An Expensive Combination: Asbestos, Money, Lawyers and the U.S. Navy

Proposed trust fund would serve as a way to fund payment of asbestos litigation cases.

Exposure to asbestos has been a treasure trove for litigation attorneys and a deadly killer for those exposed to the substance.

A recent article in the Wall Street Journal says that some of the most lethal exposure to asbestos has been in Navy shipyards. According to the Journal, 26% of mesothellioma cases (a form of lung cancer), 16% of other lung cancer cases and 13% of disabling lung disease cases are the result of exposure in military and shipyard consturction.

Asbestos is an excellent fire retardant and the Navy began using it in ships during World War II because of its ability to prevent fire. Ceilings, floors and bulkheads in ships were frequently covered with asbestos.

But the courts have ruled that the federal government can’t be forced to pay compensation for the harm caused by the deadly result of exposure to the product. Defense manufacturers have argued that they included asbestos in ships because the government specified it as a requirement. The courts have set as a legal standard that the government would have been more at fault than the manufacturer. That test has not been met. As a result, while the government profits from asbestos litigation in some cases because it collects taxes on income, it has generally not had to bear the financial cost of court judgments.

Federal employees who win in an asbestos lawsuit must return the federal workers’ compensation they have received. The result is the Navy pays a small percentage of compensation benefits as many of the employees exposed to asbestos win large judgments in court.

Senate Majority Leader Bill Frist is trying to create a trust fund that would bring about a settlement to the tens of thousands of cases brought by people exposed to asbestos. While the government would administer the fund, the money would come from the asbestos industry and insurance companies.

The reason the government won’t provide any money for the fund is simple: It would cost a lot of money. Budget deficits are already high and the trust fund would drive the red ink even higher. There is also concern that the precedent set in asbestos cases would provide a framework for settling other major litigation subjects including tobacco and breast implants.

No one is sure how much money will be required to settle the issue or how many cases are potentially going to be filed. Exposure to asbestos sometimes does not result in damage for 30 years. About $114 billion has been proposed in Congress for a trust fund funded by industry but that may not be enough.

No one knows the final outcome but some results are predictable. Some companies will go bankrupt as a result of the litigation. Taxpayers may eventually be tapped for more money if the proposed trust fund runs out of money. Some workers exposed to asbestos will become seriously ill. And last, but certainly not least, the trial lawyers taking the cases will make a great deal of money.

About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources. Follow Ralph on Twitter: @RalphSmith47