Fairness in Asbestos Injury Resolution Act of 2003 (S. 1125, 108th Congress)
CRS Report for Congress
Received through the CRS W eb
Fairness in Asbestos Injury Resolution Act o f
th
2003 (S. 1125, 108 Congress)
HenryCohen
Legislative Attorney
American Law Division
Summary
This report s ummariz es s alient features of S. 1125, 108th C ongress, the Fairness i n
Asbestos Resolution Act of 2003 (or FAIR Act of 2003), as reported b y t he Committee
on the J udiciary on J uly 30, 2003 (S.Rept. 108-118). S . 1125 would create t he Office
of Speci al Asbestos Masters, within the United S tates C ourt of Federal Claims, t o award
d a m ages t o asbest o s cl ai m ant s o n a no-faul t b asi s . Dam ages woul d b e p a i d b y t h e
Asbestos Injury Claims Resolution Fund, which would b e funded b y companies t h at
have previously made paym ents related t o asbes tos claims filed aga i n s t t hem , and by
insurers of such companies. Asbestos cla ims could n o l onger be filed o r pursued under
st at e l aw, ex cept for t h e e n f orcem ent o f j udgm ent s n o l onger subj ect t o any appeal or
judici al review before the dat e of enactment of the bill.
For background information on t he history of asbestos litigation and on proposals
besides S . 1125 to address t he situation, see CRS Report R S21398, Asbestos Litigation:
Prospects f or Legislative Resolution , b y E dward R appaport.
S . 1125, 108th Congress, grows out of a S upreme C ourt d ecision that rejected t h e
Amchem (also known as t he “Georgine”) asbestos settlement on the ground that it failed
to satisfy Rule 23 of the Federal Rules of C ivil Procedure, which governs class actions in1
federal courts. J u stice Ginsburg, in her opinion for t he Court, wrote:
T he argument i s s ensibly made t hat a nationwide admi n i s t r ative claims processing
regi me would provi de the most s e c u r e , f air, and efficient means of compensating2
vi ctims of a sbestos e xposure. Congress, however, has not adopted such a s olution.
1 Amchem Products, Inc. v. W i ndsor, 521 U.S. 591, 597 (1997).
2 Id. a t 628-629. In Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999), J ustice Souter wrote f or the
Court: “Like Amchem Products, I nc. v . Windsor , 521 U.S. 591 (1997), t his case i s a class action
prompted by the elephantine mass of asbestos cases, and our discussion in Amchem will suffice
to show how this litigation defies customary j udicial admi nistration and c a l l s f o r national
l e gi s l a t ion.” In Norfolk & Western R. Co. v. Ayers , 123 S. Ct. 1210, 1228 (2003), t he C o u r t
(continued...)
Congressional Research Service ˜ The Library of Congress
S. 1125 would “create a p rivately funded, publicly administered fund...that will
provide compensation for legitimate pres ent and future cl aimants of asbes tos ex posure”
(§ 2). T he fund would b e called t he “Asbes tos Injury C laims Resolution Fund” (§ 223),
a n d t h e bill would create t he Office of Asbestos In jury Claims Resolution (§ 221 ) t o
administer it. The Office would b e h e aded b y an Administrator, appointed by the
P resi d ent wi t h t h e advi ce and c o n s ent o f t he Senate. The Administrator would s erve a
five-year term and b e removable b y t he President only for good cause.
S. 1125 would also create t he Office of Speci al Asbestos Masters, within the United
S t at es C o urt of Federal Claims, t o award damages t o asbes tos claimants on a no-faul t
basis (§ 101(a)). The ch i e f judge o f t he Court o f Federal Claims, with the concurrence
of a m ajority of the active j udges of the court, would appoint the s pecial asbestos masters
(§101(c)).
Asbestos claims could n o l onger be filed or pursued under s tate law, ex cept for the
enforcem ent o f j udgm ent s n o l onger subj ect t o any appeal or j udi ci al revi ew before t h e
date of enactment of the b ill (§ 403(d)).
Paym ent of Asbestos Injury Claims
“Any individual [ or his representative o r estate] who h as suffered from an eligible
disease or condition...mayfileaclaimwiththeCourtofFederal Claims foranaward
with respect to such injury”(§ 111(a)). “The term ‘eligible disease o r condition’ means,
to the ex t ent t hat t he illness m eets t he medical criteria requirement s established under
subtitle C of title I [ § 121] , asbestosis/pleural disease, sever e as b e s t osis disease,
mesothelioma, l ung cancer I, lung cancer II, ot her cancers, and qualifyi ng nonmalignant
asbestos-related d iseases” (§ 3 (8)).
The s tatute o f l imitations would be four years from t he date the claimant first
“received a medical diagnosis of an eligi b l e d i s e ase o r condition,” or “discovered facts
t h at woul d h ave l ed a reasonabl e p erson t o obt ai n a m edi cal di agnosi s wi t h respect t o an
eligible disease o r condition” (§ 111(c)). If, however, a claimant had filed a timely claim
that was pending in federal or s tate court on t he date of enactment of the bill, such cl ai m
would h ave t o b e d ismissed, and t he statut e of limitations to file a claim under t h e bill
would be four years from t he date of enactment of the bill.
Any claimant who p rov e s “by a p reponderance o f t he evidence” (§ 113) that he
suffers from an eligible diseas e or c o n d i t i on and files his cl ai m within the s tatute of
limitations may receive an award; he need n o t p r o v e t hat h is injury “resulted from t he
negligence or other fault of any o ther pers on” (§ 112). Therefore, although t he Asbestos
Injury Claims Resolution Fund, which would p ay the awards, would b e p rivately funded
(as discussed i n t he nex t section of t his report), a cl aimant would file a claim with the
C ourt o f Federal C l ai m s and woul d not sue any pri v at e p art y i n order t o recei ve an award.
2 (...continued)
repeatedthat the“elephantine mass ofasbestoscases ...defiescustomaryjudicial
admi nistration,” but held that courts may not “reconfigure established liability rules because they
do not serve t o abate today’ s asbestos litigation crisis.”
The Office of Special Asbestos Masters would p rovide compensation t o eligible
individuals “in a nonadvers arial m anner” (§ 101(b)).
Within 20 days after a cl ai m i s filed, the C ourt of Federal Claims would refer it to
a s peci al asbest os m ast er, who, wi t h i n 60 days aft er t he recei pt of al l requi red i nform at i on,
would determine t he amount of an y a w a rd to which t he claimant is entitled (§ 114). A
cl ai m ant woul d h ave 3 0 d ays “aft er recei vi ng not i ce o f t he deci si on” t o fi l e an appeal wi t h
the United S tates C ourt of Asbes tos C laims, which would be a t hree-judge panel
e s t a b l i s h e d b y t he Court o f Federal Claims (§ 141(a)). 3 The United S tates C ourt o f
Asbestos Claims could (1) “sustain the s peci al asbestos master’s decision,” (2) “set aside
any findings o f fact or conc l u s i o n o f law o f t he special asbestos master found to be
arbi t rary, capri ci ous, an abuse o f d i s cret i on, or ot herwi s e not i n accordance wi t h l aw and
issue its own findings of fact and conclusions of law,” or (3) “rem and t he petition t o t he
special asbestos master for further action” (§ 141(b)). A claimant could t hen, within 30
days after t he issuance of a final deci sion by the United S tates C ourt of Asbes tos C laims,
appeal that decision to the United S tates C our t o f Appeals for the Federal Circuit (§ 301).
The Federal Circuit would h ave t o uphold t he claim unless i t wa s “ a r b i t r a ry and
capricious”(§ 301). A claimant, finally, could ask the U.S. S upreme C ourt t o review t he
case (§ 301).
The amount of an award under S . 1125 would b e d etermined pursuant t o t he benefit
table i n s ection 131(b), which prescribes different amounts f o r d i f ferent m edical
conditions, and different amounts for smokers, nonsmokers, and ex -smokers, as i t d efines
those t erms. Beginning in 2006, awards would be i ncreased annually by a cost-of-living
adjustment (§ 131(b)(5)).
Awards “shall b e reduced by the amount of c o l l ateral s ource compensation”
(§ 134(a)). Bu t t he term “collateral s ource compensation” wo u l d r efer only t o “the
compensation t hat t he claimant received, or is entitled t o receive, from a defendant or an
insurer of t hat defendant, or compensation t rust as a res ult of a judgment or settlement for
an asbestos-related i njury t hat i s t he subj ect of a claim filed under s ection 111” (§ 3(6)).
S. 1125 provides ex p licitly that collateral s ource compensation would not include
workers’ compensation o r v eterans b enefits (§ 134(b)), but it would apparently also not
incl ude any other compensation, such as disability or health insurance p aym e n t s , or
m edi care o r m edi cai d, t h at was not pai d by “a defendant or an insurer o f t hat d efendant,
or compensation t rust.” A claimant, i n o ther words, c o u l d receive all t hese amounts i n
addition t o h is award from t he Asbestos Injury Claims Resolution Fund.
Asbestos claimants would not receive lump-sum awards, but “should receive the
amount of the award through s tructured p ayments from t he Fund, made over a period of
(§ 133(a)(1)).
3 Section 141(a)(1)(B) provi des t hat t he 3 j udges would c ome from t he “Asbestos Court,” but it
apparently should s ay “Court of Federal Claims .” T he Asbestos Court was a c ourt t hat S. 1125,
as introduced, would have created to award damages to asbestos claimants, but the r eported bill
substituted t he Court of Federal Cl aims for t hat purpose.
Fundi ng of As bestos I nj ur y Cl ai ms
The Asbes tos R es olution C laims Fund would be p aid for by “defendant participants”
and “insurer p articipants.” S. 1125 wou l d d efine n either of these t erms, but defendant
participants would apparen t l y be companies t hat h ave b een sued for i nj uri es caused b y
ex posure t o asbestos, and i nsurer participan ts would be t he insurers of such companies. 4
The t o t al contribution required o f all defe ndant participants over t he life o f t he Fund,
would be $52 billion; the t otal required of all insurer participants would be t h e s a me
(§§ 202(a)(2), 212(a)(3)(A)). The aggregate cont ributions of all m andatory participants
could not ex ceed $5 billion i n any calendar yea r unless o therwise provided (§ 223(b)).
T h e m inimum aggregate contributions of defe ndant participants would b e at l eas t $ 2 ½
billion p er year for t he first five years, and l esser amounts for succeeding years, down t o
$250 million for year 27 (§ 204(h)). The bill specifies no minimum aggregat e
contribution for insurer participants.
The United S tates government would not be liable for any asbestos claims, even i f
the Fund is inadequate to pay t hem (§ 405(b)).
Defendant participants. “The Administrator [ o f t he Office of Asbestos In jury
Claims Resolution] s h al l a s s e s s fro m d efen d a n t participants contributions to the [Asbestos
In j u ry C l ai m s R esol u t i on] Fund i n accordance wi t h t h i s sect i o n b ased on t i ers and s ubt i ers
assigned to defendant participants” ( § 202(a)(1)). Though S. 1125 does not defi ne
“defendant participant,” i t does s tate which entities would be assigned to the various tiers
and s ubtiers, and thes e entities would apparently be defendant participants.
“The Administrat or shal l assign to Tier I a l l debtors t hat, together with al l of t heir
di rect or i ndi rect m aj o ri t y-owned subsi d i ari es, h ave p ri or asbest os ex pendi t u res great er
than $1,000,000” (§ 202(b)). A “debtor” would b e d efined as a company, i ncluding its
subsidiaries, t hat h as filed i n b ankruptcy within a year preceding enactment of the b ill, but
a “debtor” would not include a company whos e b ankruptcy had b een finally adjudicated
(§ 201(3)). The Administrat or would assign “persons or affiliated groups” t o Tiers II
through VI, “according t o t he prior asbestos ex p enditures” t h e y p a i d ( § 202(d)). An
“affiliated group” would b e d efined as an “u ltimate paren t ” o r any person whose entire
beneficial interest is o w n e d b y an u ltimate parent (§ 201(1)), and an “ultimate parent”
would b e d efined as a p erson who owned, as of December 31, 2002, the entire b eneficial
i n t erest of at l east one ot her p erson and whose o w n ent i re b enefi ci al i nt erest was not
owned o n t hat d ate b y any other s ingl e p erson (§ 201(9)).
The t erm “prior asbestos ex p enditures” – t he amount of which would d etermine t he
amount that a d efendan t p a r t i c i p a n t would h ave t o contribute t o t he Fund – would b e
defined as “ t h e gross total amount paid...beforeDecember 31, 2002, in settlement,
judgment, defense, or i ndemnity costs rel at ed to al l asbestos claims agai nst” the
defendant, and would i nclude paym ents made by insurance carriers, but would not include
4 The bill would define “participant” as any defendant participant or i nsurer participant s ubj ect
to an assessment f or contribution t o t he Fund (§ 3(11)).
paym ent s m ade “by p ersons who are or were com m o n carri ers b y rai l roads for asbest o s
claims” b rought under t he Federal Employers’ Liability Act (§ 201(7)).5
“A p e r s on or affiliated group that is a small business concern (as defined under
section 3 o f t he S m all Business Act (15 U .S .C. 632)), on December 31, 2002, is ex empt
from any contribution requirem e n t s under t his s ubtitle” (§ 204(b)). “A defendant may
apply for an adjustment based o n financial hardship” (§ 204(d)(2)) or “based on inequity”
(§ 204(d)(3)).
Insurer parti cipants. S. 1125 would establish the Asbestos Insurers Commission,
which would b e composed of five members, appointed for t he life o f t he Commission, by
the P resident “after consultation with” (not w ith the “advice and consent” of) t he Senate
majority and minority leader and t he House s peaker and m i n o r i t y l eader (§ 211). “The
Commission shall d etermine t he amount that each insurer p articipant will be required t o
pay i nto t he Fund” (§ 212(a)(1)(B)).
“Insurers t hat have pai d, or been assessed by a legal j udgment or settlement, at l eas t
$1,000,000 in defense a n d i n d e m n ity costs b efore t he date of enactment of this Act i n
response t o claims for compensation for asbestos injuries ...shall bemandatoryinsurer
participants in the Fund” (§ 212(a)(4)(A)). “Contributions shall b e d eterm i n e d by
est abl i s hi ng an i ndi vi dual cont ri but i o n obl i gat i o n for each i n surer p art i ci p ant ...onan
equitable b asis” (§ 212(a)(4)(B)).
Judicial review . A p art i ci p ant woul d b e abl e t o s eek j udi ci al revi ew, i n t he U.S .
District Court for the District of C olumbia, of an assessment imposed by the
Administrat or of the Office o f A s bestos Injury Claims Resolution, or the Asbes tos
In surers Commission (§ 302(a)). The d istric t court would uphold t he determination o f t he
Administrator or the C ommission unless i t was arbitrary o r capricious (§ 302(c)(1)).
After t he district court i ssues its judgment, a participant could ask the U.S. S upreme C ourt
to review the case (§ 302(c)(2)). 6
Pr ohi bi ti on of As bestos Contai ni ng Pr oducts
Title V of S . 1125 would create 18 U.S.C. § 838 to require the Administrator of the
Environmental P rotection Agency, after consultation with the Assistant Attorney General
for t he Environmental an Natural Resources Division of the U.S. Department of J u stice,
to issue regulations that “prohibit persons fro m m anufacturing, processing, o r d istributing
in commerce asbestos containing products.” The A dministrator would be permitted t o
grant an ex emption i f he det ermines that it “would not result in an unreas onable risk of
injury to public health or the environment,” and the person s eeking t he ex em ption “has
made good faith efforts t o d evelop, but has b een unabl e t o d e v e l op, a s ubstance, or
i d ent i fy a m i n eral t h at does not present an unreasonable risk o f i njury t o public health or
5 T he i nclusion of “defense” c osts (which is not defined), s ugge sts t hat e ve n a defendant who had
been found not liable, or against whom a s uit had been dismissed or dropped, would ordinarily
have to contribute t o t he Fund, because it would likely have i n c u r r e d “prior asbestos
expenditures” in defending the s uit brought against it.
6 As noted above, appeals by c laimants would be brought in t h e U . S . C o urt of Appeals f or the
FederalCircuit.
the environment and may be s ubstituted for an asbestos containi n g product.” The
Adm i n i s t rat or woul d al s o b e abl e t o grant ex em pt i ons t o t h e S ecret ary o f Defense and
NASA i f “necessary to the critical functions ” o f t he Defense Department or NASA, “no
reasonable alternatives” ex i st, and “use of as bestos containing products will not result in
an unreas onable risk t o health or the environment.” Finally, Title V w o u l d e x empt t he
following two items from t he prohibition: ( 1 ) “ A s bestos diaphragms for use in the
manufacture o r chlor-alkali and the p roducts and d erivative t herefrom,” and (2) “Roofing
cem ents, coatings and m astics utilizing asbestos t hat i s t otally encapsulated with asphalt,
subject to adeterminationbytheAdministrator....”