The Congressional Budget Office released a cost estimate study on Friday for the Fairness in Asbestos Injury Resolution Act (S. 852), stating that the $140 billion asbestos compensation fund being considered by Congress could be too small of an amount to cover potential claims for all victims of asbestos over the next 50 years.
The Fairness in Asbestos Injury Resolution Act is designed to produce collections totaling about $140 billion over the first 30 years. The budget office expects that the value of claims likely to be submitted to the fund over the next 50 years could be between $120 billion and $150 billion, not including possible financing costs and administrative expenses. The maximum actual revenues collected under the bill from asbestos defendant companies and their insurers would be around $140 billion, but could be significantly less, the budget office said. Consequently, the CBO says the fund may have sufficient resources to pay all asbestos claims over the next 50 years, however, depending on claim rates, borrowing, and other factors, its resources may be insufficient to pay all claims.
The CBO estimates that net receipts and expenditures of the Asbestos Fund would increase projected budget deficits over the 2006-2015 period by about $6.5 billion (excluding debt service costs).
The legislation would ultimately remove asbestos injury claims out of the court system and would pay claims from the fund. Payments to eligible claimants, start-up costs, investment transactions, and administrative expenses would total nearly $70 billion, the CBO reported; $63 billion of that would be collected from firms and insurance companies with past asbestos liability and certain private asbestos trust funds.
The CBO estimates that almost $8 billion would be borrowed during the first 10 years because more than half of all anticipated claims expenses in would be paid out during that time. The fund would receive payments from insurers and defendant firms over its first 30 years.
Insurers have said that a federal solution to address the claims associated with asbestos injuries is needed.
“Over the past few years, there have been several attempts to estimate the total value of claims made on behalf of of individuals who are truly sick from asbestos,” said Julie Rochman, spokesperson for the American Insurance Association. “As CBO notes, this is a somewhat inexact science. We do remain commited to creating a federal solution that quickly and fully compensates all legitimate asbestos claims, without importing the claims abuse practices present in the current tort system.”
Asbestos fibers have been used in building materials, auto parts and other products for decades, but are linked to cancer and other diseases. Hundreds of thousands of injury claims have forced many companies into bankruptcy.
Senate Judiciary Chairman Arlen Specter, a Pennsylvania Republican, and Sen. Patrick Leahy of Vermont, the panel’s ranking Democrat, are the chief co-sponsors of the asbestos bill.
The bill was approved by the Judiciary Committee in May but has not moved to the Senate floor.