Asbestos is a naturally occurring fibrous mineral that was heavily used in various construction materials in the 20th century. Unfortunately, asbestos exposure can lead to serious health issues like mesothelioma, lung cancer, and asbestosis. This has led to numerous lawsuits against companies that manufactured asbestos-containing products. As a result, many of these companies have gone bankrupt. To ensure that victims still receive compensation, asbestos bankruptcy trusts (also called asbestos trust funds) were established. These trusts hold funds to pay out asbestos claims and are an important resource for people harmed by asbestos exposure. In the United States alone, over $30 billion is held in asbestos trust funds.
Below is a comprehensive overview of what asbestos trust funds are, how they were formed, how they work, and their importance for asbestos victims.
What are Asbestos Trust Funds?
Asbestos trust funds are pools of money set aside by bankrupt asbestos companies to compensate present and future asbestos claimants. When a company declares bankruptcy due to asbestos liabilities, it must establish a trust fund as part of its reorganization plan. The company must fund the trust with enough assets to pay both current and future asbestos claims. This ensures that victims can still receive compensation even though the company is bankrupt. Typically, the company contributes cash, stock, insurance settlement proceeds, and rights to insurance coverage to the trust.
For those unfamiliar with the intricacies of these processes or the potential for compensation, consulting a firm with expertise in asbestos trust funds can be immensely beneficial. This guidance can help victims understand the complexities and assist in navigating the system effectively. There are currently over 60 asbestos bankruptcy trust funds in the U.S., holding tens of billions of dollars.
How Were Asbestos Trust Funds Formed?
The first asbestos trust fund was created in 1988 when the Johns-Manville Corporation declared bankruptcy. Johns-Manville was once the largest supplier of asbestos-containing products in the U.S. Facing over 16,000 lawsuits, the company could no longer afford to pay claims. As part of its reorganization, Johns-Manville created a trust fund to pay asbestos victims. This trust fund model was groundbreaking at the time but quickly became the standard approach for asbestos bankruptcies.
Dozens more companies soon followed Johns-Manville into bankruptcy due to asbestos liabilities. Section 524(g) was added to the Bankruptcy Code in 1994 to ensure compensation for victims. This established a legal process for companies to set up asbestos trusts. Companies like W.R. Grace, Federal-Mogul, and Babcock & Wilcox all utilized 524(g) trusts as part of their bankruptcies in the 2000s. Without 524(g) trusts, compensation for hundreds of thousands of asbestos victims would be in jeopardy.
How Do Asbestos Trust Funds Work?
The Claims Process
To receive compensation from an asbestos trust, victims must go through a detailed claims process. This begins by submitting a claim to the specific trust fund along with evidence to support the claim. The key pieces of evidence needed are:
- Work History Records – Documents like employment records, union membership cards, or Social Security records to prove exposure to the company’s asbestos products. This verifies eligibility.
- Medical Diagnosis – A report from a certified doctor diagnosing an asbestos disease like mesothelioma, asbestosis, or lung cancer. This verifies the injury.
- Product Identification – Documents or testimony identifying the victim who worked with or around the company’s asbestos products. This connects the exposure and the injury.
The trust fund administrators will review all claim documentation and determine if the claim meets the fund’s criteria. If accepted, the claim enters the scoring process.
Claim Scoring Matrix
Each trust fund utilizes a claim-scoring matrix to determine award amounts. This matrix sets defined criteria and values for assessing claims. Factors considered typically include:
- Disease Type – More serious diseases like mesothelioma or Level 3 asbestosis receive higher scores.
- Age – Younger claimants receive higher scores based on lost years of life.
- Jurisdiction – Awards may be adjusted based on the governing state law.
- Dependents – Claimants with spouses or children get higher scores.
- Economic Loss – Claims with higher lost wages or medical costs get higher scores.
An overall claim score is generated by inputting the claim characteristics into the matrix.
Payment Percentages
Once scored, the claim is assigned a payment percentage based on the fund’s current assets. This determines what portion of the full claim value will be paid out. For example, a claim valued at $100,000 may only receive a 40% payment percentage, equaling a $40,000 payout. Payment percentages often start low when a trust opens and aim to increase as more claims are processed.
Claim Payments
Given the scoring and payment percentage, the trust determines the appropriate award amount. Payments are made in the order claims were received after first prioritizing any claims involving extreme medical hardship. Awards often range from thousands to hundreds of thousands of dollars.
To manage available funds, payments are structured into multiple installments over several years. Trusts also budget and reserve funds each year to ensure compensation will be available for both current and future claimants.
Overall, the structured claims process aims to provide consistent and equitable payments to all eligible asbestos victims within the trust fund’s means.
The Importance of Asbestos Trust Funds
Asbestos trust funds play a critical role in providing compensation for victims of asbestos exposure. Over the past century, hundreds of thousands of workers and families were put at risk by asbestos products. Many have developed deadly asbestos diseases that require expensive medical treatments. Asbestos trusts offer the only avenue for compensation since the responsible companies are now bankrupt. According to a 2011 GAO report, asbestos trusts have paid about $17 billion to claimants thus far.
Asbestos trusts also reduce the burden on state court systems. Without trusts, asbestos cases would clog up courts for decades. Trusts provide an efficient alternative by handling claims through dedicated claims processing facilities. This allows courts to focus resources on other important cases.
Asbestos victims face many challenges, from medical issues to financial hardships. Asbestos trust funds were created to provide hope and support during difficult times. Though no amount of money can make up for the suffering caused by asbestos, these funds do deliver a measure of justice and financial assistance. Moving forward, asbestos trusts will continue serving victims and their families.
Asbestos trust funds have become a vital component of the ongoing response to the asbestos public health crisis in America. Born out of corporate bankruptcies, these trusts administer compensation programs for the countless victims of asbestos exposure. Through a structured claims process, asbestos trusts strive to pay victims and their families in a fair manner. Despite limited resources, tens of billions of dollars have been paid out so far. Looking ahead, asbestos trust funds will remain critically important in providing a measure of justice for those harmed by deadly asbestos products. Though challenges remain, asbestos trusts offer hope and support when victims need it most.
