Manville Asbestos Trust Payouts Under Review by Two U.S. Judges
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By David Voreacos
New York, Dec. 13 (Bloomberg) -- The Manville Personal Injury Settlement Trust, which has paid $2.7 billion to injured asbestos workers, is facing a sharp rise in claims that threatens the fund's solvency, a development that prompted two federal judges to convene a hearing to consider remedies.
U.S. District Judge Jack Weinstein and U.S. Bankruptcy Judge Burton R. Lifland scheduled the hearing in Brooklyn, New York, to assess how the trust allocates its funds.
When the trust began making payments in the early 1990s, it covered 100 percent of the amount in the medical bills submitted by claimants. The payments declined to 10 percent in 1995 and 5 percent earlier this year.
``What happens in the Manville Trust, which has been a bellwether in this field, will have impact throughout the nation,'' Weinstein said this morning.
Weinstein and Lifland cited a continuing media campaign encouraging new claims, the fund's steep reduction in claim payments, and a rise in bankruptcy filings by asbestos-related entities as daunting issues confronting trust officials.
That combination of events ``suggests that there may be a misallocation of available funds, inequitably favoring those who are less needy over those with more pressing asbestos-related injuries,'' the judges said in a notice about the hearing.
Non-Cancer Claims
David Austern, the general counsel for the trust, said there's been ``a huge increase'' recently in non-cancer claims, including for bilateral pleural disease and other lung disorders.
Before 1995, he said, cancer accounted for 14 percent of all claims. That's declined to a six-percent share, though cancer claims have actually risen, from 3,673 in 1999, he said, to 4,112 so far this year.
In 1999 the trust received 28,059 non-cancer claims. For the first 11 months of 2001 the total was 65,672, Austern told the judges.
The trust, set up during the 1988 bankruptcy reorganization of building materials maker Johns Manville Corp., has paid $2.7 billion on 437,781 claims, a number that could grow to 3.1 million claims by 2049, trust officials project.
Despite lowering administrative costs to 4.1 percent of payouts, the trust will be pressed for cash over the next five decades, according to a Dec. 5 letter to the judges by trust chairman Robert A. Falise.
He cited court-sanctioned requirements that allow payments for any of seven diseases if workers are exposed in any way to asbestos. Many successful claimants, he said, had ``no discernible asbestos-related physical impairment whatsoever.''
In his letter, Falise urged that coverage be limited to workers who sustained direct exposure to asbestos dust during manufacturing or application of the product.
Imperceptible
Many claimants have injuries that are imperceptible without the aid of x-ray or other imaging technology, Falise said. They are ``marshaled in mass screenings that have as their primary purpose the rounding up of claimants whose settlements will generate fees for the sponsors of the screenings,'' he said.
Faced with the cash crunch, the trust sued Philip Morris Cos., R.J. Reynolds Tobacco Holdings Inc., and other U.S. tobacco companies, asserting that they should pay a share of health care costs for sick asbestos workers who smoked. The suit ended in a mistrial in January, and the trust decided not to pursue a new trial.
Trust lawyers say the fund nearly ran out of money in the early 1990s because of the flood of claims. Weinstein, who intervened in operations in 1990, set up a compensation plan with a schedule of payments.
The trust has $2 billion in current assets. Most of the original money to finance the fund came from proceeds of the Manville bankruptcy.
Manville was acquired earlier this year by Warren Buffett's Berkshire Hathaway Inc. |
