Asbestos Trust Transparency Update

Asbestos litigation has been consistently active throughout the United States since the first asbestos lawsuit was filed in the 1970s. As the population of asbestos plaintiffs has grown over the last 40 years, so have the funds paid by various asbestos defendants. This growing financial burden has caused numerous asbestos defendants to file for bankruptcy. In doing so, the insolvent defendants are required to create asbestos trust funds for the protection of future asbestos plaintiffs. To date, there are over 50 active asbestos bankruptcy trusts in the U.S. responsible for providing compensation to the plaintiffs in asbestos-related lawsuits.

The plaintiffs in asbestos litigation are able to seek compensation both from filing a lawsuit against viable asbestos defendants and from filing a claim against the bankruptcy trusts created by bankrupt defendants.  Unfortunately, this two-tiered recovery system, which was established to ensure the plaintiffs receive full compensation for their asbestos-related injuries, has created the potential for fraud and double-dipping by the plaintiffs. Consequently, the opportunity exists for the plaintiffs to recover from viable defendants in court while simultaneously, or at a later time, recovering more money for the same injury from asbestos bankruptcy trusts. As a result of this unfair practice, many states have enacted asbestos transparency laws.  In order for the plaintiffs to recover full compensation from both viable defendants and bankruptcy trusts, while not double-dipping, these states require the plaintiffs to disclose claims made against asbestos bankrupt trusts pursuant to varying policies and/or disclosure deadlines.

Depending on the state, the disclosure deadlines range from 30 to 150 days after the filing of the lawsuit.  Going further, some transparency laws allow courts to exercise discretion to compel the production of trust claim forms early in the discovery phase.

The ACT blog post addressing “Bankruptcy Trust Transparency & Fairness to All Parties”, Alabama became the most recent state to enact this type of bankruptcy transparency law, and it is certainly not alone. Since 2007, when Georgia enacted the first of these laws, a total of 17 states have enacted similar legislation aimed at preventing plaintiffs from double-dipping when filing asbestos claims. In addition to Alabama and Georgia, Ohio, Oklahoma, Wisconsin, Texas, Arizona, Tennessee, West Virginia, Utah, South Dakota, North Dakota, Iowa, Mississippi, Michigan, North Carolina and Kansas have all enacted trust transparency laws.

Overall, these transparency laws, which promote fairness for all parties involved, continue to gain traction with state legislatures across the nation. This only further allows for the allocation of fault and payment of monies among all defendants to be more accurately reflected as the full picture of the plaintiffs’ exposure to asbestos is disclosed. At the same time, plaintiffs are able to continue to seek recovery for a genuine claim from both viable and bankrupt defendants, while further protecting the trust funds against false claims.