GAO Releases Asbestos Trusts Report, Identifies Possibility for Frau...

The possibility for fraud exists within the system of trusts set up by bankruptcy courts to deal with asbestos personal injury claims, although claims were down slightly in 2010 compared to the prior year, according to a new government report.

The U.S. Government Accountability Office said that 60 different trusts, created as companies declared bankruptcy because of asbestos-related liabilities to relieve them of future liabilities, paid out $3 billion to settle 461,000 claims in 2010, compared to $3.6 billion in 2009 and $3.3 billion in 2008. In all, $17.5 billion between 1988 and 2000 has been paid out to settle 3.3 million claims.

“Although the possibility exists that a claimant could file the same medical evidence and altered work histories with different trusts, each trust’s focus is to ensure that each claim meets the criteria,” the report said, adding that no trusts reported finding fraud through their audit systems.

Review procedures, payout processes and information available about individuals who received awards vary from trust-to-trust. Only one reported the actual names and amounts paid to individuals.

The U.S. Chamber of Commerce issued a press release Wednesday calling the asbestos trust system “broken” because of this lack of transparency. “It is becoming clear that rather than acting to prevent abusive claims, the asbestos trusts are effectively encouraging fraud by inhibiting claims information sharing between the trusts and the tort system,” said Lisa Rickard, president of the U.S. Chamber Institute for Legal Reform. Forbes also detailed a few cases in which conflicting records were submitted to different trusts.

During the last decade, the number of companies forced to declare bankruptcy because of asbestos liability has increased to around 100, and the number and assets of the trusts have likewise increased. There are now 60 trusts with $37 billion in assets, up from 16 trusts with $4.2 billion in 2000. This number could grow, as companies that have never declared bankruptcy remain vulnerable to asbestos-related lawsuits.

Asbestos exposure peaked in 1973, and it’s estimated that between 27 million and 100 million people in the U.S. were exposed to the substance, according to the report. Asbestos exposure can cause lung cancer, mesothelioma and other diseases. Litigation surrounding these exposures has been the longest running in U.S. history because exposure to asbestos doesn’t always immediately affect an individual. But the report did predict that mesothelioma claims peaked with 2,500 in the early 2000s.