R
The Dimensions ofThe Dimensions ofAsbestos LitigationAsbestos Litigation
Stephen Carroll September 2003
RAND INSTITUTE FOR CIVIL JUSTICE
R
Dimensions of the LitigationDimensions of the Litigation
Claims
Costs and compensation
Economic effects
Future outlook
R
Over 730,000 Claimants Over 730,000 Claimants Through 2002Through 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
R
Annual Claims Filings Have RisenAnnual Claims Filings Have RisenSharply Since 1990Sharply Since 1990
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Numberof
claims
Asbestos claims against five major defendants
Nonmalignant Claims AccountNonmalignant Claims Accountfor the Growth in Claimsfor the Growth in Claims
0
5
10
15
20
25
30
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
MesotheliomaOther CancerNonmalignant
A4632-2 0503
Ratio of the number of claims in
each year to the number of claims in
1980
R
Controversy over Injury Controversy over Injury and Impairmentand 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.
R
Filings Moved from Federal Filings Moved from Federal to State Courtsto State Courts
0
10
20
30
40
50
Pre-1988 1988–1993 1994–1997 1998–2000
Percent of filings
in federal courts
R
And from Some States to OthersAnd from Some States to Others
1970–1987 1988–1993 1994–1997 1998–2000
100
80
60
40
20
0
Percent
Other states
NY
OH
TX
MS
IL
WV
MD
NJ
PA
CA
R
Dimensions of the LitigationDimensions of the Litigation
Claims
Costs and compensation
Economic effects
Future outlook
R
Estimated Total Costs of ResolvingEstimated Total Costs of Resolving Asbestos Claims Through 2002: Asbestos Claims Through 2002: $70 B$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
R
Most Dollars Were Paid toMost Dollars Were Paid toNonmalignant ClaimantsNonmalignant Claimants
9%
Mesothelioma
4%
Other cancers
20%
Mesothelioma
20%
Nonmalignant
60%
Distribution of Claims
Estimated Allocation of
Compensation
Other cancers
Nonmalignant86%
R
Transaction Costs Have ConsumedTransaction Costs Have ConsumedMore Than Half of Total SpendingMore Than Half of Total Spending
And they are likely to go back up in the future
Plaintiff Compensation
Plaintiff Expenses
Defense Expenses
0
20
40
60
80
100
1980sLitigation
1990sLitigation
Percent
R
Dimensions of the LitigationDimensions of the Litigation
Claims
Costs and compensation
Economic effects
Future outlook
R
More Than 8,400 Firms More Than 8,400 Firms Have Been Named as Defendants 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)
R
Distribution of DefendantsDistribution of Defendantsby Industry (2-digit SIC)by Industry (2-digit SIC)
0
2
4
6
8
10
12
9 13 16 21 24 27 30 33 36 39 42 47 50 53 56 59 62 65 72 76 80 83 87 92 99
SIC
Percent
R
Distribution of DefendantsDistribution of Defendantsby Industry (2-digit SIC)by Industry (2-digit SIC)
8–10 percent of defendants: 3 industries Construction special trade contractors Wholesale trade-durable goods Water transportation
4–5 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
1–3 percent of defendants: 18 industries
Less than 1 percent: 49 industries
R
Bankruptcies Are Becoming Bankruptcies Are Becoming More FrequentMore Frequent
First bankruptcy in 1978
19 in the 1980s
17 in the 1990s
29 in 2000s through 2002
R
And Bankruptcy Is OnlyAnd Bankruptcy Is OnlyPart of the StoryPart of the Story
Defendants’ net payments to asbestos claimants weaken their financial position, cost jobs
Upper-bound estimates of effects on defendants:
As of 2000Eventually
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
R
Dimensions of the LitigationDimensions of the Litigation
Claims
Costs and compensation
Economic effects
Future outlook
R
The Future Course of LitigationThe Future Course of Litigation Is Uncertain Is Uncertain
Analysts’ projections of total claimants and costs vary dramatically
Total claimants: 1 million to 3 million
Total costs: $200 billion to $265 billion
Whether there will be money left to pay future claimants—and who will pay —remain open questions
R
Widespread Agreement About the Widespread Agreement About the Current State of the Litigation...Current State of the Litigation...
Recent surge in filings
Majority of recent claimants are not currently functionally impaired
High transaction costs
Large number of bankruptcies
Spread of litigation through economy
Future claimants’ prospects are uncertain
R
Disagreement AboutDisagreement About
Whether reform is needed
If so, what reform would best remedy perceived problems
R
R
Verdicts Are Infrequent but AttractVerdicts Are Infrequent but AttractGreat Attention Great Attention
Since 1993, out of hundreds of thousands of claims, few have been tried to verdict
527 trial verdicts
1,598 plaintiffs reaching verdict
Plaintiffs won two-thirds of the time
Mesothelioma plaintiffs were most successful
Most claims were tried in groups
In most trials, juries heard a small number of claims
R
A Few Large Awards Accounted forA Few Large Awards Accounted forMost of All Dollars AwardedMost of All Dollars Awarded
0
Distribution of Awards ($)
1K–10K
10K–100K
100K–1M
>1M–10M
10M1K–100K
100K–1M
>1M–10M
10M
Distribution of Dollars
Source: RAND compilation
R
Five States Account for Five States Account for Most VerdictsMost Verdicts
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Plaintiffs Trials
OtherMDLACATXPA
R
An Increasing Share of VerdictsAn Increasing Share of VerdictsAre in Texas and Maryland TrialsAre in Texas and Maryland Trials
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
'93-'95 '96-'98 ’99-'01
OtherLAPA
MDCA
TX