Ohio First To Put Reins On Out-of-Control Asbestos Litigation

Thursday, July 1, 2004 - 00:00

Asbestos and "toxic tort" personal injury claims are growing exponentially across the United States, and not necessarily because sickness is increasing. Widespread use of asbestos stopped in the 1970s, and the number of mesothelioma cancer claims from asbestos has hovered at about 2,000 cases a year for the past decade, according to a 2000 study by Sebago Associates. Even so, the number of asbestos-related lawsuits has jumped over 2,800 percent over the last two decades. Injury from asbestos exposure may not be immediately evident, but that alone cannot explain the explosion of lawsuits. In fact, research shows that perhaps as many as 90 percent of asbestos claimants are not sick and may never become sick from exposure.

Over the past two years, Ohio has also seen a dramatic increase in the number of silica-related lawsuits filed in its courts. Currently, there are approximately 1,000 silica-related cases pending in Ohio courts. This explosion of silica litigation is not the result of any mass disaster and comes at a time when scientific studies continue to show a decline in silica-related medical conditions.

Asbestos and silica litigation are part of the larger picture of meritless lawsuits that have caused an explosion of litigation costs in America. A study by Tillinghast-Towers Perrin found that asbestos cases alone were responsible for 40 percent of the 14.3 percent rise in tort costs from 2001 to 2002. As a result of the out-of-control litigation costs, the compensation available to the truly injured is shrinking. So are jobs. So are pensions. So are businesses. At last count, asbestos litigation has bankrupted over 70 major companies across America.

As Congress continues to struggle with its decades-old push for asbestos litigation reform, one state - Ohio - has taken firm legislative action to bring the crisis under control. Two new laws will protect jobs, protect companies and protect the people most affected by asbestos and silica exposure.

Business, Economy, Victims All Pay Price For Runaway Lawsuits

Ohio responded to the asbestos and silica litigation crisis because of necessity. More than 40,000 asbestos claims are currently pending in Ohio alone. In addition to the 1,000 pending silica cases, attorneys have stated that they plan to file 5,000 silica cases in Ohio. The asbestos and silica cases continue to be filed in Ohio at a pace faster than the cases can be resolved

Other states, too, are experiencing this unprecedented increase in asbestos filings. The RAND Institute for Civil Justice found that 66 percent of all asbestos-related filings were made in five states between 1998 and 2000. Those same states - Ohio, Mississippi, New York, West Virginia and Texas - handled just 9 percent of all asbestos cases filed before 1998. Litigation climates in those states apparently invite plaintiffs from across the country to file cases. Ohio is working to change the climate.

The economic cost of asbestos litigation is well documented. In addition to the over 70 companies that have declared bankruptcy, approximately 60,000 Americans have lost their jobs and thousands more have seen their pensions fall by as much as 25 percent. Communities also face the secondary cost of unemployment benefits, lower tax bases and decreased per-capita income because of bankruptcies. The RAND Institute estimates the total cost of asbestos litigation could exceed $210 billion.

In addition to economic costs, there are broad social costs:

• People with little or no disability as a result of asbestos exposure are clogging court dockets;

• People who truly are sick are facing compensation delays at best and greatly reduced compensation at worst;

• Companies with marginal connections to asbestos are targets of asbestos lawsuits.

Joint and several liability shifts responsibility for damages to the corporate entity with the deepest pockets, further strapping companies that could be minimally liable for asbestos-related injuries.

Last year, according to one count, more than 100,000 new claims were filed across America. At the current rate, claims could eventually total more than 2.5 million. And while early litigation targeted asbestos manufacturers, today's lawsuits take aim at industries of all sorts: car manufacturers, appliance makers, printing plants, mineral companies, rubber manufacturers and more.

In fact, the RAND Institute found that 85 percent of U.S. industry is subject to the threat of asbestos litigation, with more than 8,000 companies already impacted. Owners of buildings of all shapes and sizes are targets as well. It is conceivable that even owners of older homes will be targeted as defendants in order to gain access to their insurance. The asbestos crisis is far-flung and spreading.

States Leading The Way In Reform

Clearly, states cannot rely on the federal government to remedy the system. Congress has tried since the late 1970s to establish a system to fairly compensate asbestos victims while reducing tort costs. Congress has failed repeatedly. The most recent attempt was a plan to set up a national asbestos trust fund that would essentially eliminate lawsuits. Talks on the issue ended this past spring with no resolution, and with no timeframe for a resurrection of the discussion.

States simply had to act, and Ohio was the first to do so. Business and insurance groups have hailed the Ohio legislation as a template for other states and for national action. The new measures dramatically reform the process for making claims and advancing lawsuits. The result will be speedier resolution for sick claimants, protection of resources for people who may become sick in the future, and critical support for Ohio businesses drowning in a sea of endless litigation.

Courts in several states also are becoming more active in trying to control the crisis. One tactic is to place on inactive dockets asbestos cases in which plaintiffs cannot prove illness or disability. Another is to dismiss without prejudice cases in which claimants are not sick. In doing so, the courts preserve people's rights to bring suits if they eventually become ill.

Laws Set Reasonable Medical Parameters

The two new Ohio laws attack the problem from a common sense perspective: People who aren't sick can't sue. The laws, signed in June by Gov. Bob Taft, establish minimum medical criteria for bringing claims based on asbestos or silica exposure.

In the case of Ohio's asbestos legislation, claimants now must provide evidence that a competent medical authority has: (1) taken a detailed occupational, medical and smoking history; (2) diagnosed a permanent respiratory impairment as defined by the American Medical Association; and (3) found abnormal chest x-rays and pulmonary function tests that indicate asbestos caused the impairment. The claims of plaintiffs who fail to meet these minimum evidentiary criteria will be dismissed without prejudice by the courts.

These medical criteria will be applied to all asbestos cases currently pending in Ohio courts and to all asbestos cases filed in Ohio in the future.

Additionally, the asbestos legislation sets new standards for doctors who are providing the diagnosis. Plaintiffs must establish their prima facie case by using "competent medical authority," that is, doctors who have a doctor/patient relationship with the plaintiff and who spend less than 25 percent of their time serving as legal witnesses and consultants.

The silica legislation was a proactive step to address what many experts believe is the next frontier in toxic tort litigation and what is shaping up to be another asbestos-type tort crisis. The rising tide of silica lawsuits gives credence to those fears as personal injury attorneys exploit the justice system.

Crystalline silica is a type of quartz typically used in glass making, sandblasting and foundries. It is found in thousands of products used in industry and in the home. It is classified as a carcinogen, just as asbestos is.

Ohio's silica legislation establishes medical criteria similar to that in the asbestos legislation. H.B.342 seeks to ensure that the plaintiff is indeed impaired and that the impairment is largely a result of exposure to silica or mixed dust. The medical criteria for moving forward with silica cases are not retroactive, but will be applied to all silica-related claims after the law takes effect in September.

The goals of both the asbestos legislation and the silica legislation were to protect the rights of people who are truly sick from exposure to these harmful substances, and to preserve jobs and economic growth. At the same time, the laws also protect the rights of people who have been exposed to asbestos, silica and mixed dusts to file claims if and when they become sick.

More Work Ahead

The recently signed Ohio laws are good news for businesses today, and even better news for businesses tomorrow. States that have adopted lawsuit abuse reforms have experienced employment growth of almost 9 percent, productivity growth of 3.5 percent and total output growth of 12 percent for each liability-reducing reform, according to the National Bureau of Economic Research.

Part of the reason is that the litigation environment of a state impacts investments in that state. Eight of 10 corporate counsel respondents in a 2003 Harris Poll, for example, said that they made business decisions, such as where to locate or do business, based in part on a state's litigation environment. Tort reform makes business sense.

The work on this vital reform to Ohio's tort system is not done. Even now, the opponents to the asbestos legislation, the plaintiffs' lawyers who specialize in this type of litigation, are preparing to force a state-wide referendum vote with the hope of stopping the new law from going into effect.

Getting asbestos litigation under control in Ohio is a start; a definite step in the right direction. There is, however, more work ahead.

As noted earlier, the asbestos litigation crisis is but one component - albeit a big one - of the much larger issue of out-of-control tort costs. This is more than a legal matter; it is a business matter. As Navigant Consulting pointed out in a study commissioned by the Financial Institutions for Asbestos Reform, asbestos litigation restricts capital investment, impairs capital raising and lowers production capacity. The hidden costs of asbestos litigation alone could cut economic growth by as much as $2.4 billion a year. And that does not count the litany of other baseless lawsuits striking at the heart of corporate America each and every day. While personal injury attorneys are pocketing the lion's share of the $205 billion annual cost of the U.S. tort system, businesses are cutting people, shuttering locations or closing altogether.

Unbridled lawsuits, unreasonable jury awards and unlimited liability hurt everyone, and economic recovery will never occur in the face of such rampant abuse of the system. Comprehensive tort reform should be, must be, at the top of each state's agenda and of the national agenda as well.

Richard D. Schuster is a Partner in the Columbus, Ohio office of Vorys, Sater, Seymour and Pease LLP, one of the nation's leading asbestos defense firms. As chairman of the firm's Toxic Tort Litigation practice group and as an expert in asbestos litigation, Mr. Schuster recently helped Ohio lawmakers draft landmark asbestos and silica reform legislation. Ohio is the first state to approve such reforms. Susan B. Harty and Nina I. Webb-Lawton are also Partners at Vorys, Sater who defend clients in asbestos-related cases.