Mesothelioma Cases - Asbestosis Cases
In addition, the average verdict, the mean verdict, which includes the effect of the extreme verdicts, rose quite dramatically in the period 1998 to 2001. The increase in the value of asbestosis cases has attracted particular attention in the business community, because these are the cases where there is more debate about the nature of the injury or indeed, whether there is any kind of functional impairment, but it is important to note that the value of mesothelioma cases tripled on average in this period and that although those were a small fraction of the cases, that has contributed to the increase of the costs of this litigation in this period and is one of the things that has grabbed defendants attention.
Well, what are the consequences of all this. I think we are going to speak the rest of the morning about the consequences, so I am just going to highlight some briefly, as I have already said, bankruptcies are becoming more frequent. There is also additional economic impact on defending companies that is sometimes lost in the debate on bankruptcy and perhaps most importantly from a social policy point of view, the compensation for future claimants who, as I have said, are going to appear for several decades more, is at risk.
This just shows the trend in the bankruptcy numbers, the total number doesn't really convey to you now much growth there has been. Twenty nine of these bankruptcies have been from January 1, 2000.
One of the pieces of the Rand study that my colleague, Steve Carroll, who couldn't be with us this morning, has been working on is trying to understand what the economic consequences of this litigation is. And it is important when we think of the economic consequences to recognize that defendants who were not in bankruptcy have consequences because of the dollars that they are paying out to asbestos claimants and to their own defense counsel. And economists have different ways of modeling the effect of these kinds of costs on the level of investment and on jobs, and you can see these estimates here on this chart. They are quite substantial numbers.
However, these estimates are an attempt to understand what the effects are on specific defendant companies and economists tell us that if one company doesn't create jobs, another company may move in and create those jobs, or another company may invest in a product.
And so what we are seeing in the economy may be some shifts in the successes and failures of different companies, and the bottom line is that it is really hard to get a handle on the indirect economic affects of this litigation, but there is reason to believe, certainly, that that's significant.
Now, why do I say future claimant compensation is at risk? At some point one has to ask the question with this kind of litigation is, is there going to be enough money left to pay these litigants. And to the extent that defendants response to large scale litigation is to go into Chapter 11, we need to look at what has been the experience in the Chapter 11 bankruptcies.
And I think that many people would say that that story has been a success story in the sense of the flexibility with which parties and courts with the help of Congress in this case have used the bankruptcy system to try and deal with asbestos litigation. And we do have working trusts and many of these bankruptcies that represent relatively new petitions are now working towards reorganization plans.
But the history of the trust is sobering and I am showing you here the example of Johns Mansville because it as the leading asbestos producer and bankruptcy trusts and the story very quickly told is that at the beginning of the history of the trust, the trust thought, based on its estimates, it could pay out full value of claims just the way they were being paid in the litigation system with a reduction in transaction costs because it was an administrative scheme and by 2001, the trust was paying 5 cents on the dollar.
I have worked for a long time as many people in the room have on issues having to do with tort litigation, the tort reform wars, etc., and often in those debates, particularly in Washington, but often in state capitals as well, there is as lot of disagreement about the numbers.
One of the things that I find interesting about asbestos litigation and the current policy debate is I believe that there is wide spread agreement about the current state of the litigation as I have described it. Most, if not all of the numbers that I have showed you on these charts are not in dispute.
The only thing on this chart that is somewhat in dispute is the issue about whether future claimant prospects are as certain as I put it here. That is whether they are at risk because some plaintiff attorneys have told me, there are lots of other defendant companies or potential defendant companies out there and, therefore, sixty odd bankruptcy while sobering is not the end of the story. However, other plaintiffs' attorneys are seriously concerned about whether there will be any money left on the table when future claimants come forward, having discovered their diseases.
What the disagreement is about in my mind is whether the system that I have described is a system, whatever its warts may be, that generally should be a system that is endorsed and supported or whether it is a system that calls for reform. And if it is a system that calls for reform, there is wide spread disagreement currently about what reform would best remedy the problems and how we get to those reforms. And with that, I will end.
MS. PENDELL: Why don't you stay there. We will take questions now. Are there questions from the audience? I will start with one. Deborah, your next to the last slide said in talking about whether or not there will be enough money there for future claimants and you commented that the plaintiffs bar in many cases feel that are lots of other defendants out there. Legitimate defendants?
DR. HENSLER: Well, I think the issue is how far can you reach under substantive court doctrine to defendants. There are cases, as you know, in which an attempt is being made to sue some insurers directly on the theory that the insurers knew that the defendants were exposing their workers to asbestos, are those legitimate claims or not? The court is going to decide that. Clearly if they were judged legitimate that would have very substantial import.
What about defendants who are in the chain of distribution? What about the whole notion of premises liability, this growing component of the caseload in which workers are suing the property owners in a premise on the grounds that there was exposure to litigation? These are real battles and as plaintiffs' attorneys look to new defendants, they have new theories and those theories will be tested in the courts.
(End of Tape 1, Side A)
(Start of Tape 1, Side B)
…in the interests of their workers or maybe they will decide that their risks are too large and maybe they should seek the protection of Bankruptcy Court.
So, I think that there are questions that ultimately in our system will be decided by law. You have a product and this is one of the things that distinguishes asbestos litigation from other mass torts is that this is not a product that was manufactured or incorporated into products manufactured by a very small number of companies. It is really a ubiquitous product and that sets up a very special sort of litigation dynamic that I don't think we have seen to date in any other litigation in the United States.
MS. PENDELL: Question?
MR. FESTER: John Fester with the American Forest & Paper Association. Are there any estimates to the quantity of asbestos that is still out there in buildings and structures, etc.?
DR. HENSLER: You mean in the United States?
MR. FESTER: In the United States.
DR. HENSLER: I think they are actually some estimates, but I can't give them to you today. And the whole issue about what to do about asbestos in place, of course, has been something that has been argued fairly vigorously. There is asbestos in all residences. There was in my old house in Los Angeles, there was asbestos around the heating ducts and I assume that was true in al of the other houses that were from that era. So, there is a fair amount of it.
I can't tell you in terms of actual bulk of the product. And, of course, knowing how much out there doesn't give you the answer to the question of how much of exposure is there and then the question, how much injurious exposure is there, because exposure up there, you know, if there were asbestos in a very high ceiling, very well protected, I am not an epidemiologist, by that is clearly quite a different matter from talking about asbestos fibers dripping off an open duct in a factory somewhere.
MR. BRICKMAN: Lester Brickman, Cardozo Law School. Did Rand collect any data that would enable an estimate from a medical point or medical science point of view of the actual numbers of asbestosis current in the United States as compared to the hundreds of thousands of current claims?
DR. HENSLER: My understanding is that no one knows the answer to that question. I have been asking that question. In the report that we are working on currently, the follow on to the report that we issued a couple of months ago, there is going to be a chapter written by an epidemiologist, an epidemiologist who has not been involved in the litigation on either side, who at our request has reviewed the state of the epidemiological literature. And in preparing the September briefing, I asked her that question. I said, well, all right, you know, we know, we think we know what the projection is for mesothelioma case, but that's not what is in dispute. What is the projection for asbestosis cases? And we don't seem to have one in the United States. It is not a reportable disease the way mesothelioma is, so we can get the mesothelioma stats from the Center for Disease Control.
And there are other cancer stats but, of course, the problem with the other cancers is that virtually all the other cancers have other causes, and so we don't necessarily have those data.
And then for this huge number of cases that are non malignancies, we seem to be at a loss. It seems to me and this is not a Rand judgment but a personal judgment, that given the impact, both on people's lives and on people's pocketbooks of this litigation, that it is kind of shocking that there hasn't been any attempt by the public health agencies in the United States to get a better handle on this.
MR. BRICKMAN: A quick follow up. Is it possible the number approach is zero?
DR. HENSLER: Anything is possible. So, that's a trick question. I think the number, the fraction of non malignant cases that are serious asbestosis cases coming forward today by all reports that I have received from people is very small, including plaintiffs attorneys who represent cases of people who allege asbestosis or pleuroplax, etc. But I have not seen any statistical data and so I don't know what it is.
While the mike is coming I will say, we tried to get that data from various people who are cooperating with us, with the student and one of the problems is that even those who are willing to share data, the data on the non malignancies have been categorized very differently by different parties and by those same parties, very differently over time. So that it is not clear to me that there actually are those data out there, okay. And my comment about the public health agency is a call for some research on the medical problem.
MR. BEITER: Terry Beiter with the Congressional Budget Office. I gather from the information you presented on the mega trials, that none of those sixteen mega trials reached a verdict. Have they all been dismissed? Are some of them still the courts?
DR. HENSLER: Some of them have reached verdicts. Typically when you have large consolidations, okay, what happens is there is a settlement, sometimes on the courthouse steps. And there is no kind of coherent story that I could tell you about those cases in a table and that's why I haven't done that here. And so what we are doing in the report is actually writing a narrative description of a page or so of each of those litigations. Each one of them is to some degree sue generous and I think you need to view those as abhorrent cases. I think it is important not to think that these mega consolidations characterize the system.
At the same time, you need to understand that outcomes of those cases or the prospect that one of those cases would actually go to trial with multiple defendants and thousands of plaintiffs, does have an impact not just on the litigation strategies of the defendants and the plaintiffs' attorneys who are in that courtroom, but on plaintiffs' attorneys and defendants who are contemplating whether this is going to happen to the litigation against them.
So, wrong to think that that's the name of the litigation, as some people have asserted it is, but also wrong to think that litigation in a court in Canowa County, West Virginia is only affecting the outcomes of those cases and those parties.
MS. PENDELL: Okay, we will move on to our next speaker. You will have another shot at Deborah when we finish all of our presentations.