Asbestos Bankruptcy Trusts

Asbestos litigation began in the United States during the 1970s, and by 2002 defendants paid $49 billion in compensation to claimants. As lawsuits and expectations for future claims increased, many asbestos defendants filed for reorganization under section 524(g) of the U.S. Bankruptcy Code.

Reorganization does not mean that an asbestos defendant has run out of money, but rather that it has a large amount of asbestos liabilities. Reorganization allows the defendants to pay claims while protecting their assets.  Courts have ordered many of the primary asbestos defendants who have filed for bankruptcy to set up personal injury trust funds specifically to compensate asbestos victims.  These types of funds are also called mesothelioma compensation funds, or asbestos bankruptcy trusts.

Asbestos Lawsuits

During the past 30 years, nearly 100 companies subject to asbestos lawsuits have filed for bankruptcy. By 2011, 60 asbestos trusts had reportedly been established on behalf of companies that have filed for reorganization. Courts are expected to order the creation of additional asbestos trusts as more defendants file for reorganization.

Since creation of the first asbestos bankruptcy trust in 1988, trusts have paid out about $17.5 billion for more than 3.3 million claims.

How to File an Asbestos Bankruptcy Trust Claim

As with lawsuits, filing an asbestos bankruptcy trust claim requires showing evidence of an asbestos related injury. Most trusts identify categories and levels of diseases that are eligible for various amounts of compensation. Similar to some state laws and courts, trusts also may require claimants to satisfy certain medical criteria to file claims.

In addition to filing a claim form or some other written statement concerning the asbestos-related injury, claimants also may be required to provide other evidence.

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How Trust Claims Are Decided

Bankruptcy trusts are set up on behalf of companies with asbestos liabilities, but the companies do not operate the trusts. In fact, these companies do not review claims or make any determinations based on the evidence submitted by claimants. The decision to pay a claim is made by the trust, which is a separate organization from the company.

Trustees manage asbestos trusts for the benefit of present and future claimants. The claims are processed and decided under preset trust distribution procedures. Representatives of current and future claimants must consent to any significant changes to these procedures.

Trusts often publish additional information about their rules, guidelines and qualifications. Among the information they can publish is a list of confirmed exposure sites.

Filing A Trust Claim and A Lawsuit?

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Claimants sometimes file asbestos trust claims and asbestos lawsuits. It is important to remember, however, that filing a trust claim can affect the amount of compensation received from a lawsuit. State laws vary greatly on when trust claims must be made and how trust compensation affects the determination of lawsuit awards. For instance, states treat information sharing, setoffs, indirect trust claims and limitations on trust payments differently. The Mesothelioma Center offers general information, but it is best to consult a qualified mesothelioma attorney about your claim.

It is best to consult a mesothelioma attorney about whether you can file an asbestos trust claim, an asbestos lawsuit or both. They are knowledgeable about the litigation and trust claim processes. They can also let you know how filing one type of claim may affect the amount of compensation you may be eligible to receive through the other type of claim.

It is also important to remember that statutes of limitation only allow a certain amount of time to file a lawsuit. If your time to file a lawsuit has expired, you may be able to file an asbestos trust claim. Again, it is best to speak with a mesothelioma lawyer to determine the options for your individual case.

Information Sharing

State courts have different rules about sharing trust claim information with lawsuit defendants. Some courts require plaintiffs to disclose any claim forms they have submitted to trusts during the discovery phase of litigation. This requirement does not necessarily mean that the plaintiffs must file their trust claims before trial. It just applies to any claims that have already been filed. A few courts, such as New York City and Montgomery County, Pennsylvania courts may require filing certain trust claims before trial.

Setoffs

Some states – Illinois, New York, Texas and West Virginia among them – may permit "setoffs" for trust payments. In other words, if a claimant has already received a trust payment, any defendant he or she sues may be able to deduct the amount of that payment from a court award.

Other states do not allow or sometimes limit the use of setoffs. For example, some courts may apply setoffs differently depending on whether the compensation is for economic damages (e.g., medical expenses) or non-economic damages (e.g., pain and suffering).

Indirect Trust Claims

In addition to direct claims from asbestos victims, trusts may also receive indirect claims for compensation from other parties. For instance, an indirect claim may be filed by a lawsuit defendant. If the lawsuit plaintiff has not filed a direct trust claim, the defendant may be able to file an indirect claim with a trust. The defendant may be able to collect money that the plaintiff would have received from a trust claim. State liability laws affect the extent to which indirect claims can be filed with a trust.

Limitations on Trust Payments

The provisions governing some trusts do not allow them to pay claims if another party has already covered the trust’s liability.

The above circumstances can cause some overlap between asbestos trust claims and asbestos lawsuits. The following chart shows when overlaps can occur during the case process:

How Much Can Someone Receive from an Asbestos Trust?

The amount someone can receive from a trust depends on the type of injury and the payment schedule established by the trust. Each asbestos bankruptcy trust develops its own schedule that assigns values to various types of asbestos injuries. Certain types of diseases and levels of severity are eligible for more compensation. The values are based on the compensation payments made by the company before reorganization.

Since most trusts do not have enough money to fully pay all present and future claims, they offer asbestos victims a set percentage of their claims. The 26 largest trusts offer to pay anywhere from 1.1 to 100 percent of a claim amount. As of 2010, the median percentage they offered to pay was 25 percent of a claim. The median amount they pay for a mesothelioma claim is estimated at $41,000.

Will Asbestos Trusts Have Enough Money to Pay Future Claims?

Given the long latency period of asbestos-related diseases, new claims are expected to emerge for several more decades. As of 2011, asbestos trust funds have combined assets of $36.8 billion. Not surprisingly, there are concerns that asbestos trust fund assets will not be enough to compensate all future claimants.

If you have been diagnosed with an asbestos-related illness, speak with a mesothelioma attorney today about your options for compensation. Although there are no guarantees that you will obtain a specific amount of compensation, a mesothelioma attorney can explain the procedures and possible limitations on what you can recover under a trust claim.