Asbestos Liability Should Be On Domestic Reform Agenda
by Doug Bandow
February 20, 2003
Doug Bandow is a senior fellow at the Cato Institute.
How to get the economy moving again is the dominant concern of most Americans. Tax cuts are a good place to start. Another necessary step is liability reform.
As President Bush noted in his State of the Union speech, "No one has ever been healed by a frivolous lawsuit." The administration is targeting medical malpractice litigation, but the change must be more far-reaching.
If meritless lawsuits succeed and huge judgments are imposed on the innocent, we all pay. Product costs and insurance premiums are higher; goods and services are no longer available. Companies disappear.
So it is with asbestos.
Growing Litigation
Unfortunately, breathing asbestos, once widely used as insulation, can result in a variety of harms, including mesothelioma, a deadly cancer. Companies should be held liable when they are responsible for the asbestos and people have been hurt. Neither is any longer a requirement for big judgments, however.
Asbestos litigation once was expected to shrink; in 2001, use of asbestos was barely 3% of the peak 1973 level. But a new study by Stephen Carrol and Deborah Hensler of the Rand Corp. reports that the number of suits has exploded from 21,000 in 1982 to 600,000 today. The total eventually might exceed 3 million.
Two decades ago analysts were predicting that the litigation, which had cost about $1 billion at that point, might run another $38 billion. The total has already passed $54 billion and is likely to cost as much as $210 billion more.
Bankruptcies are spreading, hitting 67 companies so far. Jesse David of NERA Economic Consulting figures that as many as 60,000 jobs may have been lost as a result. The victims are typically blue-collar workers with limited employment options.
The Rand study has pointed out another anomaly. Claims for mesothelioma and other cancers have stayed roughly constant over the last decade. But suits for nonmalignancies have jumped dramatically.
In many of these cases, plaintiffs show no evidence of injury. Common are asbestosis and pleural plaques, types of fibrosis of the lung lining that usually cause no physical impairment.
Suing For A Payday
Observes Forbes magazine: "Asbestos defendants are very likely now paying compensation for every occupational disease known to man. Incipient or marginal asbestosis, as picked up on an X-ray, bears at least a superficial resemblance to more than 130 other lung inflammations, including scores caused by various airborne particles."
But the potential of a huge payday impels the trial bar to find clients, irrespective of the validity of their claims. Even some plaintiffs now recognize how they are being used. Last year more than 2,500 litigants sued their former lawyers, charging that the latter viewed "their clients as mere inventory that could generate enormous legal fees with relatively little effort."
Litigants who don't warrant compensation also are grabbing resources that would otherwise be available for those who really have been injured by asbestos. From 1991 to 2000, nine of 10 claims were for nonmalignancies. Two-thirds of the dollars paid went to those cases, even though many, if not most, of the plaintiffs were not sick in any meaningful sense.
Another problem is that the search for deep corporate pockets hits companies with no responsibility for any harm caused by asbestos. Today suits are pouring in against untraditional industries -- beverage and food, glass, iron and steel, metal goods, paper and even textiles. These defendants now account for six of every 10 dollars spent in asbestos litigation.
Attorney Steve Kazan, who represents genuinely sick clients and has created a group of 100 similarly minded lawyers, complained that "we are seeing large numbers of cases from "new' industries where it seems clear that if there is any asbestos exposure at all it is very likely limited in intensity as well as scope, with relatively few workers having real exposure."
Reform will not be easy, since the trial bar steadfastly resists any limit on liability. But the GOP recapture of the Senate increases the likelihood of congressional action; Senate Judiciary Committee Chairman Orrin Hatch is committed to moving legislation.
Judges Should Take Control
States are also acting. For instance, Pennsylvania has limited the liability of companies that buy firms that end up embroiled in asbestos litigation; Mississippi recently implemented general tort reform.
In a recent Washington Legal Foundation study, former Attorney General Griffin Bell suggests that judges also assert control over asbestos litigation. Strategies include insisting on proof of injury, ensuring the reliability of medical evidence, and limiting punitive damages.
The asbestos legal tsunami has taken decades to develop, so it will take time to control. But the cost of abusive litigation is too high not to begin the reform process, however lengthy it proves to be. The health of both the legal system and the economy demand no less.
Doug Bandow is a senior fellow at the Cato Institute.
This article originally appeared in Investors Business Daily on February 20, 2003.