Asbestos litigation continued to grow during the 1980s: by 1992, fully 100,000 claims had been resolved, but another 100,000, yet unresolved, had been filed.
A novel means of processing asbestos claims was initiated in 1988, when the Johns-Manville corporation emerged from bankruptcy and established the Manville Personal Injury Settlement Trust, the first “bankruptcy trust” set up to pay out money to asbestos claimants. Unfortunately, plaintiffs’ attorneys controlled the trust’s claimants committee and set up procedures for the trust that were advantageous to themselves, rather than potential claimants. The trust rules minimized requirements of proof of actual injury or causation (exposure to Johns-Manville products). The trust thus paid out a lot of money quickly to the attorneys, all the while exhausting its funds for potential future claimants.
In just its first nine months of operation, the trust paid out some $500 million to 12,600 claimants — and by the end of 1989, 89,000 more claimants were outstanding. Eventually, the trust had to sharply curtail payments to claimants — to 10 percent in 1995, and 5 percent in 2001. Injured claimants were literally getting a nickel on the dollar. “As of June 30, 2006, the trust had received more than 773,000 claims and paid out about $3.4 billion–just $4,400 per claimant.”
One Comment
[…] With Walter occupied on a deadline and Ted on the road, I’m happy to be back to wrap up my discussion of developments in asbestos litigation, as summarized in the Manhattan Institute’s recently released Trial Lawyers, Inc.: Asbestos report. As I noted last month, asbestos has an ancient history, and in the early part of the last century, it was deemed a “magic mineral”; its flame-retardant properties protected American naval vessels and schoolhouses from fire. (See here.) Unfortunately, asbestos exposure ultimately proved deadly, the plaintiffs’ lawyers pounced, and the American asbestos industry largely went bankrupt by the early 1980s. (See here.) The trusts created to pay out claimants from these bankrupt entities became a big business unto themselves, swamped with claimants and unable fairly or efficiently to process the claims. (See here.) […]