Asbestos Lawsuit Trust Funds: How Liability Claims Get Paid

Asbestos lawsuit trust funds are bankruptcy-created funds that pay injury claims without a trial. Victims file evidence with the trust, and the trust pays a percentage of the claim's set value.

The trust becomes the only source of recovery for covered claims, the U.S. Government Accountability Office reports. That design covers people diagnosed later with mesothelioma, lung cancer, asbestosis and other specified diseases.

Table of Contents

• Where does the trust money come from?
• Who can file and what proof is required?
• Should you choose expedited or individual review?
• Why is the payment only a fraction?
• Can you file with more than one trust?

Where does the trust money come from?

Federal law lets a Chapter 11 court move a debtor's present and future asbestos liability to a new personal-injury trust. The rule appears in the federal channeling-injunction statute published by the Cornell Legal Information Institute. The reorganized company keeps operating while the trust handles covered injury claims.

The U.S. Government Accountability Office found about 60 trusts held about $37 billion in assets in the GAO trust-fund audit. Available payment data showed about 3.3 million claims paid for about $17.5 billion from 1988 through 2010.

Who can file and what proof is required?

Covered victims include people diagnosed later, represented during bankruptcy by a future-claimants representative, according to the U.S. Government Accountability Office. The trust then stands as their source of recovery for covered diseases.

Claimants do not sue the trust. They file an administrative claim under court-approved Trust Distribution Procedures. The WRG Asbestos PI Trust illustrates the process with separate claim-filing and medical and exposure pages.

• medical diagnosis for a specified disease
• latency showing time since first exposure
• work history showing where exposure happened
• product evidence linking work to the debtor's asbestos

Should you choose expedited or individual review?

Most trusts offer two paths. Expedited review pays a fixed scheduled disease value when presumptive medical and exposure criteria are met. Individual review weighs detailed evidence and can pay more or less, but takes longer.

The U.S. Government Accountability Office reported only 2-3% of claimants use individual review. That split matters because expedited review offers speed and certainty, while unusual medical or exposure facts may favor individual review.

Why is the payment only a fraction?

Each trust pays only a payment percentage of scheduled value to preserve money for future claimants. RAND's study of major trusts found a median of 25%, ranging from 1.1% to 100%, in the RAND study of major trusts.

A $180,000 scheduled mesothelioma claim therefore yields far less cash. The WRG Asbestos PI Trust states its current payment percentage is 30.1% of scheduled value for expedited review and 30.1% of gross settlement value for individual review, subject to periodic adjustment. Percentages are reconsidered periodically with consent of the Trust Advisory Committee and Future Claimants' Representative.

Can you file with more than one trust?

Victims often file with multiple trusts plus the tort system. A victim files separately under each trust's procedures and payment percentage.

The House Judiciary Committee advanced the FACT Act to require quarterly bankruptcy-court reports naming claimants, amounts paid and payment basis, according to the committee press release on the FACT Act. The proposal aimed to expose duplicate or conflicting claims across roughly 60 trusts holding nearly $40 billion.

You Might Also Like

• L’Oréal Mass Tort Strategy and What It Means for Liability Claims
• How Long Does a Mass Tort Liability Lawsuit Take to Settle?
• What Documents Do You Need to File a Liability Lawsuit?

Browse more: Active MDL Cases | Arbitration | Attorneys | Claims | Class Action Lawsuits