Silica Litigation

1
SilicaLitigation Regulation Risks and
Liability Risk Reduction

• February 4, 2004
• Henry Chajet, Esq.

2
SILICA

• A WHITE OR COLORLESS CRYSTALLINE COMPOUND, SiO2,
  OCCURING ABUNDANTLY AS QUARTZ, SAND, FLINT,
  AGATE, AND MANY OTHER MINERALS AND USED TO
  MANUFACTURE A WIDE VARIETY OF MATERIALS, NOTABLY
  GLASS AND CONCRETE.
• American Heritage Dictionary, 2d C Ed, 1991

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Potential Silica Related Illness

• Chronic Obstructive Lung Disease (also known as
  chronic obstructive pulmonary disease)
• Characterized by a limitation of airflow in the
  lung which develops over time and is not totally
  reversible
• Two major diseases associated with disease are
  emphysema and chronic bronchitis
• Silicosis is a chronic fibrotic pulmonary
  disease caused by the inhalation, deposition, and
  retention of dust containing crystalline silica.
  NIOSH
• (Diagnosed by chest x-ray and occupational
  history of exposure to silica-containing dust)
• IARC Carcinogen Crystalline silica, inhaled
  from occupational sources, is categorized as a
  Category 1 carcinogen (known human carcinogen) by
  the International Agency For Research on Cancer
  of the World Health Organization.

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Potential Silica Liability Theories

• Workers Comp Defined / Limited Awards for Occ
  Illness or Injury, Regardless of Fault No Jury
  No Pain and Suffering or Punitive Damages
• Intentional Tort Action By Employee Illness or
  Death Claim, Outside Workers Compensation System,
  With Potential Jury Award.
• Tort Claim By Non Employee Potential Jury Award
  for Claims By Contractors, Visitors, and Citizens
• Product Liability Claim Potential Jury Award
  For Harm by Defective Product (Including
  Inadequate Warning)
• Strict Liability Tort Action Potential Jury
  Award For Harm Caused by A Product That is
  Inherently Dangerous
• Environmental Law Claims Potential injunctive
  relief and damages resulting from private or
  government suits under statutory provisions
• We note that we have taken substantial liberties
  in condensing complicated legal theories for this
  presentation and that the presentation should
  not be construed as legal advice or legal
  opinions.

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Medical costs associated with obstructive lung
disease

• In 2001, estimated at 8.5 billion for
  occupational asthma and other occupational lung
  diseases
• In 1996 alone, for chronic obstructive pulmonary
  disease
• Medical and administrative expenses
• 2.8 billion
• Lost wages, lost benefits, etc. 2.2 billion
• Total estimated cost 5 billion
• Source BNA, Occupational Safety Health Daily
  (January 15, 2002)

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Is silica the next asbestos crisis ?

• 54 billion spent in asbestos settlements to date
• 210 billion to settle pending/ future asbestos
  claims
• 68 companies in bankruptcy because of asbestos
• 22 filed for asbestos related bankruptcy since
  Jan, 2000

Source Rand Institute for Civil Justice (Santa
Monica, California)
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Selected Asbestos Caused Chapter 11 Proceedings
Company Date No. of Claims Cost (in billions)
Owens Corning 10/00 460,000 5
Harbison-Walker Refractories 2/02 200,000 4.1 (reserve)
Federal-Mogul 10/02 365,000 2.1 (reserve)
ABB 2/03 204,326 2.1
W.R. Grace Company 2/01 325,000 1.9
Babcock Wilcox 2/00 385,000 1.6
GAF 1/01 500,000 1.5
Pittsburgh Corning 4/00 435,000 1.2
USG 6/01 250,000 1.1 (reserve)
Armstrong World Industries 12/00 455,000 N/A
Kaiser Aluminum 2/02 112,400 .06
Source New York Times (April 24, 2003)
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Silica Verdicts

• Lee v. Dresser Industries Texas state court
  (1990)
• 47 year old foundry worker alleged that the
  defendant manufacturer failed to warn about
  possible health hazards on product package
  containing silica flour.
• Jury verdict for plaintiff 750,000

9
Silica Verdicts

• Estate of Robert Altvater v. Clay Craft Co.
  Ohio state court (1994)
• Brick manufacturer employee died of silicosis
  while in his late 50s. Estate alleged 1)
  employer intentionally exposed him to silica via
  dusty work conditions and 2) the union had
  complained about dust
• Jury verdict for plaintiff 800,000
  compensatory and 500,000 punitive damages Total
  1.3 Million

10
Silica Verdicts

• Plaintiffs v. Exxon, et al. California court
  (1997)
• Class action (28) plaintiffs with a range of
  physical conditions from alleged exposure to
  substances including silica).
• Employers failed to properly warn or to provide
  instructions for safety equipment
• Jury verdict for plaintiffs 13,724,863
  compensatory damages
• A mistrial was declared re punitive damages
  claim
• Matter under appeal

11
Silica Settlements

• Frame v. Consolidated Rail Corp. (New York,
  1997) 750,000 (suit by 53 year old locomotive
  engineer under the Federal Employers Liability
  Act, arguing that the plaintiff was exposed to
  sand through defects in the locomotive cab
  company denied that he had been exposed to
  harmful quantities of silica and argued that he
  did not die from silicosis)
• Regaldo v. Texas Mining Co. et al. (Texas, 1999)
  750,000 (sandblaster sued marketers and
  manufacturers for failing to warn of the dangers
  of exposure to silica over a ten-year period
  defendants argued they provided warnings that met
  government requirements and that plaintiffs
  employer was required to warn him of the dangers
  of working with silica-based sand)
• Garcia v. Lone Star Industries (Texas, 1996)
  40,000 settlement (42 year old with silicosis
  from work-related exposure sued silica
  manufacturer for failure to warn company argued
  that silica was not used, and that plaintiffs
  employer was liable because it did not provide
  him with proper PPE)

Source American Lawyer Media Jury Verdicts
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Silica Settlements

• Tompkins v. U.S. Silica Co. et al. (Texas, 2001)
  Case remains on appeal after jury found the
  defendant acted maliciously and awarded
  7,500,000 to the estate of a 66 year old
  deceased sandblaster. (Punitive damage claims
  settled for 600,000). Plaintiff alleged
  manufacturers failure to warn company responded
  that health hazards related to silica are common
  knowledge in the industry and that the deceaseds
  employer was required to inform and protect its
  workers from silica hazards.

13
Silica Defense Wins

• Franklin v. C-E Minerals et al. (Michigan, 1992)
  defense win on statute of limitations grounds
  (case appealed resolution unreported)
• Long et al. v. Raymond T. Opdenaker Sons, Inc.
  et al. (Pennsylvania, 1992) 9 plaintiffs
  alleged silica exposure and failure to warn at
  refuse company when one defendant dumped a
  truckload of crystobalite defendants responded
  that they had no knowledge of the trucks
  contents and that the plaintiffs had assumed the
  risk. (no appeal filed)

14
Silica Defense Wins

• Kessinger et al. v. Grefco, Inc. (Illinois,
  1994)
• Employees alleged asbestos and silica exposure
  from diatomaceous earth sold to their employer,
  w/o proper warning labels.
• Defendant argued that plaintiffs had not been
  exposed to dangerous amounts of silica and did
  not suffer from silicosis.
• Defendants argued the employer knew or should
  have known employees were being exposed to
  potentially harmful materials.
• Jury found that none of the employees suffered
  from silicosis and therefore found for defendant.
• Appellate court reversed and remanded for new
  trial but Supreme Court of Illinois upheld
  defense verdict.

15
Silica Defense Wins

• Glaser v. Bussen Quarries et al. (Missouri,
  1995) suit against sand suppliers for failure
  to warn defense that plaintiffs employer had
  not complied with OSHA regulations, that failure
  to implement safety precautions was the sole
  cause of the plaintiffs illness, and that if
  used properly, silica sand is a safe product (no
  appeal filed)
• Carlson v. Southern Pacific Transportation Co. et
  al. (California, 1996) alleged failure of
  employer to provide PPE and to take appropriate
  precautions 54 years earlier defense that
  employer had taken appropriate protective
  measures based on info available at the time, and
  that plaintiffs injuries were the result of a
  subsequent job. (no appeal filed)

16
Silica Defense Wins

• Powers v. Exxon-Mobil Corp. (Texas, 2002)
  estate of deceased sandblaster sued employer for
  failing to provide safe work environment, failing
  to provide PPE and failing to warn of known
  health hazards company defended that the
  deceased had been instructed to use appropriate
  PPE and that his death was due to an unrelated
  disease.
• Lockheed Martin v. Gordon. (Texas, 2000) Product
  liability claims by 140 foundry workers re silica
  sand supplied by a company purchased by Lockheed
  dismissed based on analysis of contract terms of
  acquisition. Parts of case on appeal.

17
Silica Defense Wins

• Cofer v. Ferro Corp. (Texas Court of Appeals,
  2003) former employee of brick company sued 78
  defendants, including Ferro Corp. The appellate
  court held that the 10-yr. Statute of limitations
  protected the company, which designed and built
  kilns for plaintiffs employer. The court did
  not address the claim that Ferro Corp.
  fraudulently concealed the dangers of silica
  because Cofer had produced no evidence of that
  fact.

18
Silica Defense Wins

• Gray v. Badger Mining Corporation (MN, 2003)
  Minnesota court of appeals reversed trial court
  ruling that supplier had a duty to warn plaintiff
  of health hazards from exposure to silica.
  (plaintiff was a foundry worker (four decades)
  who sued Badger, among others, alleging that
  Badger failed to warn of the dangers of inhaling
  silica. Badger asserted that it has no duty to
  warn plaintiff of such dangers because
  plaintiffs employer was a sophisticated buyer of
  silica and was in the best position to warn and
  to protect its workers.) (On appeal)

19
Silica Defense Wins

• Gary Gordon, et al. v. Aearo Co., et al. (Texas,
  2003) On December 10, 2003, a Texas jury
  refused to award damages to nine plaintiffs,
  concluding two models of 3M respirators worn by
  the plaintiffs were not responsible for their
  silicosis and other pulmonary problems.
  Plaintiffs alleged the respirators were defective
  and 3M did not provide adequate safety
  instructions and failed to properly test the
  masks. (Plaintiffs originally filed suit against
  numerous sand suppliers, equipment manufacturers
  and employers in state district court only 3M
  remained as a defendant by the time trial
  concluded the other defendants settled or were
  dismissed.)

20
Selected Pending Cases

• Consolidated Cuyahoga County Silica Cases (64
  named company defendants). Multiple plaintiffs
  allege negligence, strict liability, breach of
  warranty, fraudulent concealment and
  representation, product liability, and loss of
  consortium.
• 2. Consolidated Philadelphia Silica Products
  Liability Cases (97 plaintiffs). Court seeking a
  case management order. Dispute over silicosis
  medical criteria pending.
• 3. Desormeau v. American Rock Salt (US Dist Ct in
  NY). Suit under envir. laws (CERCLA) to stop rock
  salt mining/storage operations due to health
  effects from diesel, salt, silica, lead, zinc.
  Fear of cancer alleged.

21
Latency period issues

• Asbestos-related diseases can take up to 40 years
  to materialize
• Estimated that only 10 of current asbestos
  claimants have asbestos-related disease balance
  are individuals who were exposed
• Studies have shown that latency period for
  silicosis can be several years to several decades
• Substantially increases difficulty in identifying
  source of exposure leading to illness
• Plaintiffs counsel adopts shot gun posture,
  suing all possible sources of exposure for
  plaintiffs with and without symptoms.

22
Effect of latency problem on statute of
limitations

• Barnes v. Clark Sand Co. in a lawsuit by an
  employee against a sand manufacturer, a Florida
  appeals court ruled that 12-year statute of
  limitations did not begin to run until the
  plaintiff discovered that his silicosis was
  caused by occupational exposure. (1998)
• Alix v. Badger Mining Corp. (December, 2002) and
  Cocroft v. Badger Mining Corp. (April, 2003)
  Wisconsin appeals courts held claims not
  automatically barred because of delay in tying
  workers medical conditions to defective
  respirators. Cases remanded for plaintiffs to
  show they had been reasonably diligent in
  discovering link between their illnesses and the
  defective PPE.

23
Effect of latency problem on statute of
limitations

• Youngblood v. U.S. Silica Co. (Texas, 2003)
  Texas appeals court reversed in favor of silica
  supplier, ruling that trial court erred in ruling
  that plaintiffs suit was time-barred. (plaintiff
  worked at Kilgore Ceramics from 1959 to 1999
  required to have chest x-ray when hired and every
  two to three years thereafter informed by
  doctors overseeing chest x-ray program in 1992
  and again in 1997 to consult personal physician
  for further evaluation never provided a
  diagnosis that he had silicosis and asbestosis
  until Dec. 1997. Plaintiff filed suit against
  U.S. Silica Co., on Aug. 28, 1998 trial court
  determined suit was barred by statute of
  limitations. On appeal, court found that
  plaintiff had demonstrated that he had used due
  diligence in determining the cause of his
  respiratory problems, but neither knew nor could
  have known his illness was work-related until
  being provided diagnosis on Dec. 5, 1997.)

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Selected Silica Defenses

• Statute of limitations
• Intervening cause / defendant
• No silica
• Insufficient exposure to cause illness
• No illness or not silica-related
• Assumption of risk
• Warnings were adequate
• Sophisticated User defense
• Acquisition / contract terms

25
Sophisticated User Defense

• Theory A manufacturer who sells a potentially
  hazardous product to a customer, who knows or
  should know of the dangers associated with that
  product, is not liable for harm caused to the
  purchasers employees, if the purchaser fails to
  protect its employees properly from harm caused
  by the product.
• Defense recognized in some states, in a broad
  range of contexts. Defense eroding in the states
  where it exists??

26
Forum Shopping

• 66 US Asbestos Cases in Five Jurisdictions
• Texas
• Mississippi
• New York
• Ohio
• Maryland
• International litigation potential
• Newmont Gold Peru Mine Mercury Claims Brought in
  US Courts
• Rio Tinto Zinc Namibia uranium mine employee sued
  for silica exposure in UK, location of company
  headquarters.

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Regulatory Impact on Liability Risks

• Regulations Help Define Standard of Care And New
  Regulations Can Increase It.
• Regulatory Violations May Be Used As Evidence of
  Harm or Fault
• (e.g. overexposures, training failures, failure
  to provide respiratory protection, failure to
  warn)
• Regulatory Findings (e.g. willful conduct) May
  Be Used As Evidence of Intent or Fault
• Regulatory Action Increases Public Awareness
• Regulatory Action Creates A Repository of Public
  Evidence
• Based on the Asbestos Experience, Regulations Do
  Not Stop or Reduce Illness or Lawsuits.

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Regulatory Impact On Liability Risks

• MSHA / OSHA Current Exposure Limit, Rules and
  Protective Measures Define Minimum Duties
• MSHA / OSHA Special Emphasis Program Produces
  Increased Sampling / Enforcement / Press
• New MSHA Training / Haz Com Creates New Duties
  Increased Employee Awareness
• Non Consensus Standards / Recommendations Impact
  Duties, Rulemaking and Litigation
• ACGIH
• IARC
• NIOSH

29
New Silica Regulations?

• October, 2004 OSHA releases draft silica
  regulations for general industry/maritime and
  construction for small business review.
• Small business review panel convened in November
  2004 (reps from OSHA, SBA OMB and small business
  representatives) held 4 meetings / conference
  calls.
• Small business panel report concludes OSHA
  should not adopt the draft and instead focus on
  enforcement of current standards and consulting
  and assistance for small business.

30
New Silica Regulations?

• Draft OSHA silica regulation, estimated to cost
  1Billion by OSHA 3-5 Billion for
  construction alone by Patton Boggs
• Standard would result in significant reduction in
  jobs and elimination of entire industries.
• Draft OSHA standard neither feasible, nor
  justified.

31
(No Transcript)
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(No Transcript)
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New Silica Regulations ?

• Current Status
• OSHA reviewing the Small Business Panel Report
• MSHA to begin a silica rulemaking May, 2004

34
Draft OSHA Silica Rule

• New Permissible Exposure Limit (PEL) Options
• 50, 75, or 100 µ/m3 with action levels at
  50
• Compliance Hierarchy engineering controls and
  workplace practices mandated (but employee
  rotation prohibited) respirators are
  supplemental.
• Construction Option 1 certain jobs presumed
  above action level, mandate listed protections,
  unless air monitoring shows otherwise. Option 2
  Mandate air monitoring, and use exposure results
  to trigger mandated actions.

35
Draft OSHA Silica Rules

• Designation of a Competent Person to establish
  Regulated Areas where silica concentrations
  exceed or could reasonably be expected to exceed
  the PEL.
• Air Monitoring/Exposure Assessment Requirement
  (2x per year under consideration)
• Implement Respiratory Protection Program.

36
Draft OSHA Silica Rules

• Protective Work Clothing disposable protective
  clothing or non-disposable protective clothing
  with clean change room. (also, provisions for
  maintenance, removal and storage of contaminated
  clothing).
• Hygiene Facilities and Practices options under
  consideration for clean change rooms, clean
  lunchroom facilities, and shower facilities.
  Prohibition of dry sweeping and use of compressed
  air for cleaning.

37
Draft OSHA Silica Rules

• Housekeeping requiring clean-up of accumulation
  of silica-containing material with HEPA-filtered
  vacuum cleaner or equally effective filtration or
  dust collection method.
• Health Screening
• Pre-placement screening (physical exam by health
  care professional with knowledge of
  silica-related disease, work and health history,
  chest x-ray interpreted by board-certified
  radiologist or NIOSH-certified B-reader, and
  baseline pulmonary function test
• Periodic examinations (annual exam and work
  history and two options for chest x-rays).

38
Draft OSHA Silica Rules

• Medical Removal Protection (under consideration).
• Hazard Communication Program labels, material
  safety data sheets and information and training.
• Information and Training.
• Recordkeeping.

39
Congressional Action On Asbestos ?

• The move to reform asbestos litigation is
  accelerating and beginning to achieve some
  bipartisan support in Congress
• One proposal would limit the right to sue to
  those who are actually sick and extends the
  statute of limitations to provide relief for
  individuals who subsequently become sick
• Another proposal would create a federal trust
  fund from which pending and future claims would
  be paid based on criteria still undefined

40
Congressional Actions Re Silica

• No Silica Lawsuit Limitations Introduced
• Energy Employees Occupational Illness
  Compensation Program Act (EEOICA) Passed
• Compensates former Atomic Energy workers for
  illnesses due to beryllium, uranium and silica
  exposure
• Sets comprehensive medical standards (20 C.F.R.
  Part 30) for defining illness
• Creates payments for workers and surviving
  families
• Administered by NIOSH

41
Risk Reduction Actions

• Review and Improve Current Insurance
• Recover and Preserve Old Insurance Policies
• Review Potential Acquisition Documents Records
• Implement Improved Protective Programs
• On-site coverage employees /non-employees
• Off-site coverage customers/community
• Implement Effective/State of the Art Warnings
• Review and Improve Contractual Provisions
• Review and Improve Contractor Use Programs
• Monitor Silica Government Actions and Respond
• Litigation / Crisis Management Planning And
  Simulations

42
Silica-Related Insurance Coverage
Insurance Review

• Workers Compensation Insurance
• Commercial General Liability provides coverage
  for third parties (not employees) but often
  subject to pollution/silica exclusions
• Pollution Legal Liability Coverage specialized
  coverage for pollution risks, but complex and
  expensive, and can exempt silica
• Careful Review Required of Current, Old And
  Future Policies

43
Commercial General Liability policy standard
pollution exclusions (current)

• This insurance policy does not apply to
• Pollution
• Bodily injury or property damage arising out
  of the actual, alleged or threatened discharge,
  dispersal, seepage, migration, release or escape
  of pollutants..
• Pollutants means any solid, liquid, gaseous or
  thermal irritant or contaminant, including smoke,
  vapor, soot, fumes, acids, alkalis, chemicals and
  waste. Waste includes materials to be recycled,
  reconditioned or reclaimed.

44
Commercial Pollution Liability Policy Supplements
CGL, except for exclusions

• Willful or deliberate noncompliance with any
  statute, regulation, ordinance, administrative
  complaint
• Insured vs. insured claims by employees against
  insured parties claims arising in the scope of
  employment
• Asbestos, lead and recently silica containing
  products or materials have been excluded.
• Prior knowledge/non-disclosure of claims
• Products liability claims arising from the
  companys products .have been sold or otherwise
  given

45
Insurance Recovery Programs Find the Hidden
Assets

• Old Policies Can Cover Claims Caused / Initiated
  While They Were In Effect
• Old Policies Contain Fewer Exclusions
• Silica Related Claims Generally Develop Over 20
  Years
• Old Policies Issued by Companies That Were
  Purchased Or Merged, May Continue to Have Viable
  Successors
• Put Old Policy Insurance Companies On Notice

46
Risk Reduction Actions

• Document review to avoid future failure to warn,
  fraudulent non disclosure and punititive damage
  claims.
• MSDS Labels,
• Training,
• Promotional Instructional Materials,
• Minutes,
• Financial Requests,
• Acquisition Documents,
• Contracts, Purchase Orders and Sales Documents,
• Government Actions
• Employee / Customer Complaints

47
Risk Reduction Actions

• Voluntary Medical Surveillance Air Monitoring
• Pre-employment and annual exams
• Collect / update work (and smoking) history
• Give workers medical exam respirator test
  results
• Maintain medical and personnel records
• Conduct periodic air sampling
• Provide air sampling results to workers
• Audit for claim potential and address risk.

48
Risk Reduction Actions

• Contractor / Customer Risk Generally, No Workers
  Comp Shield
• All Contractors / Subcontractors / Customers /
  Visitors -- Entitled
• To The Same, Highest Level of Protection As Our
  Employees
• Examine Communications For Consistent, Repeated
  Messages Warnings, MSDS, Labels, Postings,
  Signs, Instructions, Invoices, Web Site, Weight
  Slips, Training Materials
• Examine Contract Provisions, Purchase
  Orders,Include Hazard Acknowledgement,
  Regulatory Compliance Duty and Safe Use
  Provisions
• Audit Contractors, Customers, Transport Providers
• Suggest / Demand Corrective Actions

49
Risk Reduction Actions

• Monitor and Address Government Actions
• Violations Program to Prevent Future Ones
• New Regulations Examine Needs and Feasibility
  For Voluntary Efforts
• Participate in Rulemaking Process
• Retain Expert Consultant And Counsel To Assist
  Establish privilege claims in anticipation of
  litigation
• Government Relations Efforts

50
Risk if silica is the next asbestos

• Increasing defense costs and monetary awards to
  plaintiffs
• Increase in insurance premiums or coverage
  unavailability
• Downgraded credit rating, diminished access to
  capital
• Burdens of continued litigation
• Negative impact on company/shareholder value
• Diminishing value of retirement funds
• Plant expansion restrictions
• Others
• BUT SILICA IS NOT THE NEXT ASBESTOS,
• AT LEAST NOT YET!

51
Risk Reduction Actions

• Review and Improve Current Insurance
• Recover and Preserve Old Insurance Policies
• Review Potential Acquisition Documents
• Implement Improved Protective Programs
• On-site employees/non-employees
• Off-site customers/ transportation/ community
• Implement Effective/State of the Art Warnings
• Review and Improve Contractual Provisions
• Review and Improve Contractor Use Programs
• Monitor Silica Government Actions and Respond
• Litigation Defense Planning And Simulations

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THE BEST DEFENSE IS PREVENTION THE NEXT BEST
DEFENSE IS A STRATEGIC RESPONSE BASED ON
EXPERTISE AND KNOWLEDGE
Comments or Questions re Patton Boggs Risk
Reduction Services contact
Henry Chajet or David Farber Patton Boggs,
LLP 2550 M Street, NW Washington, DC 20037
[phone] hchajet_at_pattonboggs.com dfarber_at_pat
tonboggs.com
Mark Savit or Cole Wist Patton Boggs, LLP 1660
Lincoln Street Denver, CO 80264 303-830-1776 cwis
t_at_pattonboggs.com msavit_at_pattonboggs.com
PATTON BOGGS--SEEING THINGS DIFFERENTLY
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