Understanding asbestos trusts – part two

In our last post, it was explained how a 1994 amendment to the federal bankruptcy code has allowed companies facing large liabilities for illnesses caused by their asbestos-containing products to escape such liabilities by creating asbestos trusts. In this post, we will explain the process by which persons suffering from asbestos-caused illnesses can obtain compensation for their losses from an asbestos trust.

When a company creates an asbestos trust, it also drafts a set of documents called “Trust Distribution Procedures.” These documents vary from company to company, but all such TDPs have features in common. Most, if not all, trusts use a set of defined medical and asbestos exposure criteria in an “expedited review” process. A claimant wishing to use the expedited review process must submit documentation showing that the claimant meets the defined criteria. If the claimant’s case meets these criteria, the claimant receives a defined payment that is not negotiable. The virtue of this process is relative speed: claimants can receive compensation much faster than if they use the other process.

Asbestos trusts also provide for a second process called “individual review.” In this process, claims are evaluated using additional criteria, such as the age when the disease was first diagnosed, the jurisdiction where an action could be filed, and the settlement history of the claimant’s lawyers. Payments are not pre-determined and are usually negotiated.

Since the amount of trust assets can change over time as stock or real estate values change and as claims are paid, the actual value of a claim may also change. Generally, if trust assets increase, settled claims will receive an additional payment. If trust assets decline in value, the size of future claims can also decline.

Anyone considering making a claim for damages caused by asbestos product exposure can consult an attorney experienced in representing similar claimants. Even though the goal of asbestos trusts is the streamlining of the claims process, the services of an attorney are necessary to ensure that a claim is presented with proper documentation and that any payments are the maximum possible.

Source: LexisNexis Legal Newsroom, “Asbestos Bankruptcy Trusts: A 2013 Overview Of Trust Assets, Compensation & Governance,” accessed Oct. 14, 2014