A common joke among moviegoers in the 1920s was to insist that “asbestos”–the word printed in large letters on the theaters’ fireproof curtains–was Latin for “welcome.”
For many companies today, however, asbestos just means curtains.
That’s no joke. Asbestos litigation has driven more than 50 U.S. companies into bankruptcy–about 20 since the beginning of 2000 alone. Many experts had relied on estimates that the total number of asbestos plaintiff filings would top out at 500,000, explains Raji Bhagavatula, a principal at consulting and actuarial firm Milliman USA. But lawsuits soared past that mark last summer and show no sign of abating.
Milliman now puts the ultimate total at 1.1 million lawsuits, while the Manville Personal Injury Settlement Trust–set up by former asbestos product maker Johns Manville Corp.–says it could possibly see as many as 2.7 million. For many, those revised numbers came too late.
When vehicle-parts maker Federal-Mogul Corp. bought brake-pad manufacturer T&N Plc in 1998, outside experts predicted T&N’s annual cash payment for asbestos-related liabilities would remain steady at $80 million. The next year, however, it more than doubled, to $180 million–then jumped to $340 million in 2000. “It was on track for $500 million” when Federal-Mogul sought Chapter 11 protection, declares former CEO Robert S. “Steve” Miller. “The asbestos time bomb that came with the T&N acquisition totally destroyed [Federal-Mogul.]”
Why were liability estimates so inaccurate? One reason, says Bhagavatula, is that statutes of limitation encourage plaintiffs to file claims without waiting to see if they become ill. As claims grew, Chapter 11 protection created a snowball effect.
The good news, says Bhagavatula, is that the frenzy has probably peaked, and fledgling reform efforts are under way in the courts and Congress to focus on those who are truly sick. But anyone hoping to slake the enthusiasm of trial lawyers would do well to remember that the word “asbestos” actually comes from the Greek–and means “unquenchable.” –T.R.
Dust In the Wind
Asbestos-related bankruptcies in 2002
Source: Milliman USA