Potential Impact of the Fairness In Asbestos Resolution Act of 2005

On April 19, 2005, Senator Arlen Specter introduced the “Fairness in Asbestos Injury Resolution Act of 2005” (the “Act”), S. 852, 109th Cong. (2005). The legislation would create a “privately funded, publicly administered” $140 billion trust fund (the “Fund”) to compensate asbestos claimants. S. 852, 109th Cong. § 2(b) (April 19, 2005) (hereinafter “§ xx”). The Fund would be financed by annual payments by asbestos defendants and their insurers. Defendants would be required to make annual payments for 30 years, subject to increases declared by the fund administrator. Any sale or transfer of assets, or even bankruptcy, would have no effect on this required payment. Also, while the Act generally provides for an immediate stay of pending asbestos claims, exceptions to this provision could result in the most financially significant claims moving forward despite the Act. Lastly, under the Act as proposed, insurance coverage for asbestos claims will disappear upon enactment along with a significant portion of insurance responsive to non-asbestos claims, such as environmental liabilities, leaving most companies with reduced insurance for other currently-covered “long tail” liabilities. This white paper will cover the following:

1. Asbestos Defendants Will Pay $94 Billion For the $140 Billion Fund, Insurers Will Pay $46 Billion
2. Annual Payments to the Fund and Tax Implications
3. Effect of the Act on the Transfer or Sale of Assets or Bankruptcy
4. Temporary Partial Stay of Asbestos Claims Upon Enactment
5. Effect on Insurance Coverage

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