The Dimensions of Asbestos Litigation

1
The Dimensions ofAsbestos Litigation
Stephen Carroll September 2003
RAND INSTITUTE FOR CIVIL JUSTICE
2
Dimensions of the Litigation

• Claims
• Costs and compensation
• Economic effects
• Future outlook

3
Over 730,000 Claimants Through 2002

• Number of claims filed annually has risen sharply
• Average severity of claimed injuries is declining
• Little change in frequency of seriously ill
  claimants
• Increasing proportion of claims for less serious
  injuries
• Dramatic shifts in filing patterns
• Typical claimant files against several dozen
  defendants

4
Annual Claims Filings Have RisenSharply Since
1990
Asbestos claims against five major defendants
90,000
80,000
70,000
60,000
Number of claims
50,000
40,000
30,000
20,000
10,000
0
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
5
Nonmalignant Claims Accountfor the Growth in
Claims
30
Mesothelioma
Other Cancer
25
Nonmalignant
Ratio of the number of claims in each year to the
number of claims in 1980
20
15
10
5
0
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
A4632-2 0503
6
Controversy over Injury and Impairment

• Many say most recent claimants are unimpaired.
• Others say relevant issue is whether claimants
  satisfy legal criteria for injury.
• Controversy turns on value judgments and medical
  criteria.
• Studies suggest that most claimants without
  malignancies are not currently functionally
  impaired.

7
Filings Moved from Federal to State Courts
Percent of filings in federal courts
8
And from Some States to Others
100
MD
Other states
80
TX
60
Percent
IL
OH
NJ
40
MS
PA
WV
20
NY
CA
0
9
Dimensions of the Litigation

• Claims
• Costs and compensation
• Economic effects
• Future outlook

10
Estimated Total Costs of Resolving Asbestos
Claims Through 2002 70 B

• Publicly available data are very limited
• We estimate total outlays of 70 B through 2002
• At least 5 major companies have each spent more
  than 1 B on asbestos litigation

11
Most Dollars Were Paid toNonmalignant Claimants
Distribution of Claims
Estimated Allocation of Compensation
Mesothelioma
Other cancers
4
9
Mesothelioma
20
Other cancers
20
Nonmalignant
Nonmalignant 86
60
12
Transaction Costs Have ConsumedMore Than Half of
Total Spending
100
Plaintiff Compensation Plaintiff
Expenses Defense Expenses
80
60
Percent
40
20
0
1980s Litigation
1990s Litigation
And they are likely to go back up in the future
13
Dimensions of the Litigation

• Claims
• Costs and compensation
• Economic effects
• Future outlook

14
More Than 8,400 Firms Have Been Named as
Defendants

• Our list of defendants includes more than 8,400
  firms
• Increasing number of defendants outside the
  asbestos and building products industry
• Both large and small businesses
• At least one company in 75 (of 83) U.S.
  industries (at the two-digit SIC level), now
  involved in litigation
• By 1998, nontraditional defendants account for
  more than 60 of asbestos expenditures
  (confidential study)

15
Distribution of Defendantsby Industry (2-digit
SIC)
Percent
SIC

16
Distribution of Defendantsby Industry (2-digit
SIC)

• 810 percent of defendants 3 industries
• Construction special trade contractors
• Wholesale trade-durable goods
• Water transportation
• 45 percent of defendants 5 industries
• Fabricated metal products, except machinery and
  transportation equipment
• Building construction general contractors and
  operative builders
• Chemicals and allied products
• Stone, clay, glass, and concrete products
• Industrial and commercial machinery and computer
  equipment
• 13 percent of defendants 18 industries
• Less than 1 percent 49 industries

17
Bankruptcies Are Becoming More Frequent

• First bankruptcy in 1978
• 19 in the 1980s
• 17 in the 1990s
• 29 in 2000s through 2002

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And Bankruptcy Is OnlyPart of the Story

• Defendants net payments to asbestos claimants
  weaken their financial position, cost jobs
• Upper-bound estimates of effects on defendants
• As of 2000 Eventually
• Reduced levelof investment 10 B 33 B
• Jobs not created 138,000 423,000
• However, other firms reactions may offset the
  overall effects on the economy

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Dimensions of the Litigation

• Claims
• Costs and compensation
• Economic effects
• Future outlook

20
The Future Course of Litigation Is Uncertain

• Analysts projections of total claimants and
  costs vary dramatically
• Total claimants 1 million to 3 million
• Total costs 200 billion to 265 billion
• Whether there will be money left to pay future
  claimantsand who will pay remain open questions

21
Widespread Agreement About the Current State of
the Litigation...

• Recent surge in filings
• Majority of recent claimants are not currently
  functionally impaired
• High transaction costs
• Large number of bankruptcies
• Spread of litigation through economy
• Future claimants prospects are uncertain

22
Disagreement About

• Whether reform is needed
• If so, what reform would best remedy perceived
  problems

23
(No Transcript)
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Verdicts Are Infrequent but AttractGreat
Attention

• Since 1993, out of hundreds of thousands of
  claims, few have been tried to verdict
• 527 trial verdicts
• 1,598 plaintiffs reaching verdict
• Plaintiffs won two-thirds of the time
• Mesothelioma plaintiffs were most successful
• Most claims were tried in groups
• In most trials, juries heard a small number of
  claims

25
A Few Large Awards Accounted forMost of All
Dollars Awarded
Distribution of Awards ()
Distribution of Dollars
1K100K
?10M
100K1M
?10M
gt1M10M
0
100K1M
1K10K
gt1M10M
10K100K
Source RAND compilation
26
Five States Account for Most Verdicts
100
90
Other
MD
80
LA
70
CA
60
TX
PA
50
40
30
20
10
0
Plaintiffs
Trials
27
An Increasing Share of VerdictsAre in Texas and
Maryland Trials
100
Other
90
LA
80
PA
70
CA
MD
60
TX
50
40
30
20
10
0
'93-'95
'96-'98
99-'01