Proposed Fund Would Recoup Asbestos Costs

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A settlement plan that would establish a trust fund of at least $125-million to help schools and other public entities contain or remove asbestos from their buildings was put forward this month in the Manville Corporation bankruptcy proceedings.

But the proposed settlement faces many obstacles, according to those involved in the case, including the insistence by Manville--one of the world's leading asbestos suppliers--that it is not responsible for many of the asbestos-related hazards in schools. Under terms of the settlement, the corporation would have to finance the entire trust fund.

Lawyers in the case also noted that numerous parties in the litigation must approve the final plan.

"I wouldn't go so far as to call it an agreement," said Ellen P. Chapnik, a lawyer working with the committee representing school-related claims. "It's a term sheet that provides an outline and a basis for fur-ther discussion between all the interested parties."

Leon Silverman, the court-appointed lawyer representing future health claimants in the case, presented the proposal to U.S. Bankruptcy Court Judge Burton R. Lifland during a hearing in New York on Oct. 15. It was developed following Mr. Silverman's discussions with lawyers for various property-damage claimants, including schools and school districts.

Manville officials subsequently said that the company did not agree to the principles outlined in the plan, that the plan was too costly, and that it would be premature to set a dollar amount on damages before other issues in the case are clarified.

Manville initiated bankruptcy proceedings in August 1982, after some 16,500 lawsuits had been filed against it for asbestos-related health problems.

The company's current reorganization plan limits funds available for the settlement of property-damage claims to $50 million, according to Raymond M. Gomez, manager of public relations for the corporation. He said the company would participate in negotiations regarding the new proposal, but that the plan "needs a lot of work if it is to become the basis for a reasonable settlement."

The Manville Corporation maintains that the asbestos present in most buildings rarely presents a health hazard and does not need to be removed.

In addition, Manville officials argue that the company may not be liable for any property damages because the majority of property-damage claims involve spray-on asbestos insulation, which the company never produced or installed.

Nonetheless, lawyers for the schools have described the new proposal as a "breakthrough" for property-damage claimants. They have been arguing in the case that Manville's involvement in the mining and manufacturing of asbestos was so extensive--it produced the raw material used by other manufacturers, and was the largest producer of pipe and boiler insulation--that it is unnecessary for school claimants to trace their building asbestos directly to the firm.

Proposed Terms

Under the proposed plan, all property-damage claims would be settled by a trust fund similar in composition and function to that proposed for health claimants. Operators of the fund would decide, using yet-to-be-determined criteria, who should receive funding--and at what level--for past or future asbestos identification and abatement.

The selection criteria would not require claimants to prove that the asbestos in their buildings was produced by Manville or to show that Manville had acted wrongly in any way, Ms. Chapnik said.

The Manville Corporation would4provide an initial $125 million in cash for the trust fund. Additional funds, if needed, are also a possibility in the new plan. They would come from insurance proceeds and any unused cash, bond, profit, and stock interests of the firm remaining after settlement of the health-injury claims.

The proposed settlement fund for victims of asbestos-related diseases includes $1.572 billion in noninterest-bearing bonds, $615 million in insurance proceeds, $75 million a year in Manville profits for more than 20 years, and between 50 percent and 80 percent of Manville stock.

Under the new proposal, if any of those funds are not needed for health-related claimants, or if Manville's asbestos-liability settlements with insurance companies exceed $615 million, the extra money would flow to the trust fund for property-damage claimants and not back to the company, as originally planned.

Any funds that remained unused in settling either health- or property-related damages would ultimately revert to the corporation.

The proposed trust fund would be the only vehicle for settling such claims, Ms. Chapnik said, and future lawsuits against Manville would be prohibited. Other miners, manufacturers, and distributors of asbestos would not be part of the settlement.

Concerns Remain

Some 5,000 property-damage claims have been filed against Manville, according to David Berger, a lawyer representing school-related claimants. Manville's Mr. Gomez said the face value of such claims has been estimated at more than $81 billion--a figure disputed as "grossly exaggerated" by lawyers for the schools.

Ms. Chapnik said that how much "excess" funding would be available after settlement of the health-related claims was a concern of property-damage claimants, along with how the money would be divided among schools and other property owners.

"At this point, we haven't seen the data that would allow us to reach a conclusion on that," she said. But she expressed "guarded optimism" that there would be funding above and beyond the $125 million from the settlement of Manville's lawsuits against the insurance companies.

Manville officials also said they were "hopeful and optimistic" that there would be money left over from the health-related settlement. But Mr. Gomez expressed concern that the financial viability of the reorganized company could be endangered if all of those funds went to property-damage claimants.

Stanley Nemser, co-counsel forthe school-related claimants, argued in the bankruptcy proceedings this month that any settlement for property-damage claims should give special consideration to schools and school districts.

In an interview, Mr. Nemser outlined four reasons for such special treatment:

Congressional legislation compelled school districts to test for the presence of hazardous asbestos--a mandate not imposed on any other property owner. The money schools have spent to satisfy this federal requirement, Mr. Nemser said, gives them special interests in the case that no other group has.

Compulsory-attendance laws require schoolchildren to spend time in buildings that could be contaminated with hazardous asbestos. Again, said Mr Nemser, this is a unique situation that should give schools special consideration in settling property-damage claims.

Because asbestos-related diseases have a long incubation period--often not appearing for more than 20 or 30 years--schoolchildren may be particularly at risk. Not only does this require that they be given special consideration, Mr. Nemser noted, but it makes them potential future health claimants.

Some schools and school districts lack the resources to contain or remove asbestos, the counsel added, and should be given special consideration for that reason.

Judge Lifland has instructed lawyers for the parties involved in the case to continue negotiations over the next few weeks. A report regarding progress on property-damage claims must be submitted to the court on Nov. 7, with the next hearing date scheduled for Nov. 20.

Vol. 05, Issue 09

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