Document Q3DD4XqOBaenJMEbJ9dL1Yzv

Policy Fight: Suits Over Asbestos Touch Off a War Kenai InFis On % Continued From First Page U.S, Schools Are Facing the Costly Task has refused to decide, between the conflict By a Wa ing theories of liability. This leaves standing Of Locating, Fixing Asbestos Hazardsa series of often contradictory state and fed eral court decisions. Lawyers say that the NEW: Y9 oil and. dine in insurers probably will have-to slug the issue forapo jt in state'and federal courts case by case. By a Wall Street Journal StaffReporter coated with asbestos. Since then. New The InU.S. circuit courts of appeals, just below Among those with an asbestos problem York officials have confirmed the presence New Yc the Supreme Court level,, three cases have are many of the nation's schools. - of materials containing asbestos in 258 of to pertr been decided: Two backed the exposure doc The Environmental Protection Agency the city's more than 1,000 school buildings. sue re^ f*2 trine, and rare not only backed the exposure but also ordered it applied to periods when the asbestos company, a unit of Keene Corp. of New York, may have let its insurance lapse.. ; Typical of the pending cases is one now beforerthe federal district court in Philadel phia:-It involves the 7,600 claims against Pittsburgh Corning Corp., which made as bestos insulation between 1962 and 1972. The main combatants are Travelers Corp. and Commercial Union Insurance Cos. Travelers, Pittsburgh Coming's primary insurance carrier, paid 112 million in asbes recently ordered' all elementary and secon dary schools to conduct inspections for pos sible health hazards from building mate rial containing asbestos. The mineral was widely used for fireproofing, insulation and architectural decoration in schools built be tween 1945 and 1972, a period of major school construction in the U.S. The agency estimates that up to 14,000public and private schools may have poten tial asbestos hazards. What particularly concerns environmental experts is asbestos that was either sprayed on or loosely packed so that it can be easily released Estimates of the cost of either removing or covering up potential asbestos hazards in the nation's schools run as high as 6400 million to $900 million, says an Education Department official. Instead of these costly approaches, many school officials are choking to "monitor", hazardous areas for dust release^ New York City, which has already done significant remedial construction work, ex pects to spend $10.5 million on the prob lem. California officials put the total bill in that state at $20 million. dosed; Ite tnjc ended. 33 cet cents; Fir $33.1 i tier. ciatiM earaij: lion ft reveni tos claims and legal costs under the expo into the air as minute fibers. -In 1980, Congress authorized the federal and sure theory, thereby fulfilling the limits of its policy. But Commercial Union, an excess carrier, refused to pick up its share of the liability, Its prime argument is that Travel ers should have used, the manifestation theory; if it had done-so, it would have paid Local school officials in New York pty closed two Harlem public schools in 1978 because of parents' fears about asbestos hazards to their children. Students had dis lodged ceiling tiles and - exposed pipes government to provide federal grants and loans to aid local schools in detecting and removing asbestos hazards. However, Con gress hasn't yet appropriated any money for the task, an.EPA spokesman said. Joel I turn i Rocky the ccs Bas indust) marot- claimants, left.lnstead to Commercial. survivors of 1,000 asbestos victims, found claims have been settled out of court for drillini Union and'Ilnis*WtTaitf`have reduwkfeCiafe; thatonly:30% filed for death-benefits under much less. Mr. MacAvoy's $38.2 billion esti the cut mercial Union's potential workers; 'compensation; One reason;. Work-. mate for future,asbestos, payments is based feredrj That part of the case h^^<SRued& ers'-compensatton awards don't- match the for now. The court, in a ruling-certain to btr heftyawards made by some juries; appealed, rejected Commerraif Unlon's aiY' Some- publicized awards have been sub gument Court documentajsbow; that the stantial; one. Texas jury- awarded a worker company, the U.S. unit of Britain^ Commer $3 million. But insurers say that most cial Union Assurance Co.; could be liable for on an averagw:fl*>*23ai0. per victim. But Johns-Manvllle, to take one major defen dant,. says, that 2,500 judgments and out-of- court settlements have averaged $50,000 to $60,000, counting the amount paid both by J- M and codefendants. year-e pany-7 share; i AF up to $64 million of Pittsburgh Coming's as bestos-settlement costs. 412769 OOOI ---MrwBMgwujTr-tAqnnueg mayor muy. y' 1" not be good ones, but they are the only estlmates around. None of Us critics come up with their own figures, and the individual in-' surers wrap their asbestos liabilities in a veil of secrecy. "Nobody on the outside knows what the companies' liabilities are," says John Head in, a principal of Morgan 1 Stanley & Co., the securities firm. Even when an insurer such as' Commercial Union is known to face extensive asbestos claims, Mr. Head notes, analysts can't be sure "how much went out the back door" to reinsurers; In a sign of regulatory interest, the New York State Insurance Commissioner re cently asked 20 major insurers for informa tion on the extent of their asbestos claims, available reserves and reinsurance cover age. Insurance executives privately suggest that the most likely candidates for trouble are some policy capitalized reinsurance companies. Failure of a reinsurer would send its liabilities bouncing back to other companies, an arrangement that one insurer describes as "a house of cards." Looking to Washington To ease their burden* Insurers hope to find other defendants to. share it Commer-i dal Union, for example; is suing the fedei government and the tobacco industry. It suing the government on the ground that thi government is the prime source of busirn for, or in essential control of, the nation shipyards, which use asbestos for fireproof ing and heat insulation. Shipyard workei form the largest single group of asbesti victims. Commercial Union is suing the t bacco industry because research indicab -that smoking sharply increases the heall risk among asbestos workers. Asbestos manufacturers are lobbying foi a federal bailout One bill in Congress wouli set up a federal fund to cover asbestos am similar claims. Insurers expect, howevei that Reagan-administration budget cuttei. will reject a costly federal role. I Some insurance-company lawyers feajr that the asbestos litigation has already un dermined their defenses in future product-li ability cases. By adopting the exposure doc trine, they say, some judges have forced r surers to reopen their books on policies th; expired 10 to 20 years ago. Many insure say that if this doctrine takes hold and is ap plied to other substances besides asbestos, it could destroy an insurer's ability to project future losses and therefore its ability to price policies with any reliability. The workers'-compensation system of the for a states was designed to handle job-related in juries. disease or death. But a University of Connecticut researchers, who studied the 412769 0002 Talk of Doom ~ Insurers typically assert that they have adequate reserves to handle the huge asbes tos bills, but that view has been challenged by a Yale University economist, Paul W. MacAvoy. Mr. MacAvoy, who was a mem ber of the President's Council of Economic Advisers In 1975-76, predicts in a study that payments to asbestos disease victims by employers and their Insurers are likely to total $38.2 biilion-and possibly as much as $90 billion--over the next 35 years. Some in surers, he says, may well face financial ruin. Others call such talk nonsense. "As far as I know," says Floyd H. Knowlton, a Travelers vice president, "no carrier, major or minor, is threatened by insolvency." Some outside observers, too, tend to dismiss talk of doom. In the 1970s, they recall, insur ers were screaming that medical-malprac tice insurance and product-liability insur l>ance were drying up because of an upsurge in payments: In both cases, the "crisis" dis appeared. I Mr. MacAvoy's study, published by the yYale School of Organization and Manage ment, was partly financed by Commercial Union, a circumstance that causes some dcritics to discount it Commercial Union, alone among major insurers, has been wag ing a public-relations campaign that depicts asbestos litigation as a major threat to the. property- and liability-insurance industry, although William F. Bailey, the company's senior vtce president,- -says that Commercial. Union's own liabilities, "on a worst-case ba sis,'.' are "substantially less" than $135 mil lion and don't pose any financial danger to the company. Rote Wasn't Concealed But the study made no secret of Com mercial Union's financial support, and Mr. 1 MacAvoy says that It wasn't cleared with 1 the insurer before its publication. ( ' MacAvoy critics also cite the fact that he 1 is a director- of Combustion Engineering 1 H Inc., which used to make insulation products 1 containing asbestos and has had 5,000 claims f filed against it. Mr. MacAvoy says: "My only position is that ot a university profes- I sor. I can't be billed as a Combustion Engl- 5 neering director or a Commercial Union j i consultant." ................. I 412769 0003