Asbestos awards come from workers' wages

By Susan Cornwell, Reuters

A large chunk of the money paid to asbestos claimants comes at the expense of U.S. workers in the firms being sued, a new study co-authored by Nobel prize-winning economist Joseph Stiglitz said on Tuesday.

The study urged re-examining the lawsuit system used to compensate asbestos claimants, saying it appears to unfairly penalize workers. They each lose tens of thousands of dollars in wages and pensions as their companies are driven into bankruptcy by the claims, it said.

The paper seemed certain to be seized by the U.S. business community as more evidence of the need for a legislative solution to the ever-growing number of lawsuits by people who claim they were injured by the fire-retardant mineral.

"A large component of the payments made to asbestos claimants involves transfers from workers at the defendant firms," said the study by Stiglitz, who chaired the Council of Economic Advisers under former President Bill Clinton, and was a co-winner of the 2001 Nobel Prize in Economic Sciences.

"The purpose of this paper is not to suggest that impaired claimants are unworthy of assistance, but rather to highlight the fact that payments to any claimants are not free," the study said.

Asbestos was widely used for fireproofing and insulation until the 1970s, when scientists concluded that inhaled fibers could be linked to cancer and other diseases.

An avalanche of asbestos personal injury claims has cost more than $54 billion in settlements so far and driven more than 60 U.S. companies into bankruptcy.

Lost Jobs and Income
These bankruptcies have led to a loss of 52,000 to 60,000 jobs, according to the study, which Stiglitz wrote along with Jonathan Orszag and Peter Orszag of Sebago Associates Inc., an economic policy consulting firm.

"The costs imposed on these displaced workers amount to between $1.4 billion and $3 billion in present value, or roughly $25,000 to $50,000 per displaced worker," it said.

Further, it noted that workers at many firms are also shareholders, since they hold company stock in their defined contribution pensions.

"The average worker at a bankrupted firm with a 401 (k) plan suffered roughly $8,300 in losses," the study said.

While citizens who have suffered from asbestos-related illnesses deserve appropriate compensation, the study questioned the fairness of the liability lawsuit approach to paying their claims.

"Since many of the these firms were not asbestos manufacturers, the costs imposed on workers may seem unfair and inefficient from an economic perspective," the study said.

"In light of these costs, re-examining the system used to compensate those with illnesses associated with asbestos exposure seems worthwhile."

With many asbestos manufacturers already bankrupt, lawsuits are naming companies that used it in products they sold, and a recent study said these companies spanned 85 percent of the U.S. economy.

The study was commissioned by the American Insurance Association as an independent analysis of the costs borne by workers of firms filing for bankruptcies due to asbestos liabilities.

Even before it appeared, the business community was hoping the new Republican-majority Congress, which will take office in January, will move to limit asbestos litigation.

Utah Republican Orrin Hatch, who will be the new chairman of the Senate Judiciary Committee in January, says Congress should resolve the issue before it further hurts the U.S. economy.

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