THOMAS W. KELTY, Chief Counsel,
Illinois Municipal League

THE LAMB THAT ROARED
(PART II)

In last month's edition of this column, readers were introduced to the potentially devastating health consequences of asbestos-related diseases. This month we will address three additional aspects of the asbestos problem: regulation, owner liability and litigation. Each of these areas has potential consequences for municipalities and for other units of local government.

REGULATION

In response to the hazards created by the presence of asbestos in buildings, various governmental agencies have imposed special requirements upon building owners. For example, the federal government requires advance notice of renovation projects involving asbestos containing building materials. These regulations govern virtually every building owner. If the planned renovation involves asbestos containing building materials in excess of certain thresholds, the federal government may require the removal or other abatement of the asbestos contamination, before the renovation work is allowed to proceed. Abatement projects in excess of these thresholds must conform to federal requirements, regardless of whether they are part of a larger renovation scheme.

Currently all schools are governed by regulations promulgated pursuant to the Asbestos Hazard Emergency Response Act (AHERA). School Districts nationwide are now required to inspect for asbestos-containing materials in their buildings by June of this year. Potential asbestos hazards must be removed within specified time limits. All inspections and response actions must be performed to federally mandated standards. Because such projects are very expensive and were not included in long range capital improvement budgets, these school districts are having problems paying the cost imposed by these federal requirements.

It is likely that the regulatory climate will become stricter for the private building owner. School boards will soon have company under the AHERA regulations. Indications from the Congress and the United States Environmental Protections Agency are that the inspection and abatement requirements will soon be extended to cover all publicly owned buildings and possibly all buildings open to the public (including commercial buildings). A bill introduced on September 15, 1988 will require all buildings owned by any government entity to undergo the same inspections and response actions by 1991. All other buildings, public or private, will be governed by AHERA regulations whenever any action is taken by the owner that will involve the asbestos containing materials in the building. Early indications are that this bill will become law.

Some future regulations may impact the ability of the building owner to sell property infested with asbestos. In New York City, for example, title to real estate cannot be transferred without the buyer's waiver of liability for asbestos problems. It is certain that the regulatory climate will grow stricter. The building owner will have to keep a close eye on the state of the law as it develops.

OWNER LIABILITY: PERSONAL INJURY

The fact that a building owner did not personally manufacture or install asbestos products does not necessarily shield him from suit. Occupants of asbestos infested buildings are contracting diseases. Two Chicago area school teachers have contracted mesothelioma. An employee of the federal government in Ohio has contracted the disease. The teachers, as employees of the building owner school district, were limited to Worker's Compensation remedies. The federal employee pursued remedies against the manufacturer, rather than pursue her claim into the quagmire of the United States Claims Court.

April 1989 / Illinois Municipal Review / Page 17

Another potential liability arises upon the sale of a property. Where an owner/seller is aware of an asbestos hazard in a building and fails to disclose the problem to the buyer, courts have held that a cause of action exists. Theories upon which such an action has been upheld include fraud, negligent misrepresentation, breach of express warranty and breach of different implied warranties. It is likely that future suits will involve real estate brokers and possibly lenders.

It is too early to predict the course that suits against the building owner will take in the near future. It is virtually certain, however, that more such suits will be filed. Building owners (i.e., municipalities) should act now, with the guidance of qualified legal counsel, to assess potential liability and to limit their exposure.

PROPERTY DAMAGE

Because of the enormous costs often associated with correcting an asbestos hazard, many building owners have filed "property damage" suits against the manufacturers of the products, seeking to recover the cost of eliminating asbestos hazards in their buildings.

Before exploring litigation options in depth, some background information is necessary. Evidence from courtrooms across the nation establishes that various asbestos manufacturers knew years ago of the danger inherent in their products. In the 1930's, Vandiver Brown, counsel for Johns-Manville and Sumner Simpson, the President of Raybestos-Manhattan, discouraged the U.S. publication of certain British medical studies that linked asbestos exposure to certain diseases. In the late 1930's and into the 1940's, these two companies, along with eight other manufacturers, underwrote laboratory experiments seeking to determine whether there was a link between exposure and disease. The agreement funding the experiments had one significant catch: the publication rights belonged solely to the manufacturers and no publication without their express permission was permitted. The studies tended to establish the link between exposure and disease.

The attempts to prevent adverse publicity concerning the health effects of asbestos continued into the

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1950's and 1960's, as the Asbestos Textile Institute, a trade group, formed an "Air Hygene Committee" that actively sought to discredit studies into the health effects of asbestos. At the same time, this committee attempted to dispel the theory of a link between asbestos exposure and adverse health consequences. Although the manufacturers installed equipment in their own factories to limit worker exposure to asbestos fibers, these active attempts to conceal the dangers of exposure succeeded on another front. The insulation workers, pipe coverers and other tradesmen involved in asbestos work were shielded from knowledge of the danger inherent in their work. Consequently, these men worked without protection. Thousands have died. This state of ignorance retarded investigation into the dangers posed by asbestos exposure in the workplace and other "environmental" exposures. The dangers were known sometime ago, by a select few. It is only the general public's knowledge that is relatively new.

Asbestos property damage litigation shares much with the personal injury aspects of asbestos, Cases are tried on the same theories of contract, negligence, strict liability, market share liability, concert of action and civil conspiracy. The latter theories stem from the aforementioned attempts of manufacturers to prevent the dissemination of information about the dangers of asbestos. Property damage litigation also utilizes theories of restitution and nuisance.

Property damage litigation is difficult in many respects, however, due generally to the passage of time between the installation of the product and the discovery of the hazard. A major problem is the element of product identification. In the case of personal injury litigation, the Plaintiff knows he is ill and consults an attorney while he can still remember some of the products that he used. The property damage Plaintiff, by contrast, has little reason to remember the brand names of products installed. The building owner did not install the product and often has little in the way of records to establish whose product was installed in his buildings.

INVESTIGATION AND RECORDKEEPING

Excluding theories of market share liability, market

April 1989 / Illinois Municipal Review / Page 19

share alternate liability, civil conspiracy and concert of action, liability generally requires that a Plaintiff establish that a given section of asbestos material was in fact manufactured by the particular defendant. This is often a difficult task because building documents have been lost and memories have faded. Many potential plaintiffs discard the notion of property damage cost recovery litigation because of the difficulty of product identification. This is unfortunate for two reasons. First, product identification can often be established with appropriate investigation. In most cases, such investigation is not overly expensive to the client, given the potential for recovery.

Second, not all asbestos property damage recovery depends upon product identification, or even upon adversarial litigation. The Manville bankruptcy resulted in the creation of a trust fund/claims facility designed to pay a market-share portion of all property damage claims, regardless of the ability of the owner to identify Manville's product. Although the claims process is somewhat complex, the transactional costs are substantially reduced for the client.

The Manville property damage trust facility will pay a market share percentage for the costs associated with asbestos contamination and necessary response actions. Payments will be paid out of a trust established by the Bankruptcy Court and funded by insurance settlements and a percentage of the corporation's profits. Where necessary, claims will be paid upon a prorated basis in yearly payments until the claim is paid in full. By eliminating the product identification element from the adjudication of claims, the Manville property damage trust provides a method for the building owner to recover a substantial part of his damages at a comparatively low cost. The trust is complicated in some respects, but it should be taken advantage of by building owners with asbestos contamination.

The presence of asbestos in buildings is a major environmental and public health problem. Caught in the middle is the (municipal) building owner. Although not at fault, they may be forced to shoulder the weight of the problem. The scope of the problem is great and the issues complex. The building owner is well advised to seek knowledgeable help before attempting to address the problem.

SEQUEL

The final part of this article will focus on the options that a municipal building owner has for the recovery of cost in asbestos abatement. The severity of the problems that can arise as a result of an asbestos contamination problem make the ability to recover abatement costs critical. Early identification of an asbestos problem can permit a building owner to pursue different options for recovery of cost. It is early identification and quick response that permits the building owner to limit the potential damage, both healthwise and financially. •

Page 20 / Illinois Municipal Review / April 1989