Almost thirty years ago, two companies, Johns Manville and UNR Industries, filed petitions in United States Bankruptcy Court to limit their exposure for damages caused by asbestos fibers in the products that they had manufactured. In the ensuing three decades, almost 100 companies that manufactured asbestos-containing products have sought the protection of the bankruptcy courts, at least in part to protect themselves from asbestos lawsuits. The lawsuits were brought by persons who claimed to be suffering from mesothelioma or asbestosis caused by the inhalation of asbestos fibers.
The companies were relying, in part, on a section of the bankruptcy code that halts all lawsuits against the party filing the petition until the bankruptcy proceeding is complete. Resolution of the lawsuits is then left to the jurisdiction of the bankruptcy court. The problem faced by each of these companies was how to resolve these claims in a fair manner that would allow the company to emerge from bankruptcy.
The solution was the enactment in 1994 of an amendment to the Bankruptcy Code that allowed establishment of an “asbestos trust” funded by certain liquid assets provided by the company seeking bankruptcy protection. The trust is set up with rules and procedures that govern the receipt, processing and payment of claims related to asbestos product exposure. The total value of assets in the asbestos trust system in 2005 was $8 billion. In the ensuing nine years, $27 billion in assets were added, with over $15 billion being paid out to claimants.
In spite of the creation of simplified procedures, attorneys are still a critical part of the claims process. A knowledgeable attorney is needed to assemble, prepare and submit the necessary information for each claim. In “Understanding asbestos trusts – part two,” we will review the claims process itself.
Source: LexisNexis Legal Newsroom, “Asbestos Bankruptcy Trusts: A 2013 Overview Of Trust Assets, Compensation & Governance,” Marc C. Scarcella and Peter R. Kelso, Dec. 11, 2013