THOMAS W. KELTY, Chief Counsel,
Illinois Municipal League

THE LAMB THAT ROARED
(PART III)

This month's column is the final installment on the subject of asbestos contamination. As previously discussed, the potential liability exposure to owners of buildings which contain asbestos is substantial. This substantial liability exposure is complicated by the insidious long-term effect of continued exposure to friable asbestos. Exposure which occurred many years earlier may not surface until long after the offending material or locations has been removed, altered or destroyed.

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Before discussing the ways in which a municipal building owner may attempt to mitigate financial liability, a recap of Parts I and II is in order.

The health consequences of asbestos exposure are well documented and severe. Mesothelioma, asbestosis and lung cancer are principal resulting diseases. These diseases almost certainly result in death, with the likelihood of occurrence increased substantially among smokers, although it is unknown how much exposure is too much. Some studies have suggested that very low levels of exposure can be lethal.

In response to these health threats, various legal responses have been initiated. First, at the federal level, both Congress and the Environmental Protection Agency have began action to require inspection and abatement of asbestos hazards. Second, at least two bills introduced in the Illinois legislature may create certain obligations to a building owner with an asbestos hazard, although neither of the bills mention asbestos by name. Third, and finally, the predominant action taken is the filing of civil actions by victims and survivors to recover damages for personal injuries and by building owners to recover from asbestos manufacturers for property damages occasioned by the existence of an asbestos hazard. It is this final type of action that is the subject of this column.

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The costs associated with inspection, indemnification and abatement of an asbestos hazard are substantial. The sheer depth of a building inspection that must be undertaken to properly determine the extent of a hazard and the necessary actions to abate the hazard require that skilled personnel be employed to survey the hazard. Such a survey can entail significant expenditures depending on the size of the facility and the type of hazard suspected. Equally substantial is the cost of abatement. As an illustration, the building housing the Office of the Attorney General recently underwent an abatement project. In addition to the cost of relocating the entire staff of the Attorney General, the direct cost was quite high. The abatement project involved 58,000 square feet of the building which contains approximately 65,000 square feet. The abatement project cost approximately 1.5 million dollars, translating into a per square foot cost in excess of $25.50. Although costs will vary widely depending upon a myriad of factors, this example illustrates the high cost of abatement.

Complicating the abatement process is the fact that the methods employed to abate a hazard require skills in excess of those needed for a normal construction or remodeling project. Contractors performing abatement projects must be certified by the Illinois Department of Public Health prior to initiation of an abatement project. These certification requirements, designed to insure the safety of the workers and the public in the abatement process require the contractor to incur additional costs which are ultimately paid by the building owner.

This combination of high liability exposure and substantial abatement costs has caused building owners to

May 1989 / Illinois Municipal Review / Page 15

respond legally by the filing of property damage actions against asbestos manufacturers. These actions have produced a variety of results.

Individual actions filed have generally been successful and have provided substantial compensation to building owners. A recent action illustrates this success. The City of Greenville, South Carolina was awarded an $8,400,000.00 judgment against W. R. Grace and Company. The award granted compensatory damages and a $2,000,000.00 punitive damage award. This case arose from installation of Grace manufactured fireproofing in a municipal building. On the other hand, not all actions will necessarily be this successful because of the wide variety of factors that affect litigation. Witness similar actions against certain asbestos manufacturers that have failed because courts have found insufficient connections between the product complained of and the injury or have found a failure to prove the manufacturer origin of the product.

The other method that plaintiffs are actively pursuing for recoveries is the Johns Manville bankruptcy claims trust.

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 claimant. 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.

Limitations imposed by the Bankruptcy Court Plan required that building owners intending to take advantage of the Manville claims facility to file proofs of claim with the Bankruptcy Court in 1984 or 1985. The Plan is designed to take care of personal injury victims as quickly as possible, leaving property damage claims to be paid in the long run. To this end, the bulk of the funds derived from the reorganization, including insurance proceeds and bonds guaranteed by Manville, are pledged to the personal injury trust fund. A percentage of the company's profits will also go to the personal injury trust, until all claims are paid, or the trust closes. The personal injury trust assumes that all claims will be filed within twenty-seven (27) years. That trust will shut down at the end of that period, or when the last claim is paid in full, whichever comes last. From that point on, the percentage of profits previously dedicated to personal injury victims will be paid into the Property Damage Trust, until all property damage claims have been paid.

Until the personal injury trust expires, the Property Damage Trust is funded by a $125,000,000 payment from the Manville Company and by the proceeds of litigation against several of Manville's insurers. On the date that the Property Damage Trust begins operation, the total assets available for distribution are estimated to total $225,000,000 to $250,000,000. The amount to be available is speculative; the initial notifications pursuant to the plan indicate that $80,000,000.00 is available. However, this current amount does not include insurance proceeds that are expected to be available at a later date.

The mechanical procedures surrounding the filing of claims against the trust generally require the assistance of legal counsel to insure that filing deadlines, procedures and documentation requirements are followed. Anyone considering the filing of a claim against the trust should consult with their municipal attorney or corporation counsel to insure that these requirements are met.

Rarely, if ever, has there been a product that has appeared so harmless and helpful that has resulted in such injury to property and person. The grave nature of the potential liabilities that can accrue to municipalities requires that local officials be aware of and vigilant to the hazards they may face. •

News items and photographs of interest indicating new developments and progress in your municipality are always of interest to our readers. You are urged to send such information to the ILLINOIS MUNICIPAL REVIEW for publication. Be sure your information is complete. All photographs should be black and white glossy prints. -Editor

Page 16 / Illinois Municipal Review / May 1989