Industry opposes federal solution on asbestos

There is an old adage that goes “if you are not part of the solution, than you part of the problem.” The insurance industry has sent that very message in a subtle way to Congress in letters to Majority Leader Bill Frist on the proposed Fairness in Asbestos Injury Resolution Act of 2005, (S. 852).

Scheduled for floor consideration this week, the American Insurance Association, the National Association of Mutual Insurance Companies and the Property Casualty Insurers Association of America are opposing S. 852 saying that “the resolution does not provide finality or certainty at an equitable, affordable cost.”

The AIA letter to Frist said that the bill must provide the exclusive administrative remedy for resolution of asbestos-related claims.

“Absent inclusion of all such claims in the fund or a credit for asbestos claims left in the litigation system, there can be no real finality for insurers. Our industry would inevitably find itself paying both substantial sums to the fund and additional large sums in the tort system for claims permitted to ‘leak’ outside the fund. This would present insurers with an even more untenable, expensive situation than posed by the current, highly dysfunctional litigation system,” according to the AIA.

The National Association of Mutual Insurance Companies delivered the same message calling the proposal a recipe for double jeopardy of “insurers having spent their asbestos reserves to make payments into the trust fund and then being force to respond to claims that revert back into the tort system.”

Additional critical concerns are that the $46.025 billion financing obligation created in 2003 falls on so few insurers (a dozen or so) that the impact of any orphan share obligation is greatly magnified, compared to a situation where any such obligation would be broadly distributed over thousands of entities.

Insurers also cite the lack of credits for amounts paid since $46.025 billion number was established, and also giving credits to defendants for monies that came from insurers in recent bankruptcy trusts cases, (see page 10 for Traveler’s related case) which the companies say should be provided to the insurers who were the ultimate source of the funding. There are tax issues, language problems and more. It is a complicated issue and no one expects the answers to be simple.

Meaningful asbestos reform is something the industry has sought for some time. Discussions and debates on the Senate floor this week will focus on the proposed reform resolution and we all know that it won’t just be insurance companies and their attorneys that will be paying attention. Agents, brokers and policyholders will be watching here in the Midwest and around the country to see if Congress can really be a part of the solution … or just part of the problem.

Topics Carriers