Fairness in Asbestos Injury Resolution Act of 2005 (H.R. 1360, 109th Congress)

CRS Report for Congress
Fairness in Asbestos Injury Resolution
th
Act of 2005 (H.R. 1360, 109 Congress)
Henry Cohen and Nathan Brooks
Legislative Attorneys
American Law Division
Summary
This report provides an overview of H.R. 1360, the Fairness in Asbestos Injury
Resolution (FAIR) Act of 2005, as introduced by Representative Kirk on March 17,
2005. H.R. 1360 would create the Office of Asbestos Disease Compensation, within the
Department of Labor, to award damages to asbestos claimants on a no-fault basis.
Damages would be paid by the Asbestos Injury Claims Resolution Fund, which would
be funded by companies that have previously been sued for asbestos-related injuries, and
by insurers of such companies. Asbestos claims could no longer be filed or pursued
under state law, except for the enforcement of judgments no longer subject to any appeal
or judicial review before the date of enactment of the bill.
Claims of asbestos-related injury have flooded the courts since the 1970s, but
litigation has proven to be an inadequate means to resolving all such claims. The
Supreme Court has twice struck down attempted global asbestos settlements,¹ in both
instances inviting Congress to craft a legislative solution.² In response, various bills have
been introduced in past Congresses,³ although none has passed.
On March 17, 2005, Representative Kirk introduced H.R. 1360, the Fairness In
Asbestos Injury Resolution (FAIR) Act of 2005. The bill would “create a privately
funded, publicly administered fund . . . that will provide compensation for legitimate

¹ Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997); Ortiz v. Fireboard Corp., 527 U.S.
815 (1999). In both cases, the Court held that the settlements did not satisfy Rule 23 of the
Federal Rules of Civil Procedure, which governs class actions in federal courts. For background
information on the history of asbestos litigation, see CRS Report RL32286, Asbestos Litigation:
Prospects for Legislative Resolution, by Edward Rappaport.
² See, e.g., Amchem Products, Inc. v. Windsor, 521 U.S. at 628-629.
³ See, e.g., S. 2290 (108^th Cong.)., which is similar to H.R. 1360. See CRS Report RS21815,
Fairness in Asbestos Injury Resolution Act of 2004 (S. 2290, 108^th Congress), by Henry Cohen.
Congressional Research Service ˜ The Library of Congress

present and future claimants of asbestos exposure.”⁴ The fund would be called the
“Asbestos Injury Claims Resolution Fund,”⁵ and the bill would create, within the
Department of Labor, the Office of Asbestos Disease Compensation to administer the
fund.⁶ The Office would be headed by an Administrator, appointed by the President with
the advice and consent of the Senate. The Administrator would serve a five-year term and
report directly to the Assistant Secretary of Labor for the Employment Standards
Administration.⁷
Asbestos claims could no longer be filed or pursued under state law, except for the
enforcement of judgments no longer subject to any appeal or judicial review before the
date of enactment of the bill.⁸ If the Fund were to sunset, however, suits could again be
filed or pursued, but only in federal court and under “Federal common law” (see below).
Payment of Asbestos Injury Claims
“Any individual [or, if he is deceased, his personal representative] who has suffered
from a[n eligible] disease or condition . . . may file a claim with the Office for an award
with respect to such injury.”⁹ The claimant would have to “prove, by a preponderance of
the evidence, that he suffers from an eligible disease or condition.”¹⁰ He would not have
to prove that his injury “resulted from the negligence or other fault of any person.”¹¹
The statute of limitations would be four years from the date the claimant first
“received a medical diagnosis of an eligible disease or condition,” or “discovered facts
that would have led a reasonable person to obtain a medical diagnosis with respect to an
eligible disease or condition.”¹² If, however, a claimant had filed a timely claim that was
pending in federal or state court on the date of enactment of the bill, such claim would
have to be dismissed, and the statute of limitations to file a claim under the bill would be
four years from the date of enactment of the bill.¹³
“Not later than 90 days after the filing of a claim, the Administrator shall provide to
the claimant (and the claimant’s representative) a proposed decision accepting or rejecting
the claim in whole or in part and specifying the amount of the proposed award, if any.”¹⁴
Any claimant not satisfied with the proposed decision of the Administrator would be

⁴ H.R. 1360, § 2(b)(1).
⁵ Id. at § 221.
⁶ Id. at § 101.
⁷ Id. at § 101(b).
⁸ Id. at § 403(d).
⁹ Id. at § 113(a).
¹⁰ Id. at § 111(2).
¹¹ Id. at § 112.
¹² Id. at § 113(b)(1).
¹³ Id. at § 113(b)(2).
¹⁴ Id. at § 114(b).

entitled, on written request made within 90 days, to a hearing or to a review of the written
record, by a representative of the Administrator.”¹⁵ After a hearing or review, or if no
hearing or review is requested within 90 days, the Administrator would issue a final
decision.¹⁶ A claimant would then have 90 days to petition for judicial review of the final
decision by the U.S. Court of Appeals for the circuit in which the claimant resides at the
time of the issuance of the final order.¹⁷ The court would uphold the decision unless it
determined “that the decision is not supported by substantial evidence, is contrary to law,
or is not in accordance with procedure required by law.”¹⁸
The Administrator would “establish a comprehensive asbestos claimant assistance
program,” including a “legal assistance program.” Attorneys could charge no more than
2 percent of the amount of the award for filing an initial claim, and “10 percent with
respect to any claim under appellate review.”¹⁹ The term “appellate review” is not
defined, so it is not clear whether it would include both the hearing or review by the
representative of the Administrator, and judicial review.
The amount of an award under H.R. 1360 would be determined pursuant to the
benefit table in section 131(b), which prescribes different amounts for different medical
conditions, and, in cases of lung cancer, different amounts for smokers, nonsmokers, and
ex-smokers, as it defines those terms. Beginning in 2006, awards would be increased
annually by a cost-of-living adjustment.²⁰
Awards “shall be reduced by the amount of collateral source compensation.”²¹ The
term “collateral source compensation,” however, would refer only to “the compensation
that the claimant received, or is entitled to receive, from a defendant or an insurer of that
defendant, or compensation trust as a result of a judgment or settlement for an asbestos-
related injury that is the subject of a claim filed under section 113.”²² H.R. 1360 provides
explicitly that collateral source compensation would not include workers’ compensation
or veterans benefits,²³ but it would apparently also not include any other compensation,
such as disability or health insurance payments, or medicare or medicaid, that was not
paid by “a defendant or an insurer of that defendant, or compensation trust.” A claimant,
in other words, could receive all these amounts in addition to his award from the Asbestos
Injury Claims Resolution Fund.
Funding of Asbestos Injury Claims

¹⁵ Id. at § 114(c).
¹⁶ Id. at § 114(d).
¹⁷ Id. at § 302.
¹⁸ Id. at § 302(c).
¹⁹ Id. at § 104.
²⁰ Id. at § 131(b)(5).
²¹ Id. at § 134(a).
²² Id. at § (3)(6).
²³ Id. at § 134(b).

The Asbestos Resolution Claims Fund would be paid for by “defendant participants”
and “insurer participants.” Defendant participants would apparently be companies that
have been sued for injuries caused by exposure to asbestos, and insurer participants would
be the insurers of such companies.²⁴ Subject to a the Administrator’s contingent call
power, discussed below, the total contributions “required of all defendant participants
over the life of the Fund shall not exceed” $90 billion.²⁵ “[T]he aggregate annual
payments of defendant participants” would be at least $2.5 billion for the first 23 years
of the Fund, unless the total $90 billion is received sooner.²⁶ After the $90 billion has
been paid, the Administrator could, if necessary, issue a contingent call for mandatory
additional payments of up to an aggregate maximum of $10 billion. The Administrator
would first, however, have to publish a notice in the Federal Register and consider
comments from defendant participants on the necessity of additional payments.²⁷
“The total payment required of all insurer participants over the life of the Fund shall
be equal to $46,025,000,000.”²⁸ Insurer participants would pay prescribed amounts for

27 years.²⁹ The United States government would not be liable for any asbestos claims,

even if the Fund is inadequate to pay them.³⁰
The Administrator would be authorized to sue any participant for failure to pay any
liability imposed under the bill. In addition to the amount due, the Administrator could
seek punitive damages, the costs of the suit, “including reasonable fees incurred for
collection, expert witnesses, and attorney’s fees,” and “a fine equal to the total amount of
the liability that has not been collected.”³¹
“At any time after 7 years following the date on which the Administrator begins
processing claims, if the Administrator determines that . . . the Fund will not have
sufficient resources,” then the Fund would sunset.³² If the Fund sunsets, then claimants
could again file or pursue lawsuits. “[T]he applicable statute of limitations” would be
deemed tolled for the time during which a claim had been pursued against the Fund, and
“the applicable statute of limitations would apply, except that claimants who filed a claim
against the Fund” before sunset would have two years after sunset to file a claim.³³
Claims would have to be filed in federal district court, and “Federal common law” would

²⁴ “Participant” is defined as any defendant participant or insurer participant subject to payments
under the bill. Id. at § 3(11).
²⁵ Id. at § 202(a)(2).
²⁶ Id. at § 204(h)(1).
²⁷ Id. at § 204(m).
²⁸ Id. at § 212(a)(2)(A).
²⁹ Id. at § 212(a)(3)(C).
³⁰ Id. at § 406(b).
³¹ Id. at § 223(c).
³² Id. at § 405(f).
³³ Id. at § 405(f)(6).

govern, “except that where national uniformity is not required the court must utilize
otherwise applicable state law.”³⁴
Defendant participants. “Defendant participants shall be liable for payments to³⁵
the Fund . . . based on tiers and subtiers assigned to [them].” Under the bill, Tier I
would include “all debtors that . . . have prior asbestos expenditures greater than³⁶
$1,000,000.” A “debtor” would be defined as a company, including its subsidiaries, that
has filed in bankruptcy within a year preceding enactment of the bill, but a “debtor” would³⁷
not include a company whose bankruptcy had been finally adjudicated. Tiers II through
VI would include “persons or affiliated groups . . . according to the prior asbestos
expenditures” they paid, ranging from $75 million or greater for Tier II, down to $1
million to less than $5 million for Tier VI.³⁸ An “affiliated group” would be defined as
“an ultimate parent and any person whose entire beneficial interest is directly or indirectly
owned by that ultimate parent,³⁹ and an “ultimate parent” would be defined as a person
“that owned, as of December 31, 2002, the entire beneficial interest, directly or indirectly,
of at least 1 other person; and . . . whose own entire beneficial interest was not owned on
December 31, 2002, directly or indirectly, by any other single person (other than a natural
person).”⁴⁰
The term “prior asbestos expenditures” — the amount of which would determine the
amount that a defendant participant would have to contribute to the Fund — would be
defined as “the gross total amount paid . . . before December 31, 2002, in settlement,
judgment, defense, or indemnity costs related to all asbestos claims against” the
defendant, and would include payments made by insurance carriers, but would not include
payments made “by persons who are or were common carriers by railroads for asbestos
claims” brought under the Federal Employers’ Liability Act.⁴¹
Insurer participants. H.R. 1360 would establish the Asbestos Insurers
Commission, which would be composed of five members, appointed for the life of the
Commission, by the President, with the advice and consent of the Senate.⁴² “The

³⁴ Id. at § 405(g).
³⁵ Id. at § 202(a)(1).
³⁶ Id. at § 202(b).
³⁷ Id. at § 201(3).
³⁸ Id. at § 202(d).
³⁹ Id. at § 201(1).
⁴⁰ Id. at § 201(9).
⁴¹ Id. at § 201(7). The inclusion of “defense” costs (which is not defined), suggests that even a
defendant who had been found not liable, or against whom a suit had been dismissed or dropped,
would ordinarily have to contribute to the Fund, because it would likely have incurred “prior
asbestos expenditures” in defending the suit brought against it.
⁴² Id. at § 211.

Commission shall determine the amount that each insurer participant will be required to
pay into the Fund.”⁴³
“Insurers that have paid, or been assessed by a legal judgment or settlement, at least
$1,000,000 in defense and indemnity costs before the date of enactment of this Act in
response to claims for compensation for asbestos injuries . . . shall be insurer participants
in the Fund.”⁴⁴ The Commission would be required to “establish payment obligations of
individual insurer participants to reflect, on an equitable basis, the relative tort system
liability of the participating insurers in the absence of this Act.”⁴⁵
Judicial review. Defendant participants and insurer participants would be able to
seek judicial review, in the U.S. Court of Appeals for the District of Columbia, of a final⁴⁶
determination by the Administrator or the Asbestos Insurers Commission. The U.S.
District Court for the District of Columbia would have exclusive jurisdiction over any⁴⁷
action for declaratory or injunctive relief challenging any provision of the bill.
Prohibition on Asbestos-Containing Products
Title V of H.R. 1360 would add a section to the Toxic Substances Control Act that
would require the Administrator of the Environmental Protection Agency to issue
regulations that “prohibit persons, [sic] from manufacturing, processing, or distributing
in commerce asbestos containing products.” The Administrator would be permitted to
grant an exemption if he determines that it “would not result in an unreasonable risk of
injury to public health or the environment,” and the person seeking the exemption “has
made good faith efforts to develop, but has been unable to develop, a substance, or
identify a mineral that does not present an unreasonable risk of injury to public health or
the environment and may be substituted for an asbestos containing product.”
The Administrator would also be able to grant exemptions to the Secretary of
Defense and the Administrator of the National Aeronautics and Space Administration if
“necessary to the critical functions” of the Defense Department or NASA, “no reasonable
alternatives” exist, and “use of asbestos containing products will not result in an
unreasonable risk to health or the environment.”
Finally, Title V would exempt the following two items from the prohibition: “(A)
Asbestos diaphragms for use in the manufacture of chlor-alkali and the products and
derivative[s] therefrom. (B) Roofing cements, coatings and mastics utilizing asbestos that
is totally encapsulated with asphalt, subject to a determination by the Administrator of the
Environmental Protection Agency . . . .”

⁴³ Id. at § 212(a)(1)(b).
⁴⁴ Id. at § 212(a)(3)(A).
⁴⁵ Id. at § 212(a)(3)(B)(I). “Insurer” and “insurer participant” are defined to “include direct
insurers and reinsurers, as well as any run-off entity established, in whole or in part, to review
and pay asbestos claims” (§ 212(a)(1)(A)).
⁴⁶ Id. at § 303(a).
⁴⁷ Id. at § 304.