Potential Impact of the Fairness in Asbestos Injury Resolution Act of 2005 (S. 852) on Policyholders

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) (2005) (hereinafter “§ xx”). The Fund would be financed by annual payments made 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 these required payments.

While the Act generally provides for a stay of pending asbestos claims, exceptions to this provision could result in the most financially significant claims moving forward despite the Act. The legislation is not a “permanent solution”. If the Fund cannot meet its financial obligations, then all asbestos suits will return to the existing tort system. 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 (for premises defendants) and for silicosis and other claims (for products defendants), leaving most companies with reduced insurance for other currently covered “long tail” liabilities.

For the full story, please view the PDF.