Asbestos Bankruptcy

A Popular and Toxic Product

Asbestos was first used as a viable insulation and fire retardant material in the late nineteenth century.  By the 1930s it was used on almost all ships – Navy and Merchant Marine – to control heat in the engine room and insulate pipes throughout the ship.  During the 1940’s to the 1970’s, asbestos was widely used for its fire-retardant capabilities in workplaces, schools and homes. Gradually it was incorporated into such everyday products as engine gaskets, brake shoes, auto and truck clutch plates, roofing, ceiling tiles, flooring and hundreds of other products.

Asbestos Health Issues

Breathing asbestos fibers into the lungs can cause a variety of diseases, ranging from scarring of the lungs with little or no disability to diseases such as asbestosis, lung cancer and mesothelioma cancer that can be fatal 

Although the probability of developing a serious asbestos disease rises with longer and more intense exposure, cases of cancer and mesothelioma have been documented in people with only minimal asbestos exposure. According to one estimate, more than 100 million people in the U.S. were exposed to asbestos (RAND Corporation).

Asbestos Companies Seek Bankruptcy Shelter

By the early 1970s asbestos was recognized as a known carcinogen, the government took action to get asbestos products off the market, and the issue of corporate liability for health damages caused by asbestos products found its way to courtrooms all across the country.  The number of people who were exposed to asbestos and the amount of illness that ensued was daunting to the “core” group of corporations who either mined or manufactured asbestos products.  The first two companies to file for bankruptcy did so in 1982.  They are Johns Manville and UNARCO.

In all, 49 Corporations sought Chapter 11 bankruptcy status between 1982 and 1989; over 30 have done so since 2000.  The value of bankruptcy status for a company threatened by tens of thousands of asbestos liability suits is that it buys time to allow the company to continue functioning and to develop some sort of method to deal with the liability claims.

The bankruptcy status puts a stay on all legal action, so plaintiffs must wait to pursue claims until the bankruptcy plan is completed.  The court, the corporation and plaintiffs must all agree to it; most of them take five years or more to complete.

Development of Asbestos Bankruptcy Trust Funds

The Johns Manville bankruptcy settlement set a pattern for future asbestos bankruptcies.  All tort claims against Manville were discharged and personal injury claims were channeled to the Manville Personal Injury Settlement Trust.  The Trust was financed by bonds with a face value of $1.8 billion, 80% of the equity of the reorganized Manville Corporation, and the right to receive 20% of the Manville Corporation’s profits for 25 years. People suffering from an asbestos disease file claims with the trust instead of filing suit and going to trial.

Why Bankruptcy Trust Funds Continue to Multiply

While the bankruptcies are designed to protect the companies from liability exposure beyond their net worth, they have not slowed the number of mesothelioma and asbestos claims being filed.  In addition, the liability rules governing asbestos have broadened the field so that there are far more companies in court over the issue today than the original “core” companies that were originally thought to be culpable.  That is why so many firms have filed for Chapter 11 protection since 2000.

Analysts of asbestos liability claims sometimes lose sight of the fact that while asbestos use in this country peaked in 1974, asbestos products did not just disappear.  The Environmental Protection Agency waited until 1989 to issue regulations that would have eventually banned most uses of asbestos, but the ban was challenged by the Canadian government and Canadian asbestos interests and was overturned in 1991.

Why so Many People are Eligible for Asbestos Bankruptcy Claims

Claims are steadily accelerating, and they are not all based on dire instances of terminal illness.  While mesothelioma, asbestosis and lung cancer have developed in thousands of people exposed to asbestos, average figures for claims developed in research done five years ago show that only 13% of claims involve cancer or mesothelioma, while an additional 36% involve asbestosis – which frequently is a severe affliction and can be fatal. The remaining 51% are for non- malignant pleural diseases.

Filing Claims with the Asbestos Bankruptcy Trusts

The medical requirements and proof of asbestos exposure requirements differ among the various trusts.   It is up to the claimant to produce all of the relevant evidence – the medical records, the employment history and medical opinions about possible future health problems.

Getting Experienced Legal Help

Many claimants file with more than one asbestos bankruptcy trust; for example liability may fall to the company that manufactured the asbestos product and the mining business that produced the asbestos as well.  A good asbestos attorney can maximize your claims.  In addition, because of the complex process it makes sense to use an experienced asbestos lawyer when seeking compensation from the asbestos bankruptcy funds & trusts.  Every trust has its own procedure and pitfalls.

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