Asbestos Litigation Costs and Compensation - An Interim Report

The RAND Institute for Civil Justice released Asbestos Litigation Costs and Compensation - An Interim Report in September 2002. The study is a comprehensive review of the history and status of asbestos litigation from a variety of perspectives, with the ultimate issue being whether the current tort system is the best way to resolve asbestos claims.

This study sought to synthesize data from a variety of sources, including federal courts, individual defendants, insurers, proprietary studies, interviews, and previous RAND research. It is noted that a minimal amount of comprehensive data is available, as there is no national registry of asbestos claims and lawsuits, most claims involve multiple defendants who keep their own confidential records, and claimants often receive money from multiple sources over long periods of time.

The report notes that over 600,000 claims had been filed in the U.S. through the end of 2000, and annual filings have risen over the last few years. There are increasing numbers of claims by functionally unimpaired, non-malignant individuals. Mesothelioma claims, while increasing, account for a small percentage of claims.

The typical claimant will name 60 to 70 defendants, an increase from an average of 20 different defendants in the early 1980s. The total list of defendants included in this study was over 6,000. It is noted that at least one company in nearly every U.S. industry (at the two-digit SIC level) is now involved in this litigation. According to the Claims Resolution Management Corporation, 40,453 claims from workers in "non-traditional" industries were filed in 2001, as compared to 11,420 similar claims in 1999. By spring 2002, at least 60 companies had filed for bankruptcy as a result of their asbestos liability exposure.

The report also notes that cases are heavily concentrated (66% of U.S. total filings) in five states: Mississippi, New York, West Virginia, Ohio, and Texas. The report reviews the various reasons for these concentrations, as well as the particulars of certain venues within these states.

The projections by different sources vary; however there is consensus that asbestos litigation is "far from over." This report estimates that defendants and insurers spent $54 billion through the end of 2000 to compensate the 600,000 claimants. As additional claimants come forward, the total cost estimates are for three to four times that amount . The report concludes that a figure of potentially over $200 billion raises the fundamental question of whether there will be enough money to pay future claimants. The report highlights that asbestos defendants also experience reductions in investment levels and job creation; therefore, bankruptcy is not the only economic effect to be addressed as a result of asbestos litigation.

The authors will publish a final report in early 2003, which will analyze the policy alternatives, including maintaining the status quo, relying on the bankruptcy system, changing the substantive doctrine by redefining "injury" to require functional impairment, and creating an administrative compensation program.

The full text PDF of this report is available at http://www.rand.org/publications/DB/DB397/. The authors of the report are Stephen Carroll, RAND senior economist; Deborah Hensler, RAND fellow and professor at Stanford University Law School; Allan Abrahamse, RAND consultant; Jennifer Gross, Scott Ashwood and Elizabeth Sloss, of RAND; and Michelle White, former RAND consultant.

Reviewed by Elizabeth B. Juliano and Carey J. Marousek

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