TOLEDO, OHIO — Revered for its chemical and insulative properties, asbestos was used widely in the construction industry after World War II. But those who have been exposed to asbestos may be at risk for developing diseases including asbestosis, mesothelioma or lung cancer.
The diseases often do not surface for 15-40 years. As a result, asbestos liability has continued to rise long after most manufacturers have stopped using the product.
Total liability could be as high as $50 billion, according to Credit Suisse First Boston, roughly divided among 120 defendants with varying amounts of liability.
According to a study by Aetna Inc., 27.5 million people were exposed to asbestos at work between 1940 and 1979, said Ivy Zelman, an analyst with Credit Suisse First Boston.
In a report calling for tort reform, Zelman wrote that the total number of claims filed against all defendants from the onset of asbestos litigation now exceeds 550,000.
"Currently, bankruptcy is the only way a company can attempt to cleanse itself of its asbestos liability," Zelman said.
Asbestos-related lawsuits now represent the largest mass-tort litigation in U.S. history, measured by the number of cases, said Michael Rozen, former special master appointed by state and federal courts in New York to handle asbestos cases. In terms of financial scope, asbestos is No. 2, behind only tobacco, said Rozen, a lawyer with Feinberg Group LLP in New York.
Claims related to exposure to the mineral have been filed against numerous companies, including several top plastics processors. Topping the list are Owens Corning, which filed for Chapter 11 bankruptcy protection in October, and Lancaster, Pa.-based Armstrong World Industries Inc., which sought bankruptcy protection shortly after Owens.
Another company, Valley Forge, Pa.-based CertainTeed Corp., remains a member of the Center for Claims Resolution, a Princeton, N.J.-based conglomerate formed in 1988 to help nonbankrupt companies deal with increasing claims. Currently, CCR has 14 member companies.
Each of the companies is paying now for products made 20-30 years ago. For Owens Corning, it was an asbestos pipe-insulation product. The company took asbestos out of the product in 1972, said spokesman Bill Hamilton.
"The company estimated it has paid approximately $3.1 billion to settle 440,000 claims, while it earned only $135 million from the asbestos products it produced," Zelman said.
Armstrong manufactured insulation that contained asbestos until 1969, and has estimated its liability at $758.8 million to $1.36 billion through 2006.
CertainTeed's asbestos liability stems from asbestos cement pipe and some other products, said Bill Seiberlich, vice president of corporate communications. Seiberlich did not disclose CertainTeed's liability or when the company ceased asbestos use.
Attempt to settle
OC attempted to absolve its asbestos liability through the National Settlement Program, which settled a backlog of cases and set criteria for new cases, Hamilton said. By the third quarter of 2000, 127 law firms were participating in the program, with 243,000 claims included. When OC filed for bankruptcy, there were about 26,000 outstanding non-NSP cases.
"The NSP was a great thing to have tried," he said. "We thought that could keep us out of Chapter 11, but it couldn't. The cases kept coming in."
In 2000's third quarter, OC received about 7,800 additional asbestos-related claims, compared with 3,400 and 4,200 claims received in the first and second quarters, respectively.
"Nobody there made the decision lightly to file for bankruptcy," Rozen said. "I think it's a horrible way to go, and it must be considered the absolute last resort for any responsible corporation."
After Owens Corning filed for protection, shares of other companies such as Armstrong World Industries plummeted because the firms share liability for the cases.
Despite an uphill battle for asbestos tort reform, OC Chief Executive Officer Glen Hiner said he continues to push reform on Capitol Hill.
"If you go back and look at the Supreme Court rulings, the Supreme Court justices have said, literally, that this is a problem that begs for a legislative solution," Hiner said.
Hiner said he has addressed the issue with Sen. Trent Lott, R-Miss., the Senate majority leader, and Rep. Dennis Hastert, R-Ill., the speaker of the house.
"They've been receptive to our problem and our concern," Hiner said. "We've had a very, very good reception there. We just haven't gotten any bill passed at this point."
Hiner did say, however, that President Bush's background indicates he might be receptive to the legislation.
"I called on Mr. Bush personally several times when he was governor of Texas, in the development of tort reform legislation in Texas, which was eventually passed," Hiner said in a Feb. 20 interview at Owens Corning's world headquarters in Toledo. "He was very supportive and very helpful in that process that we worked through the Texas Legislature."
Bear Stearns analyst Gary Schneider said that unless the asbestos mess receives a legislative response, everyone can expect to see more companies seeking bankruptcy protection. Some 25 companies have filed so far because of asbestos.
"These are [otherwise] profitable companies," he said in a Jan. 31 telephone interview.
Rozen estimates chances for comprehensive legislation are less than 50 percent.
"It's unlikely," he said. "I think you're going to find a lot of opposition to any legislation."
Senior reporter Bill Bregar contributed to this story.