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Racicot-led group opposes FAIR

| February 14, 2006 11:00 PM

Former Gov. Marc Racicot represents one of the many organizations opposing the existing Fairness in Asbestos Injury Resolution Act of 2005.

Racicot, as president of the American Insurance Associations, wrote a letter dated Jan. 20, 2006, to Senate Majority Leader Bill Frist, R-Tenn., saying "we want to reiterate our association's strong opposition to the bill as reported out of the Judiciary Committee."

Property-casualty insurers are committed to a solution to the national asbestos litigation crisis, Racicot said to Frist, but "since the Senate decided to pursue a trust fund, our industry has stressed that this approach must provide insurers with both certainty and finality for our asbestos exposure."

The FAIR Act includes a $140 billion trust fund for people diagnosed with an asbestos-related disease. The national fund for asbestos compensation would be financed by asbestos-related corporations and their insurers.

Insurance industry concerns center on bill language that says if the administrator of the health trust fund cannot resolve a case within a specified period of time, it will be allowed to return to the court system.

"Our industry would inevitably find itself paying both substantial sums to the fund and additional large sums in the tort system for claims permitted to leak outside of the fund," Racicot wrote.

The RAND Institute, a policy research group, reported in 2005 that more than 700,000 asbestos-related lawsuits have been filed in recent decades, costing industry tens of billions of dollars. An insurance industry consultant estimated that in 2003, asbestos litigation cost corporations $8.6 billion.

FAIR advocates seeks to absolve corporations of the legal liability that has forced companies into bankruptcy because of the number of asbestos-related lawsuits against them. The initial intent of the law was to prevent further asbestos-related lawsuits.

Under the proposed federal legislation, rather than taking their cases to court, asbestos victims would file a claim with the Department of Labor, which would then judge whether the person's case warrants compensation and allocate funds according to the severity of the harm caused by exposure.

Montana Sen. Max Baucus successfully introduced a "Libby fix" to the bill because the criteria for determining who was ill with asbestos-related disease would have eliminated the hundreds of victims who worked at W.R. Grace's vermiculite mine and mill operations in Libby. The vermiculite was contaminated with tremolite asbestos and shipped to more than 300 known locations in the U.S. for processing. Some estimates say that Zonolite Attic Insulation made from that vermiculite is in an estimated 35 million buildings in the U.S.

Racicot's letter to Frist contains six critical issues that the insurance industry has with the asbestos relief bill. One of those concerns is the "Libby, Montana Expansion Provisions" which allow the fund administrator to apply special eligibility provisions established for Libby victims to other sites throughout the country should the conclusion of a study to be conducted by the Agency for Toxic Substances and Disease Registry warrant it.

Under the so-called Libby fix:

l Libby claimants are exempted from the general exposure criteria in the bill - they just have to establish that they lived, worked or played within a 20-mile radius of Libby for any 12-month period prior to Dec. 31, 2004 and meet special medical criteria applicable only to Libby claimants.

l Libby claimants can choose to have their claims referred to an expert physicians' panel, which will utilize the special medical criteria developed for Libby claimants to ensure that they are treated fairly.

l If the Libby claimants comply with the Libby-specific medical criteria, they will receive a Level 4 award, or $400,000, essentially establishing a floor of compensation of $400,000 for sick Libby claimants. Those payments would be paid out $160,000 for the first year, $120,000 the second year and $120,000 the third year. A Libby claimant diagnosed with cancer will receive a $1.1 million award.

When the proposed law came out of the Senate Judiciary Committee last year, the language for the diffused lung capacity test was removed. Sen. Conrad Burns, R-Mont., has been fighting to have the test language returned to the bill because nearly 40 percent of the Libby victims would be eliminated former the "Libby fix."

The insurance association is concerned that expanding the "Libby fix" to other sites in the country could threaten the solvency of the $140 billion trust fund. Their suggestion is to take away the authority of the administrator to make that decision and give it to congress since the federal government could find itself with a financial liability if there is not enough money in the fund.

Racicot, himself a former resident of Libby, was governor when the Libby asbestos problem became a national issue due to widespread media attention. Shortly afterward, he turned his attention to help then Texas Gov. George Bush campaign for president.