CAMAR - Spring 2005 Meeting
Princeton, NJ
June 2, 2005
Michael E. Angelina, ACAS, MAAA
Kevin F. Downs, FCAS, MAAA
©Towers Perrin
Agenda
 Concerns in the Current System
 Quantification of Liabilities
 Potential Solutions
©Towers Perrin
2
Concerns in the Current System (1)
 Plaintiffs should demonstrate injury to file a claim
 The number of claim filings has increased dramatically
 2003 claim filings against the Manville Trust exceeded
100,000
 Fewer than 10% of claims are malignant
 Per RAND, ⅔ to ¾ are unimpaired
 The right to seek recovery if/when an injury manifests should
not be limited
 Each claim should stand on its own merit
 Restrictions on mass consolidations
 Venue should be controlled
 Avoid forum shopping in “magic jurisdictions”
©Towers Perrin
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Surge in Claim Filings
Manville Trust - Injury by Year Filed
100,000
90,000
(Denied) or Unknow n
80,000
Non-Malignant
Cancer
Mesothelioma
Number of Claims
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Year Filed
 2004 Manville Trust Claim Filings: 14,500
 2005 Manville Trust Claim Filings: 9,300 at May 2005; 22,320 annualized
Note: Excludes Non-U.S. claims
©Towers Perrin
4
Change in Disease Mix
Manville Trust - Injury by Year Filed
100%
90%
Percent of Claims Filed by Category
80%
Non-Malignant
70%
Cancer
60%
81%
82%
84%
89%
85%
86%
85%
92%
89%
88%
91%
93%
90%
90%
6%
7%
Mesothelioma
50%
40%
30%
20%
13%
12%
6%
6%
5%
4%
5%
1990
1991
1992
1993
1994
10%
11%
7%
0%
9%
10%
9%
7%
8%
4%
6%
2%
5%
4%
4%
6%
3%
4%
2%
4%
3%
1995
1996
1997
1998
1999
2000
2001
2002
2003
Year Filed
©Towers Perrin
5
Evidence of Forum Shopping
100
MD
Other
states
80
TX
60
Percent
IL
40
NJ
OH
MS
PA
WV
20
NY
CA
0
1970–1987
©Towers Perrin
1988–1993
Source: RAND, January 2003
1994–1997
1998–2000
6
Increasing Numbers of Claimants Are
Unimpaired
1982
4% of claims showed no manifest asbestos-related injury
(RAND)
1993
Up to one-half of all asbestos claims have little or no physical
impairment (Harvard Journal of Legislation)
1998
No evidence of disease in 57% of asbestos claims
(Manville Trust)
74% of pending claims are unimpaired
(confidential report prepared for a defendant)
2001
Two-thirds of claims show no evidence of impairment
(Babcock & Wilcox)
Vast majority of claims provide no evidence of impairment
(W.R. Grace)
©Towers Perrin
Source: RAND
7
Concerns in the Current System (2)
 A low percentage of total payments have reached the
claimants. Per RAND:
 30% - defense transaction costs
 29% - plaintiff attorney fees and legal costs
 41% - to claimants
 Resources are limited
 77 defendant companies have sought bankruptcy
protection
 But defendant pool has increased to ~8,400
 Future sick may not be compensated
©Towers Perrin
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Number of Asbestos Related Bankruptcies
per Year
14
12
12
10
Number
10
8
7
6
5
4
4
4
3
3
3
2
2
2
1
5
2
2
2
2
1
1
0
1
1
0
0
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
While only five bankruptcy petitions were filed during each of 2003
and 2004, the reduced level should not be misinterpreted as a sign of
improvement in the asbestos litigation crisis. Rather, the number of
2003-2004 petitions was likely lower as defendants delayed
decisions as they awaited the outcome of federal reform efforts.
©Towers Perrin
Note: Graph excludes a bankruptcy in 1976.
9
Differences Between Traditional and PrePackaged Bankruptcies
Traditional
Pre-Packaged

Can take years to complete1
 File petition
 Negotiate with creditors
 File reorganization plan
 File disclosure statement
 Solicit votes
 Confirmation hearing

Intended to be completed within a few
months of filing
 Negotiated and voted on before filing
 Combined hearing to confirm plan and
disclosure

Insurance coverage generally exhausted or
settled, or insurers included in negotiations

Insurers interests are not represented in prepetition negotiations

Court appoints claimant representatives
 Future’s Rep involved in negotiation
for >50% equity

Commonly include a pre-petition trust to pay near
full value on current claims
 Plaintiff attorneys with large inventories
negotiate matrix agreements that benefit
their own clients, but do not owe a duty to all
claimants
 Disease criteria broadly defined
 Claimants not fully compensated, so
remain eligible to vote on the
bankruptcy plan
 Generous awards to lower disease
severity classes
 Significant portion of equity can be secured
(therefore not available to bankruptcy trust)
1
Johns Manville filed bankruptcy in 1982 and
its plan was not confirmed until 1988;
Babcock & Wilcox filed bankruptcy in 2000
and its plan has not yet been confirmed.
©Towers Perrin
10
Problems with Pre-Packaged Bankruptcies
 Negotiated in secret by a select group of lawyers,
whose clients receive preferential treatment relative to
other claimants with similar disease
 Future’s Representative bound by pre-petition
settlements
 Debtor is negotiating with insurers’ money
 Conflicts of interest are abundant
Source: Mark D. Plevin/Crowell & Moring LLP
©Towers Perrin
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Independence vs. Conflicts of Interest?
 AC&S’ counsel for pre-packaged
AC&S
bankruptcy
GHR
 Also negotiating AC&S claim
settlements
Joseph Rice/Ness Motley
Pre-petition Committee
70% Ownership
 “Independent” claim reviewer
Pre-petition
Trust
– Categories A, Bx, By, C, D
 Paid $3M to review documentation
Kenesis
of 250,000 Category D claimants
 Purchased Clearing House in
June 2003
 Paid $2M as subcontractor of
Clearing
House
Kenesis
 Sole proprietor, J. Benee Wallace,
paralegal of Ness Motley

From appointment of Kenesis (5/2002) until pre-package bankruptcy filed (9/16/2003), AC&S
settled more than $2 billion of claims
 Settlements over prior 20 years totaled $600 million

Pre-packaged plan stipulated that these settlements could not be challenged by the asbestos
trust or AC&S
©Towers Perrin
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AC&S Plan Denied Confirmation
 On 1/23/04 Judge Newsome (Delaware federal bankruptcy court)
denied confirmation of the AC&S pre-packaged bankruptcy plan,
finding that the plan
 Was not proposed in good faith
 Unjustly prejudiced by plaintiff attorneys
 Largely drafted by and for the benefit of the pre-petition
committee through various pre-petition settlements
 Unfairly favors one plaintiff over another
 Fundamentally unfair that one claimant with nonsymptomatic pleural plaques will be paid in full, while
someone with mesothelioma runs the substantial risk of
receiving nothing
 Both should be compensated based on the nature of their
injuries, not based on the influence and cunning of their
lawyers
“The court is informed that other judges have confirmed
plans with such discriminatory classifications. This judge
cannot do so in good conscience.”
©Towers Perrin
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How to Quantify Asbestos Liabilities?
 Many use benchmarks or rules of thumb
 Market share techniques
 For example, 5% of GL premium volume for affected years
translates to 5% share of ultimate liabilities
 Survival ratio techniques
 equals ratio of total reserves divided by average annual
payments
 U.S. net asbestos survival ratio at year-ends 2001, 2002,
2003 = 8.8, 11.4, 10.6, respectively
 A.M. Best using an undiscounted survival ratio of 18 - 20.
 Aggregate development
 multiples of paid losses, case reserves, or reported losses
 Comparisons to peer companies (e.g., significant
reserve additions)
©Towers Perrin
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How to Quantify Asbestos Liabilities?
 Exposure-based modeling will improve understanding
of ultimate A&E liabilities
 For an insurer or reinsurer, it considers
 Mix of insureds
 Types of coverage




Policy wording
Attachment points and limits
Years of coverage
Claims handling and settlement activities
 Greater understanding equips the defendant, insurer,
or reinsurer to deal strategically with its exposure
©Towers Perrin
15
Asbestos Insurer/Reinsurer
Exposure-Based Analysis
Steps:
(1) Identification of exposure to asbestos defendants
(2) Projection of ground-up ultimate loss and expense for known
asbestos defendants
(3) Allocation of defendant losses across coverage block
(4) Comparison of losses in a given year to insurer / reinsurer
coverage terms
(5) Provision for non-products losses
(6) Provision property damage, DJ expense
(7) Provision for “pure” IBNR
(8) Ceded / net analysis
(9) Provision for uncertainty
©Towers Perrin
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Asbestos Insurer/Reinsurer
Exposure-Based Analysis
The Types of Asbestos Defendants
Tier 1: Manufacturer/producers in litigation
since inception
 Will use all available insurance
coverage
Tier 2: Became involved shortly after Tier 1
companies
 Some will exhaust all insurance
coverage
 Others will not hit highest layers due
to smaller share of industry
©Towers Perrin
Tier 3: Manufacturers, distributors and
installers brought into litigation due to
Tier 1 and Tier 2 bankruptcies
 Lesser exposure due to
encapsulated products or limited
distribution
Tier 4: Owned/operated facilities where
asbestos used and third parties
exposed on premises
17
Exposure-Based Analysis:
(1) Identification of Exposure to Asbestos Defendants
 List all asbestos claims / notices
 Identify all coverage issued to major asbestos
defendants
 Review non-asbestos claims/notices
 Search of underwriting records for direct coverage
and facultative reinsurance
 Cedent audits for reinsurers’ treaty business
 Review coverage profiles of major defendants to
identify cedent involvement and potential reinsurer
treaty coverage
 Research corporate genealogy
 Identify producers of “at risk” products
©Towers Perrin
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Exposure-Based Analysis:
(1) Identification of Exposure to Asbestos Defendants
 Practical Issues:
 “Missing” coverage
 Unknown coverage terms
 Exclusions in underlying policies
 Reinsurer attachment relative to first dollar
 Potential reinsurer benefit from client’s inuring
facultative coverage
©Towers Perrin
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Exposure-Based Analysis:
(2) Projection of Ultimate Ground-Up Loss and Expense
for an Asbestos Defendant
 Frequency / severity projection
 Project future claim filings
 Select average indemnity and future trend
 Estimate expense load
 Special considerations
 Coverage exhaustion / settlements
 Bankruptcies
 Changing litigation profile of the defendant
 Incremental v. cumulative experience
 Changes in mix of claims by disease and state
©Towers Perrin
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Exposure-Based Analysis:
(2) Projection of Ultimate Ground-Up Loss and Expense
for an Asbestos Defendant
 Transaction costs have consumed more than half of
total spending and are likely to increase in the future
 No formal joint defense mechanisms remain (e.g.,
ACF, CCR)
 “Settlement” philosophy hasn’t worked
 Newer defendants
 Discovery costs (product, coverage)
 “Fight or die”
©Towers Perrin
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Exposure-Based Analysis:
(3) Allocation of Defendant Losses Across Coverage
Block


Allocate ground-up ultimate indemnity and expense to year
Compare to available coverage
 Reflect expense treatment (varies by policy)
 Consider coverage disputes, choice of law
 Consider other erosion of products aggregate limits
 Consider reinsurance cessions to estimate net losses
Asbestos Insured XYZ's Coverage Chart
Coverage Amount $
Excess 5
Excess 4
Excess 3
Excess 2
Excess 1
----------------- Self - Insured --------------------
Primary
1930
…
1978
1979
1980
1981
1982
1983
1984
1985
1986
Year
©Towers Perrin
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Exposure-Based Analysis:
(4) Comparison of Losses to Coverage Terms
 Example: More detailed coverage description of
Excess 1 Layer in 1980
8
Excess 2
$ Millions
6
4
Excess 1
10%
Insurer
ABC
Excess 1
20%
Insurer
DEF
Excess 1
Excess 1
10%
Excess 1
70%
Insurer
70%
Insurer
ABC
Insurer
GHI
GHI
2
0
1980
Primary - Insurer JKL
©Towers Perrin
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Exposure-Based Analysis:
(4) Comparison of Losses to Coverage Terms
 Example: Comparison of Losses in a Given Year to
Insurer / Reinsurer Coverage Terms
 If Insurer ABC wrote 10% of $5 million xs of $1 million
in 1980, and ultimate losses allocated to 1980 totaled
  $1,000,000, then Insurer ABC’s gross liability
would be $0
 $4,000,000, then Insurer ABC’s gross liability would
be $300,000 (= 10% x ($4,000,000 – $1,000,000))
  $6 million, then Insurer ABC’s gross liability would
exhaust its limit of $500,000
©Towers Perrin
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Exposure-Based Analysis:
(5) Provision for Non-Products Losses
 Non-products losses without products exposure
 Most often premises related
 For most, absence of aggregate limits has no impact
 Non-products losses by traditional products defendants
 A limited number of traditional products defendants have been
successful in bringing non-products claims
 Attorneys are clever
 Generally due to exhausted products coverage
 “Reclassify” claims to reinstate products limits
 File operations claims to access additional coverage, generally
written without aggregate limits
 Aggregate limits may be imposed
 Wellington
 Bankruptcy negotiations
 Settlements
©Towers Perrin
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Exposure-Based Analysis:
(6) Provision for Property Damage, DJ Expense
 Significant property damage liability experienced by
only a few defendants
 DJ Expenses
 Consider ratios of paid DJ/paid loss & ALAE
 Consider DJ reserves
 Consider recent DJ payment levels and future
multiples
 Consider (changes in) staffing levels
©Towers Perrin
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Exposure-Based Analysis:
(7) Provision for Pure IBNR
 Emergence of additional exposure arising from
additional coverage / new defendants
 Estimate annual emergence
 Estimate future reporting horizon and rate of decline
 Consider severity of new exposure
 Adverse development on known accounts
 Uncertainty with newer risks
 Coverage identification / ”missing” policies
 Discovery of liability potential / immature litigation
©Towers Perrin
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Exposure-Based Analysis:
(8) Ceded/Net Analysis
 Best practice: directly reflect terms of outward reinsurance
protections applied to gross loss estimates
 Model gross, ceded and net directly
 However, some outward programs are too disparate /
complicated to model
 Some insurers can provide gross estimates to ceded
reinsurance department
 Common practice: review historical net / gross ratios by
homogenous groupings
 Paid ratios may not be reflective of future
 May be distorted by a few large accounts
 May not adequately reflect future cessions in excess-of-loss
programs
 Consider reinsurance collectibility: commutations, insolvencies,
disputes
©Towers Perrin
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Exposure-Based Analysis:
(9) Provision for Uncertainty
 Range of estimates considers various scenarios / uncertainty
 Why have projections missed the mark in the past?
 Choice of methods
 Data constraints
 Specific assumptions
 External environment





©Towers Perrin
Unimpaired claimants
 Mass screenings
 Impact on settlements / compensation
 Dismissals
 Inactive dockets
“Jackpot” awards
Bankruptcy
 Pre-packs
 Accelerated payments
Expansion of “target” defendant list
Reform efforts
29
Portion of $200 billion Ultimate Loss and Expense
– Retained, Net Insured U.S., Net Non-U.S.**
Net NonU.S. Insured
Retained by
31%
Defendants
39%
Net U.S.
Insured
30%*
*$60 billion mid-point of $55 – $65 billion range of the “Universe” of net liabilities to the U.S. P/C market.
**Additional details available in Emphasis 2001/3, “Sizing Up Asbestos Exposure,” a publication of Tillinghast –
Towers Perrin, at www.towers.com.
©Towers Perrin
30
$ Billions
Paid and Reported Loss and Expense Compared to
Estimates of Net U.S. Ultimate Liability
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
0
1994
1995
1996
1997
1998
Estimated Ultimate Cost ($55 - $65 billion)
1999
2000
2001
2002
2003
Cumulative Paid ($28.2 billion at 2003)
Outstanding Case & IBNR ($22.2 billion at 2003)
©Towers Perrin
31
Recognition of Asbestos Liabilities
Gross Incurred Asbestos Loss and Expense
Calendar Year 1998 - 2003: Ten Largest Increases
Hartford Insurance Group
Travelers Prop Cas Group
ACE INA Group
CNA Insurance Companies*
American International Grp Inc*
White Mountains Insurance Grp
Allianz of America, Inc
CY Net Incurred
CY Ceded Incurred
Liberty Mutual Insurance Cos
Allstate Insurance Group*
Chubb Group of Insurance Cos*
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
Millions
Based on Note 29 Annual Statement data as of 12/31/2002 and public disclosures of reserve charges during 2003.
*Note, for some companies 2003 gross (or ceded) amounts were not disclosed, so only the net amount is included.
©Towers Perrin
32
Recent Increases in U.S. Asbestos Liabilities
 U.S. Insurers have increased asbestos reserves by at least $12
billion gross ($8 billion net) since the beginning of 2003
 The Hartford – $4.0B gross, $2.6B net (May 2003)
 Travelers - $3.2B gross, $2.6B net (Jan 2003)
 ACE USA - $2.2B gross, $0.3B net A&E (Jan 2003)
 Swiss Re America - $520M gross, $458M net (Q4 2003)
 CNA - $517M net A&E (Q3 2003)
 Allstate - $514M net (Q2&Q3 2003)
 AIG - $440-450M net (Q4 2003)
 Liberty Mutual - $405M gross, $331M net (Q3 2003)
 Chubb $250M net (Q4 2003)
 Argonaut - $52.8m (Mar 2003)
 Follows further significant increases in 2001 and 2002
 Increased pressure on peers to make similar disclosures
©Towers Perrin
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Recent Increases Abroad
 Equitas (amounts in Sterling)
 £1.5B gross undiscounted (Q1 2000)
 £1.7B gross undiscounted (Q1 2001)
 No change as of Q1 2002
 £0.4B gross discounted (Q1 2003)
 £0.3B gross discounted (Q1 2004)
 Royal & Sun Alliance (amounts in Sterling)
 £371M for U.S. and U.K. (Feb. 2002)
 £150M for U.S. and U.K. (Sept. 2003)
 £500M for U.S. and U.K. (March 2004)
©Towers Perrin
34
Themes Underlying Insurer/Reinsurer Charges
 Some companies recognized increases each year,
others less frequently
 Not all insurers included in the “dirty thirty” have
increased reserves by a significant amount
 Increases in anticipated cessions exceed increases in
net amounts recognized by reinsurers
 Some reinsurance is non-U.S.
©Towers Perrin
35
Comparisons of Reserve Adequacy
 Need an understanding of the method(s) utilized
 Prior to 2002 insurer disclosures
 Guesswork
 Rules of thumb
 Disclosures during 2003
 Provided first details regarding ground-up exposure-
based analyses
 Specific assumptions underlying the actual analyses
are critical and many details are still not disclosed
©Towers Perrin
36
Manville Trust Recent Claim History
 The Manville 2002 TDP is almost exactly the same as the TDPs in
emerging and pending asbestos trusts
 From October 1, 2003 through March 31, 2005, a period of 18
months, the CRMC received approximately 28,000 Manville Trust
claims
 In the first 9 months of 2003, the CRMC received approximately
90,000 Manville Trust claims
 Why such a dramatic decrease in claim filings?
Source: David Austern, CRMC, April 6, 2005 ACI Meeting
©Towers Perrin
37
2002 Revised Manville Trust Distribution
Process (TDP)
 The 2002 Manville TDP differs from the 1995 TDP in the following ways
 There is a requirement of Significant Occupational Exposure (“SOE”)
 There is more stringent medical criteria under the 2002 TDP
 An independent claims forecaster re-evaluated claims filed between 2000
and 2003 under the 1995 TDP to determine how the claims would have
been settled if they had been filed pursuant to the 2002 TDP
 Expected annual claim payments decreased from (estimated) $146.8
million to $87.9 million
 Only one-third of the 1995 TDP claims filed in three of the major claim
categories met the SOE requirement
 A significant number of claims failed to meet the more stringent 2002
medical criteria
 Approximately 50% of the 1995 TDP claims were paid at the lowest
compensable value; when 2002 TDP criteria were employed, nearly
84% of the claims were paid at the lowest compensable value
Source: David Austern, CRMC, April 6, 2005 ACI Meeting
©Towers Perrin
38
What Are Potential Federal Solutions?
Asbestos-Related Bills Introduced into the 108th (2003-2004)
Congress:
 6 relating to asbestos reform
 HR1114 – Kirk (R-IL) – office of Asb. Comp./court
 HR1586 – Cannon (R-UT) – court
 HR1737 – Dooley (D-CA) – court
 S413 – Nickels (R-OK) – court
 S1125 / S2290 – Hatch (R-UT) – trust
 2 to ban the use of asbestos
 HR2277 – Waxman (D-CA)
 S1115 – Murray (D-WA)
 1 to change the tax code, such that asbestos-related
settlement funds would be exempt from tax
 HR2503 – Collins (R-GA)
©Towers Perrin
39
Senate Bill 1125
 Introduced May 2003
 No Fault System
 Initially called for a privately funded trust totaling $108 billion
comprised of:
 Insurers - $45B
 Defendant companies - $45B
 Current bankruptcy - $4B
 Voluntary contributions - $14B
 Funding contribution
 Insurers still negotiating; subject to insurer commission
 Defendants grouped to tiers based on historical payments
 Separated into sub-tiers based on revenues
©Towers Perrin
40
Potential Insurer Allocation
 Insurers include U.S. and Non-U.S. companies
 Insurer funding is net of third party reinsurance
 Gross of financial cover
 Initial discussions based on a blended approach
 Market share – premium and paid losses
 Future exposure – carried reserves
 More recent discussions focused on an industry-wide
ground-up study
 Insurer funding is concentrated
 12 insurers likely to contribute 75%
 20 insurers likely to contribute 90%
©Towers Perrin
41
Initial Quantification of the Economic Impact
of S1125 – 6/4/2003 Hearing
 Is proposed Trust Fund of $108B adequate?
 Tillinghast Projections Released May 2001:
 $200B Ultimate Loss & Expense
 Less $70B paid as of 12/31/2002 (est. by RAND)
 Equals $130B of 2003+ future payments
 Reduced for frictional costs
 $61B expected to reach claimants
 Conclusion is consistent with RAND: transaction
costs have consumed more than half of total
spending
©Towers Perrin
42
Initial Quantification of the Economic Impact
of S1125 – 6/4/2003 Hearing
 Reflect specific indemnity awards under S1125
 Future claims to be be filed from 2003 - 2049
 Pending claims to be re-filed
 Initially eight Disease Levels consistent with the
Manville 2002 TDP
 Specific awards by Disease Level
 $0 for Levels I-II to
 $750,000 for Level VIII (meso)
 Tested various scenarios - all at or below $108B
©Towers Perrin
43
Senate Bill 1125 - 2003 Compromises
 S1125 passed out Senate Judiciary Committee on
July 10, 2003 (10-8) with significant compromises
 Revised medical criteria – 10 Disease Levels
 Revised awards ($20,000 for Level II to $1 million
for Level X)
 Department of Labor to process claims
 Unresolved issues:
 Size of the fund
 Start-up / pending claims
 Finality / sunset provisions
©Towers Perrin
44
Progression of Trust Fund (S1125 / S2290)
 S2290 was an updated version of S1125
 Introduced April 7, 2004
 Frist funding - $124B
 Specter process agreements
 Administrative structure
 Expedited start-up
 Expedited judicial review
 Modified sunset
 Moratorium
 Return to federal court
©Towers Perrin
45
Outcome of S2290
 4/22/2004 – Senate did not obtain 60 votes needed to
invoke cloture for debate before the full Senate
 50 Yea / 47 Nay
 5/6/2004 – Further negotiations mediated by Chief
Judge Emeritus Edward Becker of the Third Circuit
U.S. Court of Appeals ended without agreement
 Defendants / Insurers offer $116B + $12B
contingency = $128B
 Demand by AFL-CIO remains at $134B + $15B
contingency = $149B
 However, Frist / Daschle continued to work toward a
compromise
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Potential Size of the Fund
 Compensation levels and projections of claim filings
 April 2004 CBO estimate = $140B over 50 years
 Daschle late-June proposal of $141B
(+$4B from existing trusts = $145B)
 Frist mid-July proposal of $140B
(=$136B + $4B from existing bankruptcy trusts)
 September 2004 compromise reached at $140B
 NPV differs by ~$4B
 Demand by AFL-CIO remains at $149B
 Insurers remain at 2003 offer of $46B
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Most Significant Outstanding Issues of S2290
 Start -Up
 Daschle would allow most cases with a trial date to
proceed in court
 Frist would have all existing claims revert to the
fund, except where there has been a final judgment
 Lung cancer claims
 Level VII: $500K Daschle v. $150K Frist
 No finality
 Reversion to state and federal courts
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Efforts in the 109th (2005-2006) Congress
 President Busch campaigns for asbestos reform
 Trips/speeches in Detroit and Madison County
 State of the Union
 Specter holds Judiciary Committee Hearing
January 11, 2005
 Discussion draft released January 7, 2005 with
“blanks”
 Exxon Mobil, DuPont, Federal Mogul and others say
they would fare better under existing system
 AIA says draft bill “designed to fail”
 Group of insurers / defendants say draft “raises
serious concerns”
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Efforts in the 109th (2005-2006) Congress
 February 2, 2005 Hearing regarding mixed-dust claims and “double-
dipping”
 Medical experts agreed asbestos v. silica disease can be
distinguished
 Unlikely an individual would suffer diseases carried by both
substances
 Early-February Specter delays introduction of bill to garner GOP support,
at request of Frist
 Late February, describes process as balancing act between
Democrats and Republicans, but making progress
 March 1, Washington Times “If everyone insists on the last bit of
advantage, there will be no bill… Prompt compromises will have to be
forthcoming if this critical legislation is to become law or relegated to
the deep freeze.”
 Frist has reserved time in early April (after 3/18 – 4/4 recess) for
Senate consideration
 S. Res 43 (H. Reid/Democrat/Nevada) designates April 1, 2005 as
“National Asbestos Awareness Day”
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State Reform Efforts
 Efforts at federal reform have drawn attention to
abuses in the current system (e.g., claims by the
unimpaired)
 Several states aren’t waiting for a federal solution and
recently have enacted various reforms
 Mississippi
 New York
 Ohio
 Texas
 West Virginia
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Will It End?
 Legislative Reform
 Federal vs. one jurisdiction at a time
 Will Ohio hold, Texas be enforced, ….?
 How portable are the claims?
 Judicial System Changes
 Getting back to the basics
 Adequate discovery
 Trying cases
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Fraudulent Claims
 National Tire Workers Litigation Project – 1986
 Group 1: 64% positive; Group 2: 95% positive
 Re-evaluated 439 cases: only 3.6% positive
 Johns Hopkins
 Re-evaluated 551 films used as legal basis for claims
 Originally >90% positive drops to <5% positive
 2/16-18/2005 Silica MDL Daubert Hearings – Judge Jack/Corpus
Christi, TX
 >50% of 10K MDL claimants previously filed asbestos claims
 Doctors testified they weren’t qualified to make diagnoses;
didn’t authorize silica diagnoses
 Defense attorneys have requested $1.1M sanctions against
plaintiff attorneys; subject of 3/14/2005 hearing
 Judge Jack likely to remand cases to state court by end of
March
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