Understanding asbestos trust funds

Over the course of six decades of litigation in North Carolina and elsewhere involving the health hazards of asbestos, many companies have elected to seek protection from such claims under the federal Bankruptcy Act. A bankruptcy proceeding proved to be an effective method of controlling an asbestos company’s legal exposure for damages, but claimants were often left short-changed or even empty-handed even when they had compelling claims for damages.

In 1994, Congress attempted to create a compromise solution based upon the outcome of the bankruptcy proceeding commenced by Johns-Manville Company. Under Section 524(g) of the Bankruptcy Code, a company facing numerous tort claims based upon asbestos product exposure can create an asbestos trust fund to receive and pay claims. Each trust fund must establish Trust Distribution Procedures (“TDPs”) that are appropriate for the company in question. If the bankruptcy court approves the amount of money that will be committed to the fund, and approves the proposed TDPs, all asbestos claims against that company are assigned to the trust fund, and no independent claims can be made in any other court. The company is legally discharged from all future liability for asbestos claims.

In the twenty years since Section 524(g) was passed, asbestos trusts have paid out billions of dollars to claimants. To receive a distribution, a claimant must demonstrate only that he or she meets the TDP’s exposure and medical criteria established for the company in question. A person who satisfies these tests is then paid a prescribed amount from the trust assets. Independent claims for damages caused by exposure to asbestos-containing products manufactured by companies that have not filed bankruptcy are still allowed.

Anyone who has become ill or lost a loved one because of exposure to asbestos-containing products will benefit from consulting an attorney who specializes in handling asbestos claims. Such a consultation can provide a helpful evaluation of the case. In addition, an attorney can help to identify companies that may be liable and provide an estimate of the likelihood of recovering damages from any asbestos trust fund or solvent company whose products may be at fault.

Source:American Bar Association, “Bankruptcy Trusts and Asbestos Litigation,” Lee Blanton Ziffer, June 11, 2012, accessed on Dec. 8, 2015