The Role of Asbestos Trusts

Asbestos manufacturing companies hid the truth about the mineral’s health effects for decades. Corporations literally sat back and watched employees suffer and ultimately die from diseases it knew to be caused by occupational exposure to asbestos, without ever notifying the public of its role. It was not until the 1970s that litigation finally began, and courts held manufacturers liable for the injuries caused by its actions.

Today, about 100 American companies have declared bankruptcy from asbestos-related liability. In accordance with federal laws, those companies must then transfer liabilities and some assets to an asbestos personal injury trust. These trusts are responsible for providing compensation for all present and future claims, prioritizing seriously ill victims, and establishing processes for settlements.

Asbestos exposure attorneys highlight the importance of this litigation. Justice must be brought against not only the asbestos products manufacturers, but businesses and insurers that used asbestos or asbestos products as well. The U.S. Government Accountability Office (GAO) annually reviews available trust payment data set up in relation to bankruptcy claims. Companies filing for bankruptcy must submit plans of reorganization to the U.S. Bankruptcy Court, who must confirm the plans, and then be affirmed by the U.S. District Court of jurisdiction.

Once the reorganization plan is confirmed and the trust established, all asbestos personal injury claims originally intended for the debtor company must go through the trust. The asbestos trusts are privately managed and are generally comprised of at least one or more trustees, a trust advisory committee (TAC), and a future claimants’ representative (FCR). The trustees are to manage the trust for the sole benefit of the present and future claimant beneficiaries.

Although 60 companies subject to asbestos-related liabilities have filed for bankruptcy under Chapter 11 and established asbestos bankruptcy trusts, asbestos claimants can also seek compensation from potentially liable solvent companies (that is, a company that has not declared bankruptcy) through the tort system.

Since the establishment of the first trust in 1988 through 2010, available data indicate that asbestos trusts have paid about 3.3 million claims valued at about $17.5 billion. GAO reviewed available 2009 and 2010 annual financial reports and found that these trust paid approximately 443,000 additional claims totaling $3.6 billion in 2009 and 461,000 more claims totaling $3 billion in 2010.

The ratio is different in each trust, but trusts may allocate 80 percent or more of their available assets to the more serious claims. Such provisions serve to prioritize the more serious claims to ensure that less serious claims do not absorb the bulk of available assets each year simply because there are more of them.

Trusts typically offer claimants two options for claim review, either expedited review or individual review. Under expedited review, claims that meet the medical and exposure criteria for the alleged disease (referred to as the disease level) are to be assigned a scheduled value for the disease. The trusts seek to achieve relative equity among claimants by establishing these scheduled values. A claimant may elect to have a claim undergo the individual review process for purposes of determining whether the liquidated value exceeds the distribution procedures’ scheduled value, or if the claim does not meet the presumptive medical criteria for any of the disease levels.

If a trust determines that a claim meets the criteria documented in the distribution procedure, the trust is to make the claimant an offer based on a percentage of the scheduled disease value. Most trusts cannot pay the full value of a claim and still maintain sufficient assets to compensate all present and future claimants. As a result, trusts determine a payment percentage, a fraction of the full value that can be paid to present claimants and still maintain sufficient assets for future claims.

The median payment percentage across trusts is 25 percent. If the claimant accepts the trusts’ offer, the claim is paid. If the issue is not resolved through alternate dispute resolution, the claimant may file a lawsuit in the tort system against the trust in an appropriate court of jurisdiction regarding the amount of compensation offered by the trust.

Asbestos exposure attorneys at Pintas & Mullins Law Firm advocate on behalf of victims of occupational exposure and their families. Obtaining justice is an important right afforded to these victims, and it should not be taken lightly. If you were exposed to asbestos and developed a related disease, contact one of our experienced lawyers immediately for a free legal consultation.

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