British Asbestos Newsletter
BRITISH ASBESTOS NEWSLETTER
9 Tintagel Drive, Stanmore, Middx. HA7 4SR England
Issue 41: Winter 2000/2001
Asbestos Compensation Endangered by Insurer
Collapse
A press release issued on January 10, 2001 announced that Chester Street
Insurance Holdings Ltd. was insolvent. Few had heard of Chester Street
and little was made of the news until the penny dropped: Chester Street
had previously been Iron Trades Holdings Ltd., a company which had been
the Employer's Liability Insurers for British Steel, The Central Electricity
Generating Board, Swan Hunter Shipyards, Harland & Woolfe Shipyards and
other shipyards and ship-repairers. According to one plaintiffs' solicitor,
"Since Employers' Liability Insurance became mandatory, Iron Trades has
been the UK's biggest insurer of industrial risks." This has resulted
in current asbestos liabilities of £60 million. Coverage under 2,000 Iron
Trades policies is now uncertain due to "financial uncertainties surrounding
the company's financial position." Information on Iron Trades is difficult
to obtain at this time. When contacted, Philip Grant, Chester Street's
Managing Director, required permission from the official liquidators to
answer press enquiries. From the details which are available, it looks
likely that corporate restructuring at Iron Trades is behind the economic
failure of Chester Street. In 1989, Iron Trades Employers Association
Ltd. dumped all pre-1990 policies, many of which have resulted in and
will continue to generate asbestos-related liabilities, into the Chester
Street company. Post-1990 policies went to Iron Trades Insurance Company
Ltd. which, unsaddled by asbestos claims, was bought in February, 2000
by the Australian-based insurance group: QBE International Insurance Ltd.
According to one insurer, this is a "controlled run off" rather than
a fire sale. Chester Street is publicly acknowledging £200 million of
assets. This sum would, according to an analysis by the Trades Union Congress
(TUC), be enough to pay between 1500-2500 mesothelioma claimants sums
of £50,000-£100,000 each. At this rate, two-four years' worth of claims
will exhaust the reserves. Once these are gone, cases stemming from post-1972
exposure will be covered by the Policyholders Protection Board (PPB),
a scheme operated under the Department of Environment, Trade and the Regions.
As the vast majority of asbestos claims arise from pre-1972 exposure,
they will not be topped-up by the PPB. Claimants whose former employers
are still in business, will be able to hold them liable for the full compensation
due. Unfortunately, in many instances, defendants have disappeared by
the time plaintiffs become ill. While a claim can be pursued against a
defunct defendant when the company's insurer can be identified, plaintiffs
with such claims against Iron Trades could now find themselves under-compensated.
The TUC concludes that: "Large numbers of victims therefore stand to lose
out over the next ten to twenty years." It seems that the reorganization
which ensured the viability of part of the Iron Trades group has been
achieved at the expense of the growing numbers of UK asbestos victims.
A Scheme of Arrangement has been designed under section 425 of the Companies
Act to ensure creditors receive part payment of claims "in the event that,
at some time in the future the company's liabilities exceed its assets."
Policyholders told to "continue to submit claims information in the normal
manner," on January 10, have reported paralysis at the Leeds office administering
pre-1990 policies. This has been confirmed by news that on January 16,
the liquidators ordered the stoppage of all checks, including those already
issued but not yet presented, for pre-1990 business. Under their instructions,
no settlement offers will be discussed, no admissions made or instructions
given until after the creditors' meeting in February. According to the
provisional liquidators, if the Scheme of Arrangement is not approved
by the creditors and court, the company would be put into liquidation.
For the moment, government departments and the insurance industry are
adopting a wait and see approach. Ian McFall, Head of the National Asbestos
Team at Thompsons' Solicitors, has been working to identify legal and
political solutions: "There is enormous concern amongst our clients as
to how these developments will affect their cases. Many of those who are
terminally ill do not have the luxury of time to wait and see what may
happen over the next weeks and months."
T&N, Ltd: An Update
For over seven decades T&N, Ltd., formerly Turner & Newall Ltd., was
at the heart of an industrial group which owned asbestos mines, operated
foreign subsidiaries with asbestos interests, sold asbestos products or
franchises overseas and maintained a watching brief on the climate in
which the industry operated. Although the company diversified into non-asbestos
technologies, recent adverse developments indicate that its intimate involvement
with all things asbestos will continue to reverberate for some years yet.
Many observers were amazed by the company's 1998 take-over by the Federal-Mogul
(FM) Corporation. Why would a Michigan-based manufacturer of automotive
and vehicle components assume the virtually unquantifiable liabilities
of the former "asbestos giant?" Three years ago FM was: "pleased with
T&N's innovative efforts to manage this serious problem and intend to
build on those efforts for the future." In October, 2000, FM's expansionist
Chairman and Chief Executive, Richard Snell resigned abruptly amidst warnings
of poor third-quarter performance. The company's stock plunged to $3.25
from a high of $72 in July, 1998. It was predicted that loan agreements
would not be honoured and that "bankruptcy is no longer a remote risk."
With asbestos-related payments of $335 million in 2000, the poisonous
asbestos legacy, so blithely acquired, had started to undermine FM's very
existence.
Even after decades of asbestos litigation, new threats still seem to
be emerging. During 1999, Owens-Illinois, Inc. (O-I), a key asbestos producer
in the US, alleged that T&N had participated "in a scheme to defraud and
a conspiracy with other asbestos fiber suppliers to create and protect
a demand for asbestos through the suppression and misrepresentation of
information concerning health risks to users of finished insulation products
containing asbestos." Richard Josephson, one of O-I's lawyers, said: "Who
would have bought raw asbestos from any of them (the alleged cartel) if
they knew that the people who were going to be exposed to that product
would have been at risk of developing disease?" If O-I were to win one
billion dollars in damages, a major deep pocket for asbestos victims could
be wiped out in a single stroke. For this reason, plaintiffs' lawyers
W. Mark Lanier and Shepard Hoffman agreed to help T&N. They made no concession
to their temporary employer with Hoffman telling the Texas court it should
assume T&N "did everything it's accused of doing." Ultimately their aim
was to protect a major settlement source for claimants and not to exonerate
the defendants. Their attitude could best be summed up by a quote from
William Shakespeare: "A plague o' both your houses!" According to Lanier,
"I think asbestos companies conspired together to defend themselves, and
have hidden documents, and distorted literature, and lied in discovery
responses. I think through this case, we will probably see an implosion
of that, and I think it'll be to the benefit of injured victims all over
the country."
On August 24, 1999, a default judgment of $1.6 billion was entered against
T&N; this judgment was vacated by a federal judge on December 20, 1999
at a preliminary injunction hearing. Prior to another hearing in February,
2000, Paul J. Hanley, Jr., one of T&N's most experienced asbestos defense
counsels in the US, was deposed. The picture Hanley paints of the behaviour
of both O-I and T&N is disturbing. He describes his working relationship
with R. Bruce Shaw, another of T&N's defense attorneys prior to 1985.
According to Hanley, Shaw, who was also regional counsel to O-I, had often
been briefed on T&N's defenses to asbestos claims; "Mr. Shaw and his firm
also reviewed and signed discovery responses on behalf of T&N on numerous
occasions." After the formation of the Asbestos Claims Facility (ACF)
in 1985, Shaw appeared as joint defense counsel for O-I and T&N. In this
role Shaw traveled to London in November, 1985, with Hanley to depose
T&N witnesses and review company documents on cancer, TLVs and insulation
workers. In Hanley's deposition, he states: "Mr. Shaw asked if we could
find a way not to produce certain of the documents in these three categories.
When I asked why, he explained that such documents could 'kill O-I' because
of the position on the state of knowledge taken by O-I in the U.S. litigation.
Mr. Shaw and I worked through the documents and withheld some on the basis
of privilege, but most were produced the next day." The following year
Andrew T. Berry, an ACF lawyer who represented T&N and O-I in numerous
insulator cases in New Jersey, went to London with Hanley for depositions
and document review. Because of the New Jersey cases, documents on T&N's
knowledge about the hazards of working with finished insulation products
were provided. "Mr. Berry expressed concern that the documents concerning
T&N's knowledge of risks to insulators could adversely affect his defense
of O-I cases in which O-I and T&N were defendants, and specifically asked
whether I objected to his discussing the subject matter with O-I. I told
him that I did not object to such discussions." How, in light of these
discussions, could O-I not have discovered the alleged conspiracy until
1998? This is something we may never know. In early December, 2000, this
case was "resolved;" although one experienced asbestos litigator speculated
that a relatively small amount had been paid by T&N to extricate itself
from this case, we will never know for sure as the terms of the settlement
are confidential.
In the US, asbestos has humbled many defendant corporations; this trend
continued during 2000 with Pittsburgh-Corning, Babcock & Wilcox, Owens
Corning, Fibreboard Corporation and Armstrong World Industries Inc. seeking
protection under Chapter 11 of the Bankruptcy Code. On January 5, 2001,
G-I Holdings Inc., owner of GAF Corp., followed citing a "sharp, unforeseen
increase in the number of claims... the dramatic escalation in settlement
demands and the inability of the tort system to resolve such claims in
a fair and orderly manner." As asbestos claimants have fewer deep pockets
to access, those defendants which remain are faced with increasing claims.
The size of T&N's problem is discussed frankly in its most recently published
annual report: "In 1996, the Company purchased a £500 million layer of
insurance which will take effect should the aggregate amount of claims
filed after 30 June 1996, where the exposure date occurred prior to that
date, exceed £690 million. The initial reserve for the T&N companies together
for (sic) claims filed after that date was approximately equal to the
insurance excess of £690m. The Company has reviewed the financial viability
and legal obligations of the three re-insurance companies and has concluded,
at this time, that there is little risk of the insurers not being able
to meet their obligations to pay... While management believes that reserves
are appropriate for anticipated losses arising from the Company's asbestos-related
claims, given the nature and complexity of the factors affecting the estimated
liability, the actual liability may differ. No absolute assurances can
be given that the Company will not be subject to material additional liabilities
and significant additional litigation relating to asbestos. In the possible,
but unlikely event that such liabilities exceed the reserves recorded
by the Company or the additional £500 million insurance coverage, the
Company's results could be materially affected."
Some might sympathize that FM has been brought into a fight not of its
own making. In May, 2000 O-I amended its billion dollar complaint to include
FM, as T&N's ultimate parent company. The constant stream of asbestos
claims was unsettling for shareholders and stock analysts. It was hoped
that $550 million obtained in short-term loans in early January, 2001
would go some way towards reassuring creditors, suppliers, employees and
investors. That was before a report by The National Econometric Research
Company estimated that FM/T&N is facing $900 million of asbestos claims,
excluding the possibility of punitive damages, in the next four years;
$350m in 2001, $250m in 2002, $150m in 2003 and 2004. While FM maintains
that $800 million of asbestos-only insurance should cover the bulk of
the claims, it is pursuing other means to reduce the final bill, such
as the introduction of an "asbestos management strategy to focus payments
only on the impaired and malignant individuals who have been exposed to
our subsidiaries' products. We believe this will result in a long-term
phase down of our asbestos payments. We are also working toward a legislative
solution for our continuing situation." Robert Miller, acting Chief Executive
between the September resignation of Snell and the January 11 appointment
of Frank Macher, provided worrying insights into the company's new strategy.
Miller told a Reuters journalist that claims would undergo increasing
scrutiny, more cases would be contested and settlements offered later
rather than sooner during the judicial process. The use of the phrase
"malignant individuals" and the threat to dispute claims and delay settlement
indicate that FM has well and truly become part of the asbestos club.
Let's hope that Frank Macher and Charles McClure, FM's new President,
will find a more equitable way of resolving this problem, one which does
not penalize those whose lives have been devastated by exposure to T&N's
asbestos.
Asbestos in Scotland
Incubating Death: Working with Asbestos in Clydeside Shipbuilding and
Engineering, 1945-1990 by Ronald Johnston and Arthur McIvor describes
the aftermath of a century of heavy asbestos use in an area of the United
Kingdom often overlooked: Scotland. Cooperation from Clydeside Action
on Asbestos, the first asbestos victims group in Scotland, and the use
of an oral history methodology enabled the authors to obtain first-hand
information from shipyard workers, insulators, riggers, fitters, ships'
plumbers and marine engineers. The twenty-five individuals interviewed
confirm that asbestos use was unregulated and uncontrolled. According
to one boilermaker: "I'm no exaggerating when I say this: it was like
snow coming down, and there were nobody there to supervise them...There
was asbestos all over...and it was all coming down on top of you." An insulation
engineer recalled mixing asbestos paste, also known as "monkey dung,"
during his apprenticeship at Harland and Woolf's shipyard. In 1970 "they'd
spray that (monkey dung) on the bulkhead of a boat. And the sprayer would
have a wee drum. So you'd just mix it up and stick it in the drum. Eh,
you got a half pint of milk for that. It was a good bonus you know. A
half pint of milk..." Decades of neglect were due to lack of knowledge,
a "machismo work culture," across-the-board acceptance of workplace hazards
and enfeebled trade unions. The naivety of the Factory Inspectorate and
the Health and Safety Executive in expecting employers to protect shipyard
and engineering workers was a major contributory factor to the longevity
of toxic conditions. Inadequate industrial compensation for the illness
which ensued threw "victims and their families into relative poverty and
social exclusion."
Lethal Work: A History of the Asbestos Tragedy in Scotland by Ronald
Johnston and Arthur McIvor, published in 2000, is the culmination of the
project first described above. Detail by graphic detail the history of
Scotland's asbestos tragedy unfolds as the authors explain how and why
the country came to top the UK league table for asbestos-related disease.
Although the Scottish incidence rates of asbestos-related disease are
high, the rates in the West of Scotland are higher, with the rates in
the Clydebank district being off the scale. Between 1986-1995, the standardized
mortality rate (SMR) for mesothelioma in Clydebank was 1100 compared to
the average British SMR of 100. Using statistics, documentary evidence
and the telling testimony of survivors, Johnston and McIvor produce an
in-depth study of the worst occupational health disaster in Scottish history.
From its inception, the commercial exploitation of asbestos found a ready
home in Scotland. In the 19th century, Scottish companies pioneered the
manufacture of asbestos products; the Patent Asbestos Manufacturing Company
was set up in Glasgow in 1871. By 1885, Glasgow boasted nineteen asbestos
manufacturers and distributors; by 1900, the Glasgow Post Office Directory
listed fifty-two asbestos manufacturers. Occupational asbestos exposure,
common throughout Scotland, reached epic levels in the Glasgow area where
a myriad of asbestos goods were manufactured: engine packing and insulation,
blocks, rope, millboard, paneling, boiler mattresses, tape, powder, putty,
cement, paint, drive bands, wide sheets for marine insulation, thin strips
for electrical insulation, locomotive insulation mattresses, brake linings,
jointings, hoses plus a range of asbestos cement products. John Brown's,
Clydebank and other shipyards employed the services of specialist insulating
companies such as Bell's Asbestos and Engineering Co., Cape Asbestos Co.,
Drumoyne Asbestos Covering Co., Kitson's Insulators Ltd. and Newalls'
Insulation Co. Asbestos was commonly used on building sites, in locomotive
construction and repair, at the oil refineries and in premises which specialized
in motor, marine, chemical, heating and electrical engineering. Grossly
unhealthy working conditions produced high levels of exposure: "occupational
health standards in relation to asbestos were particularly poor in the
Turner's Asbestos Cement factory in Clydebank and also in the Clyde shipyards
and building sites. Widespread exposure to asbestos in these workplaces,
especially from the 1920s to 1960s, incubated a mesothelioma time bomb
which is currently exploding across Scotland."
The active participation of former workers in this project has produced
testimony which is as dramatic as it is precise: "I'll never forget till
the day I die the first impression of that place (Turner's factory). It
was like walking into Dante's inferno without the fire. It was just hell.
The noise was unbelievable... Dust was flying through the air everywhere,
clouds of dust." Another witness said: "The worst of the whole thing was
the clean-downs. You had to clean the machine once a shift. You had big
steel tools like scrapers, and they were for all the world like a big
broad blade 6 or 7 inches long, that was made out of steel. And eh, you
scrapped off all the hardened asbestos cement from round the sides of
the machine with high pressure hoses and these scrapers... And because you
were working with high pressure hoses you got an awful lot of splash-backs
and you were covered in wet asbestos cement." A Clydeside insulation engineer
summed up the situation as follows: "If you put a guy into a car and push
him down a hill with no brakes in it and it crashes at the bottom and
kills him, you've murdered him. Well, it's the same with us. They made
us work with poisonous materials that were killing us, and never told
us." Throughout the asbestos century "society tolerated a certain level
of death and disability, and for far too long employers and managers were
allowed a virtual free hand by a cautious state unwilling or unable to
implement the tough measures needed to protect citizens effectively, both
in the workplace and in the community." Scientists predict that by the
year 2025, twenty thousand Scots will have died from asbestos diseases.
The Asbestosis Research Council
What was the Asbestosis Research Council (ARC)? On the surface, the
Council was a 1957 initiative set up in response to the continuing escalation
of the incidence of asbestosis in the UK. According to its Constitution,
the ARC's prime objective, as stated in 1976, was "to foster research
into the causation and prevention of asbestosis and any other diseases
possibly associated with exposure to asbestos." Projects by scientists
such as Drs J.M.G. Davis, S. Beckett, J. Beattie, D. Holt et al were funded
at universities in Reading, Cambridge, Leeds and Manchester and institutes
such as the Strangeways Laboratory, the Institute of Diseases of the Chest
and St. Luke's Hospital, Institute fur Lufthygiene (Dusseldorf) and the
ARC Foundation at the Institute of Occupational Medicine. By the time
the Council closed, several hundred papers on ARC sponsored research had
appeared in scientific journals. Officially recipients of ARC funding
"always had complete academic freedom to publish their work." Or did they?
Not according to Dr. Barry Castleman who states: "By 1963 and onwards,
it was the ARC's policy to require approval by all member companies, of
any publication by ARC-funded research. Researchers... regularly submitted
pre-publication manuscripts for review, and they were directed to make
numerous changes before approvals were granted... Papers approved by the
ARC Research Committee had to afterwards be approved by the ARC Management
Committee before publication was authorized."
Historian Geoffrey Tweedale concurs. Ten years after the ARC closed
down, Tweedale has reassessed its role in his paper: Science or Public
Relations?: The Inside Story of the Asbestosis Research Council, 1957-1990.
The impression of an independent science-based organization could not
have been further from the truth. The ARC began and remained commercially
motivated. Tweedale points out: "the ARC was run by industrialists and
not by scientists." The growing importance of the ARC to industry was
reflected by a fifty-fold increase in its budget from £4,100 in 1957 to
£230,000 in 1982. Seven million pounds of contributions bought its members,
British Belting and Asbestos, Cape Industries and Turner and Newall, control:
"Strategy was set by the management committee, which in turn responded
to the wishes of the sponsoring directors... these men did not see the ARC
as fundamentally a council for scientific research. Ultimately, it was
an attempt to capture the scientific agenda and influence public policy."
The name of the ARC was well-chosen; the combination of words sounds quasi-official
and reassuringly medical. The impression created of independent, benevolent
concern was manipulated by industry to great effect. While statements
by asbestos manufacturers would have been disbelieved, information disseminated
by the ARC and later the Asbestos Information Center was readily digested.
From the 1970s, the ARC published and distributed brochures on various
subjects including: "a code of practice, a technical note on dust counting
and a number of 'control and safety guides' on such subjects as asbestos
spraying and handling consignments of asbestos fibre... Their leitmotif
Ð that asbestos was a 'safe' material Ð was contentious even at the time.
The ARC leaflet on asbestos spraying, for example, aimed to bolster a
technology that was about to be banned in America and that even the ARC
knew greatly exceeded official safe dust levels."
Compiled by Laurie Kazan-Allen
Jerome Consultants
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