By
Scott B. MacDonald
The
asbestos issue is not likely to go away any
time soon, but there is some good news. Recent
announcements of settlements in asbestos cases
for Sealed Air Corp., Halliburton and Honeywell
indicate there is a positive trend in this
direction. Although the settlements have large
price tags, they begin to quantify the costs
related to the issue and start to remove some
degree of the uncertainty that has been hanging
over a number of companies and their employees
many of whom were threatened with job losses
related to possible bankruptcies. Equally
important, the push on the part of the companies,
with their insurance companies in tow, puts
more pressure on the U.S. Congress to pass
reform legislation on torts.
In early December, Sealed Air Corp., maker
of Bubble Wrap, agreed to pay $856.3 million
in stock and cash to settle asbestos and bankruptcy-fraud
claims connected with its 1998 purchase of
W.R. Grace & Co.,’s food-packaging
unit. Grace creditors and asbestos-injury
claimants sought to prove the chemical maker
fraudulently transferred assets before filing
for Chapter 11 protection in 2001. What was
regarded as positive from the settlement was
that it was well below expectations in terms
of cost. Stated in another way - Sealed Air
can afford the settlement.
The news concerning asbestos settlements continued
into mid-December with the announcement that
Halliburton, an oil services company with
85,000 workers, has offered to pay about $4.2
billion to settle more than 200,000 claims
and create a trust to handle future claims.
It was also announced that Honeywell, a diversified
manufacturer with 115,000 employees, agreed
to settle a similar number of claims against
one of its subsidiaries and ensure that all
claims against the unit are paid.
Related to these recently announced settlements
is the expectation that the new Republican-dominated
Congress may finally reform U.S. tort law,
under which asbestos litigation falls. Both
U.S. business and labor are growing more concerned
that asbestos will be increasingly more damaging
in terms of lost jobs. A recent report commissioned
by the American Insurance Association noted
that so far 60,000 jobs had been lost due
to asbestos-related bankruptcies. In addition,
the report noted that worse is yet to come
if there is no reform as only about a quarter
of the costs of asbestos claims have yet been
paid. The eventual price tag is expected to
range between $200-275 billion. This has gotten
the attention of Congress.
Over the last several years, Congress has
considered a number of bills aimed at creating
a system for resolving asbestos claims outside
the judicial system. The Democrats, backed
by trial lawyers, have consistently blocked
any changes in the law. The recent settlements
could represent an important breakthrough.
In the Sealed Air case, approval of the settlement
is required from the judge overseeing Grace’s
Chapter 11 case, filed in U.S. Bankruptcy
Court in Wilmington, Delaware and several
creditors’ committees. If the judges
approve the settlement, there is a strong
possibility that other companies in similar
cases will follow suit, seeking to settle
out of court. This, in turn, could provide
additional pressure on the Congress to reform
tort laws, which would make sense out of a
judicial system that is largely stacked against
the companies. If nothing else the threat
of legislative reform of the tort code could
force settlements.
