The trust fund set up by Johns Manville Corp. to compensate peopleinjured by asbestos is facing a sharp rise in claims that threatensthe fund's solvency--a development that worries Chicago-based USGCorp. and other companies that also face huge asbestos costs.
The drain on the Manville Trust, which already has paid $2.7billion to injured asbestos workers, prompted U.S. District JudgeJack Weinstein and U.S. Bankruptcy Judge Burton R. Lifland to convenea hearing last week to consider remedies.
Weinstein and Lifland had cited a continuing media campaignencouraging new claims, the fund's steep reduction in claim paymentsand a rise in bankruptcy filings by asbestos-related entities asdaunting issues confronting the trust.
That combination of events "suggests that there may be amisallocation of available funds, inequitably favoring those who areless needy over those with more pressing asbestos-related injuries,"the judges said in a notice about the hearing. When the trust beganmaking payments in the early 1990s, it covered 100 percent of theclaimants' medical bills. The payments declined to 10 percent in 1995and 5 percent this year.
"What happens in the Manville Trust, which has been a bellwetherin this field, will have impact throughout the nation," Weinsteinsaid.
Wallboard manufacturer USG Corp. and three of its operatingsubsidiaries, including U.S. Gypsum Co., filed for bankruptcyprotection in June because of asbestos litigation costs.
In a memo filed with the judges Nov. 7, U.S. Gypsum's attorneyurged the court to prioritize claims so "only sick plaintiffs receiveawards and that others be remitted to future remedies protected bythe trust's ability to pay in the event actual sickness occurs."
"The threat of future harm, not yet realized, is not enough,"wrote attorney John D. Aldock.
Similarly, several lawyers at the hearing argued that the trustmust tighten its criteria to screen claimants without cancer morerigorously. Others suggested that the trust should change the ratioof payments it makes to cancer and non-cancer patients to give moreweight to the most seriously ill.
"It's time for the trust to set the example and stop payingsignificant amounts of cash to people without any evidence ofsignificant impairment," said attorney Steven Kazan. "We need totighten the criteria."
Weinstein and Lifland made no rulings and were not asked to do so.Rather, they urged the lawyers and the trust to meet and report backin 30 days about whether they can resolve the problem.
David Austern, the general counsel for the trust, cited "a hugeincrease" in non-cancer claims, including for bilateral pleuraldisease and other lung disorders.
In 1999, the trust received 28,059 non-cancer claims. For thefirst 11 months of 2001 the total was 65,672, Austern told thejudges.
The Manville trust, one of four major asbestos trusts in thecountry, is facing mounting claims as eight major asbestos companieshave filed for bankruptcy protection in the past year.
They include Owens Corning, the largest U.S. insulation maker;Armstrong World Industries Inc., North America's largest vinyl-flooring maker; G-I Holdings Inc., owner of building materialscompany GAF Corp., and chemical maker W.R. Grace & Co.
Several attorneys said that the resolution of those bankruptcycases probably will affect the volume of medical claims to theManville trust.
The Manville trust, set up during the 1988 bankruptcyreorganization of building materials maker Johns Manville Corp., haspaid $2.7 billion on 437,781 claims, a number that could grow to 3.1million claims by 2049, trust officials project.
Despite lowering administrative costs to 4.1 percent of payouts,the trust will be pressed for cash over the next five decades,according to a Dec. 5 letter to the judges by trust chairman RobertA. Falise.
He cited court-sanctioned requirements that allow payments for anyof seven diseases if workers are exposed in any way to asbestos. Manysuccessful claimants, he said, had "no discernible asbestos-relatedphysical impairment whatsoever."
Many claimants have injuries that are imperceptible without theaid of X-ray or other imaging technology, Falise said. They are"marshaled in mass screenings that have as their primary purpose therounding up of claimants whose settlements will generate fees for thesponsors of the screenings," he said.
Bloomberg News, with Sandra Guy contributing
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