June 11, 2012 Articles

Bankruptcy Trusts and Asbestos Litigation

By Lee Blanton Ziffer

As asbestos litigation stretches into its fifth decade, the largest mass tort in U.S. history has shown no signs of slowing down. Diagnoses of mesothelioma, a rare form of cancer linked to asbestos exposure, are at an all-time high, and some predict that the number will continue to grow well into the next decade. See BertramPrice & Adam Ware, "Mesothelioma Trends in the United States: An Update Based on Surveillance, Epidemiology, and End Results Program Data for 1973 through 2003," 159 Am. J. Epidemiology 107–12 (Issue No. 2, Jan. 15, 2004). By 2002, an estimated 730,000 people had filed asbestos-related lawsuits.

As liabilities for manufacturers that formerly used asbestos in their products continue to grow, many of the most prevalent asbestos litigation defendants have filed for bankruptcy reorganization. During confirmation proceedings, many of these companies have established asbestos personal injury trusts to pay claimants who allege to have been injured by exposure to asbestos-containing products. While the bankruptcy trust model has grown in usage and popularity among defendants faced with insurmountable asbestos liabilities, so have the number of trusts and so have problems associated with integrating trust compensation into the traditional tort system.

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