The asbestos litigation crisis has cost the American economy tens of thousands of jobs and has reduced pension wealth for employees at bankrupt firms by an average of 25 percent, according to an American Insurance Association-sponsored study authored by Nobel Prize-winning economist Joseph Stiglitz and two of his colleagues who served in the Clinton Administration.
The study, which can be found at http://www.asbestossolution.org, examines the economic costs of bankruptcies associated with asbestos liabilities. The study estimates that 61 companies have gone bankrupt as a direct result of asbestos liabilities. The authors noted that many of the workers at those companies are also shareholders, and that the bankrupt companies had a relatively high unionization rate. In addition, the study points out that asbestos claims are skyrocketing even though the number of seriously ill plaintiffs has remained roughly the same for a decade.
Among the study’s key findings are the following facts:
• Asbestos-related bankruptcies have led to the loss of an estimated 52,000 to 60,000 American jobs; this number is likely to grow in the future, since the pace of bankruptcies has accelerated in recent years. (During the first 10 months of 2002, 15 companies facing significant asbestos-related liabilities filed for bankruptcy, more than the total bankruptcies in any five-year period before 1999).
• Each displaced worker at a bankrupt firm will lose $25,000 to $50,000 in wages over his or her career because of the bankruptcy.
• The 401(k) retirement account for the average worker at a bankrupt company has lost an estimated 25 percent of its value, on average.
• Forty-seven states have at least one facility affected by an asbestos-related bankruptcy; the companies that have gone bankrupt employed more than 200,000 people the year before they filed for Chapter 11 bankruptcy protection.
“American workers are paying a heavy price for the asbestos litigation crisis, which is being created by claims which increasingly and overwhelmingly come from healthy plaintiffs,” Leigh Ann Pusey, AIA senior vice president, federal affairs, said. “The U.S. Supreme Court, prominent think tanks, major newspaper editorial pages around the country, leading asbestos trial lawyers, victims of asbestos-related cancers and their families, now a Nobel-prize winning economist are all making the same argument—Congress should fix this broken system now.”
Stiglitz and his colleagues—economists Jonathan Orszag and Peter Orszag—point out in the study that the dramatic rise in the number of asbestos claims is occurring despite the relatively stable number of claims each year from people who are severely ill because of asbestos.
The study was released at a news conference co-sponsored by the Asbestos Alliance, a coalition of companies and trade associations pushing for asbestos litigation reform. The AIA co-chairs the Alliance along with the National Association of Manufacturers.
Correction: In the Nov. 25 InsuranceJournal West issue, an incorrect phone number was submitted for the new market for real estate agents & mortgage brokers E&O. The contact is Phil Merrick, and the correct number is (510) 452-9291, ext.103.