Budget Office Figures Federal Asbestos Fund Too Small to Pay All Claims

The Congressional Budget Office has estimated that the federal $140 billion asbestos compensation fund being considered by Congress could be too small to cover claims over the next 50 years.

The Fairness in Asbestos Injury Resolution Act was written to collect 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 chief co-sponsors of the asbestos bill are Senate Judiciary Chairman Arlen Specter, a Pennsylvania Republican, and Sen. Patrick Leahy of Vermont, the panel’s ranking Democrat. The bill was approved by the Judiciary Committee in May but has not yet moved to the Senate floor.

Maximum revenues
The maximum 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 fund would increase projected budget deficits over the 2006-2015 period by about $6.5 billion.

The legislation would ultimately remove asbestos injury claims out of the court system. 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.

However, under the proposed legislation, if the fund is unable to pay all claims, victims would have the option to return to the tort system to seek compensation. If there is a reversion to the tort system, suits may be filed in federal court, the state court in which the plaintiff resides or in the state court where the asbestos exposure occurred.

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.

Some insurers have supported a federal solution to address the claims associated with asbestos injuries. “Over the past few years, there have been several attempts to estimate the total value of claims made on behalf of individuals who are truly sick from asbestos,” said Julie Rochman, of the American Insurance Association. “As CBO notes, this is a somewhat inexact science. We do remain committed 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.”

“The Senate plainly wants a more rational asbestos claims system, and I believe that this legislation offers a realistic prospect of accomplishing that result,” Sen. Specter said when he proposed the legislation in April.

Topics Legislation Claims