IOWA INSURANCE INSTITUTE POSITION ON ASBESTOS CLAIMS

For a number of years, property & casualty insurance companies have been defending throughout the nation large numbers of actions, some class in nature, against businesses to whom the companies provide liability insurance brought by individuals who have developed asbestosis or silicosis. The cost of defending these actions can be considerable. Some of the suits seem to be poorly prepared or filed on the spur of the moment. In addition, some self - insured businesses have become insolvent as a result of defending the actions. As a result, businesses (but not insurers) have looked to the federal government for a solution. This would take the form of a large trust fund paid into by insurers. Under this proposal, all lawsuits would be extinguished.

The insurance industry does not believe that cutting off an injured person's right to sue is appropriate. Rather, insurers feel that the proper measure is to make the claims more structured. This approach has been proposed and adopted in other states, with the concurrence of trial lawyers and business.

The main problems are (a)bankruptcies of companies, (b) huge transaction costs that divert compensation from actual injured people, and vague and often inconsistent medical standards that result in awards to people without symptoms or significant damages, at the expense of those people who are truly suffering. The Institute supports a bill that will provide uniform and rational standards of medical proof, which should have a favorable impact on transaction costs and ensure that reasonable awards are made to those people truly suffering from asbestos - related illnesses.

Details are as follows. Definable elements of a claim would be have to be established : 1)there must be a "physical impairment"; 2) to which exposure was a "substantial contributing factor". Regarding the first element, "impairment" is defined as permanent respiratory impairment of class 2 in degree as defined by the AMA Guides to the Evaluation of Permanent Impairment. Regarding the second element, it must be shown the impairment was not more probably the result of causes other than exposure to asbestos or silica. In this respect, expert testimony in the form of an opinion by a treating physician must be more than simply that the condition is "consistent with" exposure to asbestos or silica. Cases where cancer results have a more lenient legal standard. At the same time, the statute of limitations is liberal: the discovery rule is honored. Thus, an action could be brought anytime within two years of symptoms manifesting themselves.

While Iowa does not have a huge number of asbestos suits compared to other jurisdictions, the insurance industry believes it is best to pass this bill in the maximum number of states in order to stave off the trust fund approach. This lacks certainty and finality needed to resolve the asbestos litigation crisis. There is no certainty that the contribution made to the fund by insurers will be enough to cover all valid asbestos claims. Insurers become responsible not just for their estimated initial $46 M contribution to the fund but also for countless billions in legal costs they will spend on cases which the trust fund does not cover. Moreover, the trust fund approach requires insurers to contribute a disproportionately large share of the funds start - up costs, with a very high likelihood the fund would fail in its early years. The up front contribution places the insurance industry in a potentially disastrous and unfair situation if the fund fails for any reason in the early years. Insurers will have contributed significant payment only to find themselves back in the tort system. In essence, insurers will be paying twice for claims - once under the trust fund and again under the tort system.