Escaping the Asbestos Crisis
September 29, 2003
Supreme Court justice David Souter has called asbestos litigation "an elephantine mass" -- 600,000 plaintiffs have sued for damages, 6,000 companies have been sued, 80 companies have filed for bankruptcy because of asbestos liabilities, $54 billion has already been paid in compensation, and estimates of total compensation costs range as high as $250 billion.
Asbestos litigation is a crisis because damage payments are so high that they have caused substantial disruption to defendant firms, their workers, their insurers and their equity holders, says Michelle J. White, a research associate of the National Bureau of Economic Research. Many large asbestos defendants have filed for bankruptcy while others have avoided bankruptcy but seen their stock values plunge:
- The Halliburton Company's share value fell by 42.5 percent in one day of trading in December 2001 when investors became fearful of its asbestos liabilities - erasing $3.8 billion of market capitalization. Halliburton's bonds also fell sharply.
- One recent study concluded that asbestos bankruptcies have caused the loss of between 52,000 and 60,000 jobs, and displaced workers have lost an average of $25,000 to $50,000 in future wages plus $8,300 in their 401(k) retirement plans.
- Another study concluded that 128,000 jobs have been lost, counting jobs shed by both bankrupt and non-bankrupt asbestos defendants.
The rapidly rising number of claims means that new defendants are being drawn into asbestos litigation to replace old defendants that have gone bankrupt. Unlike other mass torts, asbestos litigation has no natural ending point because the number of potential plaintiffs and potential defendants is virtually unlimited, says White.
Source: Michelle J. White, "Resolving the "Elephantine Mass," Regulation, Vol. 26, No. 2, Summer 2003, Cato Institute.
Browse more articles on Government Issues