Last Updated on September 26, 2023 by Beth Skwarecki
Asbestos is a naturally occurring fibrous mineral that was heavily utilized in various construction and industrial materials during the 20th century. However, it was later discovered that exposure to asbestos can lead to serious health issues like mesothelioma, lung cancer, and asbestosis. This resulted in a flood of lawsuits against the manufacturers of asbestos-containing products.
Many companies ended up going bankrupt under the weight of asbestos liabilities. To ensure victims could still receive compensation, these bankrupt companies were required to establish asbestos trust funds (also called asbestos bankruptcy trusts) as part of their reorganization.
Asbestos trusts are pools of money set aside to pay present and future asbestos claims. There are currently over 60 asbestos trust funds holding over $30 billion in assets in the United States alone. For victims and families affected by asbestos exposure, these trusts provide a critical avenue for receiving financial compensation. Understanding what asbestos trust funds are, how they operate, and how to navigate the claims process is vital for anyone seeking justice.
What are Asbestos Trust Funds?
Asbestos trust funds are specialized legal entities established by bankrupt asbestos companies to manage compensation for asbestos personal injury claims. When a company goes bankrupt due to asbestos liabilities, the company is legally obligated to establish a trust fund and contribute assets to pay both current and future claims. The assets contributed usually include cash, stock shares, proceeds from insurance settlements, and the rights to insurance coverage.
In total, major asbestos trust funds hold billions of dollars designated to help compensate victims of asbestos exposure. These funds provide a dedicated mechanism for payment when the responsible companies no longer exist.
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 integrated miner, manufacturer, and supplier of asbestos products in the United States. Facing over 16,000 pending asbestos lawsuits, Johns-Manville’s insurers refused to continue covering claims. This forced the company to file for bankruptcy protection. As part of its reorganization, Johns-Manville established a trust funded with $2.5 billion in assets to pay victims. This pioneering trust fund model paved the way for many other companies facing asbestos liabilities.
By the early 1990s, nearly 30 more companies had followed Johns-Manville into bankruptcy due to asbestos claims. To provide a formal process for establishing asbestos trusts, Congress added Section 524(g) to the Bankruptcy Code in 1994. This enabled companies to set up trusts that were legally protected from asbestos lawsuits. Major corporations 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, just compensation for hundreds of thousands of victims would be impossible.
How Do Asbestos Trust Funds Work?
Filing a Claim
To receive compensation from an asbestos trust, victims first need to file a claim with the specific trust fund. This initiates the detailed claims process. Key evidence to support the claim includes:
- Work records proving exposure to the company’s asbestos products
- Medical diagnosis reports confirming an asbestos disease
- Documentation identifying exposure to the company’s asbestos products
Without proper documentation, the trust administrators cannot verify eligibility and exposure. Having an experienced asbestos law firm assist in the claim filing can help ensure the claim is complete and supported.
Once a claim is filed, the administrators will review all the submitted evidence and determine if it meets the fund’s criteria. If accepted, the claim enters the trust’s scoring process. Each trust utilizes a claim-scoring matrix to evaluate claims consistently. Some factors that are considered typically include:
- Type of disease diagnosed
- Age at diagnosis
- Jurisdiction/state laws
- Economic loss
Inputting the claim characteristics into the matrix produces an overall claim score. Higher scores are given to claims involving mesothelioma, significant lost wages, and younger victims.
After scoring, the claim is assigned a payment percentage based on the trust’s current available funds. For example, a claim may be valued at $100,000 but only receive a 40% payment percentage, equaling $40,000. Payment percentages often start low when a trust opens and gradually rise as more claims are processed.
Given the claim’s score and payment percentage, the trust determines the appropriate award amount. Payments are made in the order of claims received after prioritizing any claims involving extreme medical hardship. In order to manage funds, payments are structured into multiple installments distributed over several years. Trusts also reserve sufficient funds annually to ensure both current and future claimants can be paid.
Importance of Asbestos Trust Funds
Asbestos trusts play a vital role in delivering justice and compensation to victims of asbestos exposure. With many responsible companies long bankrupt, asbestos trusts offer the only viable option for payment. According to a GAO report, asbestos trusts have paid about $17 billion to claimants so far.
Asbestos trusts also ease the burden on state courts by handling claims out of court. Without these trusts, asbestos cases would overwhelm court dockets for decades. Trusts thus provide an efficient claims process that saves court resources for other cases.
For victims facing severe health issues and financial struggles, asbestos trusts can provide critical assistance and hope. Though no amount of money can make up for the suffering caused by asbestos, these funds do help victims and families obtain a measure of justice during difficult times.
Asbestos trust funds have become an essential component of the ongoing response to the asbestos public health tragedy in the United States. Established out of corporate bankruptcies, asbestos trusts strive to compensate victims fairly through a structured claims process. Despite limited assets, these trusts have paid billions of dollars to claimants so far.
Moving forward, asbestos trust funds will remain vital in providing support and justice to the countless victims of deadly asbestos exposures. Though many challenges remain, asbestos trusts continue to offer hope and financial relief when victims need it most.
Beth is Cloudmineinc’s senior health editor and a certified personal trainer. She has over 10 years experience as a science journalist and is the author of two books. She deadlifts over 315 lbs.