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Ms. Margaret Seminario
January 11, 2005
Testimony of Margaret Seminario,
January 11, 2005
The AFL-CIO appreciates the opportunity to testify on federal legislation on asbestos compensation. Senator Specter, I want to begin by congratulating you on your selection as Chair of the Senate Judiciary Committee. I also want to thank both you and Senator Leahy for your commitment and tireless efforts to craft a fair and sound asbestos compensation bill. It is certainly a daunting and complex task, but a most important undertaking. I also would like to take this opportunity to thank Judge Edward Becker for his dedication to this issue and effort. For the last year and a half, he has devoted countless hours of his time working with stakeholders, senators and others to bring the parties together to examine key issues and narrow and bridge differences.
The AFL-CIO has welcomed the opportunity to participate in these efforts to craft a fair compensation bill for asbestos victims. For the last several decades we have seen the toll of workers and family members disabled and killed by asbestos disease mount to staggering levels, the result of the willful practices of manufacturers and employers who withheld information about the hazards of asbestos, and did little or nothing to control exposures. The result of these actions is an occupational and environmental disease crisis of unprecedented magnitude. Hundreds of thousands of victims have already suffered and died from cancers and disabling lung diseases. Hundreds of thousands more will suffer or die in coming years.
As the disease crisis has grown, so has litigation as victims have sought redress for their injuries. While the civil litigation system provides justice for some asbestos victims, because of long delays, high transaction costs, and inequitable distribution of compensation among victims, it is far from an optimal system for compensating victims and their families. In addition, as companies with the greatest responsibility for asbestos exposures have sought bankruptcy protection, plaintiffs have increasingly looked to other firms for relief, creating uncertainty for those companies about future liability and uncertainty for victims about whether sources of compensation will be available in the future.
It is for both these reasons - the massive asbestos disease crisis and the serious problems with the current litigation system - that the AFL-CIO has engaged so deeply in efforts to craft a legislative solution.
The AFL-CIO has supported, in principle, the establishment of a federal asbestos trust fund to compensate victims for their personal injuries through a no-fault system to replace the present, inadequate civil litigation system. We have consistently made clear that, to gain our support, any legislation establishing a national compensation fund must provide fair compensation for victims for the diseases they have suffered; have adequate funding to pay claims and ensure fund solvency; deliver compensation in an efficient and timely manner to victims who qualify; and ensure that victims will not be left at risk if administrative or financial problems arise. We have also made clear that we will not support, and will strongly oppose, any legislation that does not meet these basic principles, and any legislation that relieves defendants and insurers of their responsibility and liability at victims' expense.
In the last Congress, through hard work, extensive discussions and good faith efforts by many, including Senators Frist and Daschle, significant progress was made on key aspects of asbestos trust fund legislation. Important agreements were reached among senators and stakeholders on medical criteria and the establishment of an administrative system at the Department of Labor. Major progress was made on providing fair awards for disease victims and increased funding for the trust fund. But at the end of the Congress, differences on key issues remained.
Given these agreements and progress, we are deeply disturbed and dismayed by letters and statements from some insurance and business groups opposing current efforts to reach a compromise on asbestos trust fund legislation. Apparently, these groups read the results of the November election as license to back track on previous agreements, and to renege on their commitments made to fairly compensate asbestos victims. If, indeed, business groups are not prepared to stand behind their agreements, it will be impossible to resolve, or even to narrow, remaining differences, destroying any possibility of passing asbestos compensation legislation.
Let me now turn to the key issues that the AFL-CIO believes must be addressed in asbestos compensation legislation. But first let me note that we have not had the opportunity to review the latest discussion draft of the legislation in great detail. We are in the process of doing so, and will provide our views and comments on that proposal shortly. For today, this testimony will outline the AFL-CIO's views on key issues that have been under discussion for the past two years.
Key Issues for the AFL-CIO
Fair Compensation for Victims - First and foremost, asbestos compensation legislation must provide fair compensation to victims who have developed disease as a result of asbestos exposure. The compensation awarded should be commensurate with the level of disease and disability suffered. We believe that through last year's discussions, compensation values for diseases have moved closer to what represents fair compensation. However, the values proposed for some diseases in S.2290 and in the latest business offers, particularly those proposed for Level VII lung cancer remain far too low. The argument that claimants with lung cancers merit lower awards because their conditions may not really be asbestos-related ignores the requirement that, to qualify for an award, these claimants must show 15 years of exposure to asbestos, a period of time that makes it substantially likely that exposure to asbestos contributed significantly to their condition. These victims deserve to be fairly compensated for this serious, life-threatening disease.
Second, the legislation must provide for upward adjustments in compensation for those victims and the families of victims on whom the burdens of asbestos disease fall most harshly. For reasons of administrative efficiency, the AFL-CIO has been willing to accept a compensation scheme under which claimants who qualify for an award for a particular disease level would for the most part receive the same lump sum amount, regardless of individual circumstances. We have not, for example, insisted that awards be individualized to take into account differences in lost income or future earnings or differences in the medical expenses incurred by different claimants. However, where a claimant is significantly younger than the typical claimant and has more dependents, basic principles of fairness require that there be some adjustment in his or her award to account for those circumstances. The simple fact is that both the economic and the non-economic impacts of a life-threatening or disabling asbestos-related disease are much greater on a 45- year-old with young children than they are on an 85- year-old with the same disease. We have therefore proposed that, in exceptional circumstances where the claimant is unusually young or has dependent children, adjustments in awards be made to take account of those circumstances. Because the victim's age and the number and ages of the victim's dependents are objective factors that can easily be demonstrated, a compensation scheme that provides for such adjustments would be easy to administer and could be designed in such a way that it would not increase the overall cost of the bill.
Directly related to award values are the issues of collateral source offsets and subrogation of awards, which will determine the net value of compensation received by claimants. As has been recognized by all those involved in this process, the award values in the bill are not designed to fully compensate individual victims for the effects of their asbestos exposures. Even if awards are adjusted as we have proposed for claimants who are unusually young and have dependent children, there will be no individualization to take into account actual and projected medical costs or lost income, nor are there values assigned to pain and suffering. Consequently, for many sick claimants, the award levels are far below what they would receive in the current tort system. To be fair to victims, claimants must be permitted to receive and retain the full value of their awards. There should be no collateral offsets, except for amounts received in litigation over the same asbestos-related conditions. And the bill must extinguish any liens or rights of subrogation that other parties might otherwise assert against the claimants based on workers' compensation awards, health insurance payments, health and welfare plans, or the like.
Recent proposals by insurers have called for a workers' compensation payment holiday for insurers or employers for victims who receive trust fund awards. These proposals would in effect allow them to impose a lien against the entire trust fund award, which goes well beyond the practice under a number many state and federal laws, which the insurers propose be preempted. The AFL-CIO strongly believes that there should be no subrogation against trust fund awards, but certainly in no way should the legislation reduce workers compensation payments and make things worse for victims, as the insurers proposal would do.
Adequate Funding to Ensure Trust Fund Solvency - A central concern of the AFL-CIO is that the trust fund has sufficient funding to ensure that victims' claims can be paid. We are particularly concerned that the program be adequately funded during the early years, when the demands and stresses on the system will be greatest. The number of pending claims that may immediately come into the fund is estimated to range from 300,000 - 600,000. With the new claims that are expected, projections predict that one- third of total costs and claims will come in the first 5-6 years of the program.
As the AFL-CIO has stated previously, we are deeply concerned that the costs and claims projections performed for this legislation in 2003 underestimate the claims that will actually be filed with the fund, particularly in its early years. The most recent government data from the National Center for Health Statistics (NCHS) show that reported mesothelioma deaths in the United States are running 25 percent higher than the number of mesothelioma claims projected in cost estimates for the bill. The NCHS data also show that the asbestos disease epidemic has not yet peaked, but instead that deaths attributed to mesothelioma and other asbestos-related deaths are still increasing, with 2,573 mesothelioma deaths reported in the United States in 2002.
Moreover, a recent study by the National Institute of Occupational Safety and Health (NIOSH) reports the actual incidence of mesothelioma (as opposed to the number of reported deaths where mesothelioma was specified as the cause of death) to be even greater, which would put the number of actual mesothelioma cases at a level that is 50 percent greater than that projected in the costs estimates for S.2290.
While we recognize that there are uncertainties in claims projections, the legislation and funding needs should be based upon the most complete and current information available. The legislation must provide for sufficient funding to pay the large numbers of initial claims that are expected, and to ensure that the fund will work. It is in no one's interest and, indeed, it would be a disaster, particularly for victims, if the fund were to collapse within a few years of its inception.
Since the last Congress, the confirmation of the Halliburton bankruptcy trust for asbestos has raised a new issue with respect to contributions and funding. This confirmation will result in a change in the treatment of Halliburton under the legislation from a Tier I defendant to an asbestos class action trust. Defendants have asked that the aggregate contribution level for Tier I entities and defendants be reduced by the amount Halliburton would have paid as a Tier I defendant, so that other defendants are not responsible for making up the amount of Halliburton's contribution. The AFL-CIO does not object to such an adjustment being made. However, based upon available information, it appears that Halliburton's contribution to the national trust fund as a bankruptcy trust will exceed what it would have been required to pay as a Tier I defendant. It is the AFL-CIO's position, as was intended in establishing the Halliburton trust, the victims should benefit from the additional value of its contribution, not the defendants. Therefore, the adjustment to the defendants' contribution should be fixed at the amount that Halliburton would have paid as a Tier I defendant, and any additional liability on Halliburton's part should simply increase the overall size of the national trust fund.
Treatment of Existing Asbestos Trusts - It is the AFL-CIO's view that the immediate and total transfer of assets from existing asbestos bankruptcy trusts to the new national fund, as proposed in S.2290 is very problematic because in the event of a sunset of the national trust fund, victims injured by the companies that established these trusts would have nowhere to go to obtain compensation. Under section 524(g) of the bankruptcy code, companies like Johns Manville that created these trusts were able to rid themselves of all future liability for asbestos-related injuries in return for creating and funding these trusts, to which all future claims were to be channeled. If, however, the assets of the trusts are transferred at the outset into the new national fund and the fund subsequently becomes insolvent, triggering a return of claims to the tort system, claimants who would have otherwise have had the right to file a claim for compensation with one or more of these trusts will be left without recourse.
We have proposed, as an alternative, that the existing trusts pay into the national trust fund over time like other defendants, with their annual contributions set at levels calculated to insure that if there is a reversion, the trusts will have retained a proportionate share of their assets with which to pay future claims. Recently, the companies that have established such 524(g) trusts have made a similar proposal, with a modification that would require the contribution of 10 years of estimated payments upfront. While we continue to believe that annual contributions by the 524(g) trusts are preferable, the proposal made by the 524(g) companies is more acceptable than the treatment of these trusts under S. 2290.
Transparency of Contributions- As proposed, S. 2290 failed to provide any transparency with respect to liabilities and contributions of defendant and insurer contributors, and indeed specifically provided that information submitted by contributors would be treated as confidential financial records for FOIA purposes. While the argument has been made that defendants and insurers are reluctant to provide such information prior to enactment of the legislation, there is no reason that such information should be withheld from the public after the enactment of the statute. Indeed, one of the primary mechanisms for ensuring that defendants' and insurers' declarations of asbestos liability are true is to provide for public review of those declarations, so that others with factual knowledge have the opportunity for comment.
To this end, the AFL-CIO believes that information submitted by defendants and insurers should be treated under the existing requirements of FOIA. Moreover, we believe that the legislation should require that initially and during the assessment process, there is notification through the Federal Register of defendants and insurers identified as potential and qualifying participants and the assignment of their level of contributions, and the opportunity for the public to comment on the accuracy and completeness of these determinations.
Preemption of "Asbestos Claims" - A matter of increasing concern to the AFL-CIO is the preemptive scope of the proposed legislation - that is, the kinds of claims that plaintiffs will be precluded from bringing in court if the new asbestos fund is created. From the start, it has been understood by all concerned that the proposed new administrative compensation scheme would be a substitute for the current civil litigation system for resolving asbestos-related personal injury claims; that in return for obtaining the right to obtain compensation for their injuries from the proposed new fund, victims of asbestos disease would lose their current right to sue third parties responsible for their exposures in state and federal court; and that in return for obtaining immunity from such suits, those third party defendants and their insurers would finance the new fund. Unfortunately, however, because of overreaching by the business community, the pre-emptive scope of the bill has been broadened to the point that it would extinguish all kinds of perfectly valid claims by persons or entities who would have no right of recovery for those claims from the new fund, against persons or entities who would have no obligation to contribute to the fund. There is no justification whatsoever for allowing this to happen.
The way this broad preemption is accomplished is through the definition of an "asbestos claim," which defines what claims will be extinguished when the new legislation is enacted. As originally introduced and reported out of Committee, S. 1125 defined an "asbestos claim" for preemption purposes as "any personal injury claim" arising out of, based on, or related to, the health effects of exposure to asbestos. The limitation to personal injury claims was consistent with the intended purpose of the bill, and with the scope of the administrative remedy that the bill would provide. At the behest of the business community, however, this language was changed in S. 2290 to provide for preemption of "any claim, premised on any theory, allegation, or cause of action" arising out of, based on, or "related to," the health effects of exposure to asbestos.
This definition of an "asbestos claim" is so broad that it would, on its face, preempt the following lawsuits, all of which are actual examples of cases "relating to" the health effects of asbestos that have been brought in state or federal court:
? a suit by a state environmental agency to collect a fine or enforce a lien imposed against a property owner or contractor for improper removal or disposal of asbestos materials.
? an action by an insured against a disability or health insurer for refusing to pay for treatment for a covered asbestos-related condition;
? a suit by a union to enforce an arbitration award requiring an employer to furnish personal protective equipment to employees working with or around asbestos in accordance with a collective bargaining agreement provision requiring the employer to provide such equipment.
? a suit by a purchaser of real property against the seller to recover damages for the seller's failure to comply with a contractual provision requiring abatement of asbestos hazards prior to transfer of the property
? a suit by a commercial building owner against a city tax assessor seeking a reduction in real property tax assessments because of diminished value caused by the presence of asbestos in the building
The definition of a preempted "asbestos claim" in S.2290 covers not only claims for damages but also claims for "other relief, " such as, presumably, injunctions. This too sweeps far beyond the intended purpose of the bill and would preclude the use of the courts by federal and state enforcement agencies to enjoin individuals or entities from engaging in actions that create or expose individuals to asbestos hazards, or to require them to take actions necessary to avoid such exposures.
In addition, in the name of preventing "leakage," defendants and insurers seek to cut off all suits by claimants who have had so-called "mixed dust" exposures - that is, who have had exposures not only to asbestos but to other substances, such as silica, that also cause disease, including cancer. Under their proposed broad definition of an "asbestos claim," a victim of silica disease who also happened to have been exposed to asbestos would be unable to bring a suit for damages against a defendant responsible for the exposure, regardless of whether or not the claimant was eligible for an asbestos award from the new fund, and even though the fund provides no compensation for silica-related conditions and companies that manufactured and used silica in their products are not required to contribute to the fund. Under no circumstances could the AFL-CIO acquiesce in the passage of a bill which so heedlessly and unjustly stripped workers and others of their rights of access to the civil justice system.
Transition to a New System - Providing for a smooth and fair transition to a new no-fault compensation system from the current litigation system is one of the most complex issues associated with this legislation. As noted earlier, there are more than 300,000 people with claims currently pending, with some estimates as high as 600,000 claims. Many of these are victims with serious diseases who have been in limbo for years while the defendants seek bankruptcy protection, and who have legitimate expectations that, absent legislation, their claims will soon, finally be settled. These people simply cannot have their current rights extinguished, only to be left again to wait, with no recourse, while a new system is put in place.
It is critical to be realistic about the time needed to make a new administrative system operational, and to pay victim's claims. Congress recently enacted legislation transferring portions of the Energy Employees Occupational Injury Program to the Department of Labor, giving the department 210 days to begin processing the 20,000 pending claims. Given the complexity of setting up an entirely new asbestos compensation program, which is dependent on the assessment and collection of contributions from as yet unidentified parties, it is likely that it will take much longer for this program to be operational.
The transition from the tort system must be accomplished in such a way that claimants who have invested substantial time, energy and resources in litigating their claims are not shut out of the court system and left with no recourse while the administrative system is created. A reasonable cutoff must be found that permits ripe cases to proceed to conclusion in the tort system. Similarly, claimants who have entered into enforceable settlements must be granted the benefits of their bargains. Finally, provisions must be made the to ensure that those with exigent claims - that is, mesothelioma victims or other claimants suffering from terminal illnesses - can have their claims quickly processed, either in the new system or, pending startup, back in the courts.
Administrative Issues - As I have noted, the central premise of the proposed legislation is that in return for losing their right to seek compensation for their injuries in court, asbestos disease victims will be able to secure fair compensation quickly and efficiently through a no-fault administrative system. The administrative system in S.2290 is largely the product of the good faith negotiations by parties in the last Congress. In our view, this system goes a long way to ensure that claims will be processed fairly and expeditiously. The agreement to assign the Department of Labor the responsibility for processing claims is important since, as the agency with the most extensive experience in handling compensation programs, it will be best able to get the program up and running.
One of the key elements of the medical criteria - and therefore, one of the key elements of a claimant's case - is exposure to asbestos for a specified period of time. For the administrative system to function efficiently, without presenting claimants with bureaucratic traps, the exposure proof requirements must be clear, simple and straightforward, and the Administrator must be easily able to determine whether the exposure requirements are satisfied. To that end, claimants should be able to attest to their exposure by affidavit, subject to the penalty of perjury to prevent fraud. And the Administrator should be required to identify industries and occupations for which there will be a rebuttable presumption that workers employed in those industries and occupations had substantial occupational exposure to asbestos. We propose that, to facilitate that task, the exposure presumptions currently used in the Manville Trust be among those adopted by the Administrator.
Statute of Limitations Issues - The AFL-CIO feels strongly that while there is reason to impose a statute of limitations on claims that have arisen before the establishment of the Fund - to avoid flooding the Fund with claims that would have been time-barred under the current system -- imposing limitations periods on claims that arise after the Fund is established and on claims that are pending in court or at a bankruptcy trust at the time of enactment would actually be detrimental to the interests of the Fund. A statute of limitations would lead to more filings in the early years, when the Fund is likely to be under the most financial pressure, and would create incentives for claimants to file, who might otherwise forego filing a claim at an early stage of disease, in order to avoid having their claims extinguished. We believe permitting these cases to come in over time would alleviate some of the anticipated flood of claims in the first few years, and avoid a major spike in claims filing - and the attendant bottleneck in processing - that is predictable at the close of a limitations period.
Labor is also strongly opposed, on both fairness and practical grounds, to the language in S.2290 providing that the statute of limitations runs from when the individual first received a medical diagnosis of an eligible disease or condition "or discovered facts that would have led a reasonable person to obtain a medical diagnosis with respect to an eligible disease or condition." We believe such a standard would create an administrative nightmare for the Fund and for claimants. It would impose a duty on the Administrator to make a threshold factual determination as to when the claimant had discovered facts that would have led a reasonable person to obtain a medical diagnosis -- a determination that would necessitate extensive inquiry into when and to what degree the claimant first began experiencing symptoms of his disease and require the Administrator to make a highly subjective and contestable determination as to when a "reasonable person" would have acted on those facts to obtain a diagnosis. This kind of inquiry and judgment is not appropriate for a no-fault administrative system that is supposed to ensure prompt processing of claims based on objective criteria.
Sunset and Reversion - Just as there must be a smooth and orderly transition at the start-up of the compensation fund, the bill must contain provisions for a smooth and orderly shutdown, in the event the fund is ever unable to satisfy all of its financial obligations. We support a process under which the Administrator will routinely evaluate the program's success in processing and paying claims and the fund's continuing ability to satisfy its on-going financial obligations. If, through these periodic assessments, the Administrator determines that funding will not be adequate, the Administrator should be required to develop options for addressing the problem, including planning to close the program's doors and permit claimants to return to the tort system. Any shutdown would be undertaken only as a last resort, after a thorough examination of the alternatives and through careful advance planning.
In letters and statements issued during the past few weeks, defendant companies and insurers have expressed concern and even alarm over the prospect that, should the fund run out of money, claims will revert to the tort system. The suggestion that reversion is a new and surprising concept is, in our view, completely disingenuous.
As reported out of Committee, S.1125 provided for a base amount of funding, with the possibility that, should the fund prove inadequate, the Administrator could make contingent calls requiring substantial additional contributions from the fund participants. And, if the fund were ultimately unable to satisfy all claims, the system would revert to the courts. Responding to the cries of the defendant and insurer communities, Senator Frist proposed eliminating the contingent calls and instead creating a fund that would give contributors greater certainty by fixing their contribution levels. The trade-off was that if the fund ran out of money, claimants would return to court. This is the system embodied by S.2290.
The AFL-CIO's preference from the beginning would have been to create an evergreen fund - one that would be replenished as necessary to ensure that all meritorious claims are paid in full, as long as there are victims of asbestos exposure. Absent an evergreen fund, however, the only fair alternative is to permit claimants to return to the courts once the Administrator determines that the fund cannot satisfy their claims. We cannot believe that the Congress would create a system that would leave asbestos victims totally without recourse if the fund collapsed.
No one who is honestly committed to establishing this asbestos compensation fund wants to see claims revert to the tort system. But there must be a safety valve to protect future claimants. In our view, the legislation must provide for a return to the status quo. This bill simply is not and cannot be a vehicle for tort reform. The AFL-CIO has engaged in this process in good faith, and has worked long and hard to guarantee fairness to victims of asbestos exposure and to help ensure the financial viability of the entities that owe them compensation. The solution that all this work has been aimed at is the creation of an administrative compensation system, outside the courts. If this system fails - which we sincerely hope it will not - and asbestos disease victims are forced to return to court, it will be the responsibility of the policymakers then in place to determine whether adjustments need to be made in the judicial system for handling those cases.
Federal Employee Liability Act (FELA) Claims - A key issue for the AFL-CIO has been the legislation's treatment of asbestos disease claims under the Federal Employee Liability Act (FELA), the workers' compensation system for rail workers. Earlier versions of the bill would have preempted FELA claims for asbestos-related diseases, limiting victim's recovery to compensation under a national asbestos trust fund. Such an approach is grossly unfair to rail workers, since for all other workers, the bill maintains workers' compensation rights. Alternative approaches to dealing with the FELA issue have been proposed, including providing for a supplemental payment, in addition to awards under the bill, to provide compensation to rail workers for work-related asbestos diseases. The AFL-CIO's affiliates who represent workers in the rail industry have been engaged in discussions with industry and senators on this issue, and will continue to work to see if a fair resolution can be reached.
Medical Screening - The inclusion of a medical screening program in the asbestos compensation legislation is a priority for the AFL-CIO. Medical screening of individuals at high risk of asbestos disease due to past exposure is necessary for the early detection of disease, so that interventions can be made to lessen the impacts and/or prevent the disease from progressing. Indeed, the recently issued American Thoracic Society Guidelines on the Diagnosis and Initial Management of Nonmalignant Diseases Related to Asbestos recommend both medical screening and medical monitoring as part of the medical management of asbestos-related diseases (Am J Respir Crit Care Med, Vol. 170. pp 691-715, 2004). In addition to providing early detection, treatment and management of asbestos-related diseases, a high quality medical screening program can provide individuals at high-risk with access to medical evaluations that meet accepted medical standards, conducted by qualified medical professionals. Patients can have confidence in the results and medical advice provided through such evaluations.
Prevention of Future Exposures and Disease - The various versions of this legislation have included provisions to ban asbestos and promote strong enforcement actions against parties that violate EPA or OSHA asbestos rules, thereby putting workers and the public at risk of asbestos-related diseases. While we strongly support the intent of such provisions, as drafted, they fall short of the mark. In particular, the bills call for referral of OSHA asbestos violations to the U.S. Attorney and Secretary of Labor for possible criminal prosecution under the OSHAct. However, the OSHAct provides for criminal sanctions only in those cases where a willful violation results in the death of a worker, a circumstance that is not possible when an employer is cited for an asbestos violation, given the long latency of the disease and the fact that any citation must be issued within six months after the agency discovers the violative workplace condition.
The AFL-CIO is very concerned that by eliminating third party liability, the bill will reduce current incentives to ensure that asbestos regulations are followed and workers and the public protected. To increase those incentives, and reduce the chance of future asbestos-related diseases, the AFL-CIO proposes that strengthening the OSHAct criminal penalties for willful violations of OSHA asbestos standards, and further, that that violators of EPA and OSHA asbestos standards be assessed for contributions to the national asbestos trust fund. Such contributions should be at levels sufficient to create real deterrence, with increasing contributions for recurring violations.