible problem.

One of the things I am concerned about in this bill, as well, is that the Department of Labor would have to administer this $140 billion fund, however it works. Obviously, there are going to have to be a lot of new people hired to perform those duties, and I believe it will, in fairness, create a new Government bureaucracy, designed to administer this program in the Department of Labor.

I am wary about creating new Government bureaucracies and programs in Washington, DC. I am reminded of the quote of former President Ronald Reagan. He said: The closest thing to eternal life here on Earth is a temporary Government program. This is supposed to be a temporary Government program, but I fear that we will create a new and mammoth bureaucracy within the Department of Labor that will never go away, even after the trust fund has come and gone.

So I look forward, during the course of the debate, to have the opportunity to offer amendments in the form of alternatives, which I think may provide a better solution to the problem that we all agree exists; and failing that, to offer amendments that will, I hope, narrowly address some of the problems presented in the list of issues I have spoken about. We need to make sure our good intentions don't exacerbate the problem. In a way, I sort of look at this as a legislative or congressional Hippocratic oath. Doctors take a Hippocratic oath which says: First, do no harm. You want to make sure the cure doesn't kill the patient. Indeed, I think we need to take a congressional Hippocratic oath that also says: First, do no harm. That ought to be our initial focus, to try to find a solution to this very difficult, complicated problem.

I look forward to working with all of my colleagues in good faith, in an effort to try to find that solution, even in the form of an alternative, if necessary, or, failing that, to come up with some targeted amendments which will address some of the concerns, which will make sure that sick people get paid and people who are not sick don't get paid--to make sure we don't explode the fund by underestimating the demands made upon it--and that we have some fairness when it comes to the allocation of who pays into the fund and that we proceed to a full and final solution to the problem, not a temporary patch that, ultimately, leads then back into the ditch in which we currently find ourselves, known as the asbestos liability crisis.

I see my colleague from Alabama, with whom I proudly serve on the Judiciary Committee, who is steeped in the details and has been part of a Herculean effort to come up with a solution. At this time, I yield the floor.

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