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British Asbestos Newsletter

9 Tintagel Drive, Stanmore, Middx. HA7 4SR England

Issue 41: Winter 2000/2001

1. Asbestos Compensation Endangered by Insurer Collapse
2. T&N, Ltd: An Update
3. Asbestos in Scotland
4. The Asbestosis Research Council

Asbestos Compensation Endangered by Insurer Collapse

A press release issued on January 10, 2001 announced that Chester Street Insurance Holdings Ltd. was insolvent. Few had heard of Chester Street and little was made of the news until the penny dropped: Chester Street had previously been Iron Trades Holdings Ltd., a company which had been the Employer's Liability Insurers for British Steel, The Central Electricity Generating Board, Swan Hunter Shipyards, Harland & Woolfe Shipyards and other shipyards and ship-repairers. According to one plaintiffs' solicitor, "Since Employers' Liability Insurance became mandatory, Iron Trades has been the UK's biggest insurer of industrial risks." This has resulted in current asbestos liabilities of 60 million. Coverage under 2,000 Iron Trades policies is now uncertain due to "financial uncertainties surrounding the company's financial position." Information on Iron Trades is difficult to obtain at this time. When contacted, Philip Grant, Chester Street's Managing Director, required permission from the official liquidators to answer press enquiries. From the details which are available, it looks likely that corporate restructuring at Iron Trades is behind the economic failure of Chester Street. In 1989, Iron Trades Employers Association Ltd. dumped all pre-1990 policies, many of which have resulted in and will continue to generate asbestos-related liabilities, into the Chester Street company. Post-1990 policies went to Iron Trades Insurance Company Ltd. which, unsaddled by asbestos claims, was bought in February, 2000 by the Australian-based insurance group: QBE International Insurance Ltd.

According to one insurer, this is a "controlled run off" rather than a fire sale. Chester Street is publicly acknowledging 200 million of assets. This sum would, according to an analysis by the Trades Union Congress (TUC), be enough to pay between 1500-2500 mesothelioma claimants sums of 50,000-100,000 each. At this rate, two-four years' worth of claims will exhaust the reserves. Once these are gone, cases stemming from post-1972 exposure will be covered by the Policyholders Protection Board (PPB), a scheme operated under the Department of Environment, Trade and the Regions. As the vast majority of asbestos claims arise from pre-1972 exposure, they will not be topped-up by the PPB. Claimants whose former employers are still in business, will be able to hold them liable for the full compensation due. Unfortunately, in many instances, defendants have disappeared by the time plaintiffs become ill. While a claim can be pursued against a defunct defendant when the company's insurer can be identified, plaintiffs with such claims against Iron Trades could now find themselves under-compensated. The TUC concludes that: "Large numbers of victims therefore stand to lose out over the next ten to twenty years." It seems that the reorganization which ensured the viability of part of the Iron Trades group has been achieved at the expense of the growing numbers of UK asbestos victims.

A Scheme of Arrangement has been designed under section 425 of the Companies Act to ensure creditors receive part payment of claims "in the event that, at some time in the future the company's liabilities exceed its assets." Policyholders told to "continue to submit claims information in the normal manner," on January 10, have reported paralysis at the Leeds office administering pre-1990 policies. This has been confirmed by news that on January 16, the liquidators ordered the stoppage of all checks, including those already issued but not yet presented, for pre-1990 business. Under their instructions, no settlement offers will be discussed, no admissions made or instructions given until after the creditors' meeting in February. According to the provisional liquidators, if the Scheme of Arrangement is not approved by the creditors and court, the company would be put into liquidation. For the moment, government departments and the insurance industry are adopting a wait and see approach. Ian McFall, Head of the National Asbestos Team at Thompsons' Solicitors, has been working to identify legal and political solutions: "There is enormous concern amongst our clients as to how these developments will affect their cases. Many of those who are terminally ill do not have the luxury of time to wait and see what may happen over the next weeks and months."

T&N, Ltd: An Update

For over seven decades T&N, Ltd., formerly Turner & Newall Ltd., was at the heart of an industrial group which owned asbestos mines, operated foreign subsidiaries with asbestos interests, sold asbestos products or franchises overseas and maintained a watching brief on the climate in which the industry operated. Although the company diversified into non-asbestos technologies, recent adverse developments indicate that its intimate involvement with all things asbestos will continue to reverberate for some years yet. Many observers were amazed by the company's 1998 take-over by the Federal-Mogul (FM) Corporation. Why would a Michigan-based manufacturer of automotive and vehicle components assume the virtually unquantifiable liabilities of the former "asbestos giant?" Three years ago FM was: "pleased with T&N's innovative efforts to manage this serious problem and intend to build on those efforts for the future." In October, 2000, FM's expansionist Chairman and Chief Executive, Richard Snell resigned abruptly amidst warnings of poor third-quarter performance. The company's stock plunged to $3.25 from a high of $72 in July, 1998. It was predicted that loan agreements would not be honoured and that "bankruptcy is no longer a remote risk." With asbestos-related payments of $335 million in 2000, the poisonous asbestos legacy, so blithely acquired, had started to undermine FM's very existence.

Even after decades of asbestos litigation, new threats still seem to be emerging. During 1999, Owens-Illinois, Inc. (O-I), a key asbestos producer in the US, alleged that T&N had participated "in a scheme to defraud and a conspiracy with other asbestos fiber suppliers to create and protect a demand for asbestos through the suppression and misrepresentation of information concerning health risks to users of finished insulation products containing asbestos." Richard Josephson, one of O-I's lawyers, said: "Who would have bought raw asbestos from any of them (the alleged cartel) if they knew that the people who were going to be exposed to that product would have been at risk of developing disease?" If O-I were to win one billion dollars in damages, a major deep pocket for asbestos victims could be wiped out in a single stroke. For this reason, plaintiffs' lawyers W. Mark Lanier and Shepard Hoffman agreed to help T&N. They made no concession to their temporary employer with Hoffman telling the Texas court it should assume T&N "did everything it's accused of doing." Ultimately their aim was to protect a major settlement source for claimants and not to exonerate the defendants. Their attitude could best be summed up by a quote from William Shakespeare: "A plague o' both your houses!" According to Lanier, "I think asbestos companies conspired together to defend themselves, and have hidden documents, and distorted literature, and lied in discovery responses. I think through this case, we will probably see an implosion of that, and I think it'll be to the benefit of injured victims all over the country."

On August 24, 1999, a default judgment of $1.6 billion was entered against T&N; this judgment was vacated by a federal judge on December 20, 1999 at a preliminary injunction hearing. Prior to another hearing in February, 2000, Paul J. Hanley, Jr., one of T&N's most experienced asbestos defense counsels in the US, was deposed. The picture Hanley paints of the behaviour of both O-I and T&N is disturbing. He describes his working relationship with R. Bruce Shaw, another of T&N's defense attorneys prior to 1985. According to Hanley, Shaw, who was also regional counsel to O-I, had often been briefed on T&N's defenses to asbestos claims; "Mr. Shaw and his firm also reviewed and signed discovery responses on behalf of T&N on numerous occasions." After the formation of the Asbestos Claims Facility (ACF) in 1985, Shaw appeared as joint defense counsel for O-I and T&N. In this role Shaw traveled to London in November, 1985, with Hanley to depose T&N witnesses and review company documents on cancer, TLVs and insulation workers. In Hanley's deposition, he states: "Mr. Shaw asked if we could find a way not to produce certain of the documents in these three categories. When I asked why, he explained that such documents could 'kill O-I' because of the position on the state of knowledge taken by O-I in the U.S. litigation. Mr. Shaw and I worked through the documents and withheld some on the basis of privilege, but most were produced the next day." The following year Andrew T. Berry, an ACF lawyer who represented T&N and O-I in numerous insulator cases in New Jersey, went to London with Hanley for depositions and document review. Because of the New Jersey cases, documents on T&N's knowledge about the hazards of working with finished insulation products were provided. "Mr. Berry expressed concern that the documents concerning T&N's knowledge of risks to insulators could adversely affect his defense of O-I cases in which O-I and T&N were defendants, and specifically asked whether I objected to his discussing the subject matter with O-I. I told him that I did not object to such discussions." How, in light of these discussions, could O-I not have discovered the alleged conspiracy until 1998? This is something we may never know. In early December, 2000, this case was "resolved;" although one experienced asbestos litigator speculated that a relatively small amount had been paid by T&N to extricate itself from this case, we will never know for sure as the terms of the settlement are confidential.

In the US, asbestos has humbled many defendant corporations; this trend continued during 2000 with Pittsburgh-Corning, Babcock & Wilcox, Owens Corning, Fibreboard Corporation and Armstrong World Industries Inc. seeking protection under Chapter 11 of the Bankruptcy Code. On January 5, 2001, G-I Holdings Inc., owner of GAF Corp., followed citing a "sharp, unforeseen increase in the number of claims... the dramatic escalation in settlement demands and the inability of the tort system to resolve such claims in a fair and orderly manner." As asbestos claimants have fewer deep pockets to access, those defendants which remain are faced with increasing claims. The size of T&N's problem is discussed frankly in its most recently published annual report: "In 1996, the Company purchased a 500 million layer of insurance which will take effect should the aggregate amount of claims filed after 30 June 1996, where the exposure date occurred prior to that date, exceed 690 million. The initial reserve for the T&N companies together for (sic) claims filed after that date was approximately equal to the insurance excess of 690m. The Company has reviewed the financial viability and legal obligations of the three re-insurance companies and has concluded, at this time, that there is little risk of the insurers not being able to meet their obligations to pay... While management believes that reserves are appropriate for anticipated losses arising from the Company's asbestos-related claims, given the nature and complexity of the factors affecting the estimated liability, the actual liability may differ. No absolute assurances can be given that the Company will not be subject to material additional liabilities and significant additional litigation relating to asbestos. In the possible, but unlikely event that such liabilities exceed the reserves recorded by the Company or the additional 500 million insurance coverage, the Company's results could be materially affected."

Some might sympathize that FM has been brought into a fight not of its own making. In May, 2000 O-I amended its billion dollar complaint to include FM, as T&N's ultimate parent company. The constant stream of asbestos claims was unsettling for shareholders and stock analysts. It was hoped that $550 million obtained in short-term loans in early January, 2001 would go some way towards reassuring creditors, suppliers, employees and investors. That was before a report by The National Econometric Research Company estimated that FM/T&N is facing $900 million of asbestos claims, excluding the possibility of punitive damages, in the next four years; $350m in 2001, $250m in 2002, $150m in 2003 and 2004. While FM maintains that $800 million of asbestos-only insurance should cover the bulk of the claims, it is pursuing other means to reduce the final bill, such as the introduction of an "asbestos management strategy to focus payments only on the impaired and malignant individuals who have been exposed to our subsidiaries' products. We believe this will result in a long-term phase down of our asbestos payments. We are also working toward a legislative solution for our continuing situation." Robert Miller, acting Chief Executive between the September resignation of Snell and the January 11 appointment of Frank Macher, provided worrying insights into the company's new strategy. Miller told a Reuters journalist that claims would undergo increasing scrutiny, more cases would be contested and settlements offered later rather than sooner during the judicial process. The use of the phrase "malignant individuals" and the threat to dispute claims and delay settlement indicate that FM has well and truly become part of the asbestos club. Let's hope that Frank Macher and Charles McClure, FM's new President, will find a more equitable way of resolving this problem, one which does not penalize those whose lives have been devastated by exposure to T&N's asbestos.

Asbestos in Scotland

Incubating Death: Working with Asbestos in Clydeside Shipbuilding and Engineering, 1945-1990 by Ronald Johnston and Arthur McIvor describes the aftermath of a century of heavy asbestos use in an area of the United Kingdom often overlooked: Scotland. Cooperation from Clydeside Action on Asbestos, the first asbestos victims group in Scotland, and the use of an oral history methodology enabled the authors to obtain first-hand information from shipyard workers, insulators, riggers, fitters, ships' plumbers and marine engineers. The twenty-five individuals interviewed confirm that asbestos use was unregulated and uncontrolled. According to one boilermaker: "I'm no exaggerating when I say this: it was like snow coming down, and there were nobody there to supervise them...There was asbestos all over...and it was all coming down on top of you." An insulation engineer recalled mixing asbestos paste, also known as "monkey dung," during his apprenticeship at Harland and Woolf's shipyard. In 1970 "they'd spray that (monkey dung) on the bulkhead of a boat. And the sprayer would have a wee drum. So you'd just mix it up and stick it in the drum. Eh, you got a half pint of milk for that. It was a good bonus you know. A half pint of milk..." Decades of neglect were due to lack of knowledge, a "machismo work culture," across-the-board acceptance of workplace hazards and enfeebled trade unions. The naivety of the Factory Inspectorate and the Health and Safety Executive in expecting employers to protect shipyard and engineering workers was a major contributory factor to the longevity of toxic conditions. Inadequate industrial compensation for the illness which ensued threw "victims and their families into relative poverty and social exclusion."

Lethal Work: A History of the Asbestos Tragedy in Scotland by Ronald Johnston and Arthur McIvor, published in 2000, is the culmination of the project first described above. Detail by graphic detail the history of Scotland's asbestos tragedy unfolds as the authors explain how and why the country came to top the UK league table for asbestos-related disease. Although the Scottish incidence rates of asbestos-related disease are high, the rates in the West of Scotland are higher, with the rates in the Clydebank district being off the scale. Between 1986-1995, the standardized mortality rate (SMR) for mesothelioma in Clydebank was 1100 compared to the average British SMR of 100. Using statistics, documentary evidence and the telling testimony of survivors, Johnston and McIvor produce an in-depth study of the worst occupational health disaster in Scottish history. From its inception, the commercial exploitation of asbestos found a ready home in Scotland. In the 19th century, Scottish companies pioneered the manufacture of asbestos products; the Patent Asbestos Manufacturing Company was set up in Glasgow in 1871. By 1885, Glasgow boasted nineteen asbestos manufacturers and distributors; by 1900, the Glasgow Post Office Directory listed fifty-two asbestos manufacturers. Occupational asbestos exposure, common throughout Scotland, reached epic levels in the Glasgow area where a myriad of asbestos goods were manufactured: engine packing and insulation, blocks, rope, millboard, paneling, boiler mattresses, tape, powder, putty, cement, paint, drive bands, wide sheets for marine insulation, thin strips for electrical insulation, locomotive insulation mattresses, brake linings, jointings, hoses plus a range of asbestos cement products. John Brown's, Clydebank and other shipyards employed the services of specialist insulating companies such as Bell's Asbestos and Engineering Co., Cape Asbestos Co., Drumoyne Asbestos Covering Co., Kitson's Insulators Ltd. and Newalls' Insulation Co. Asbestos was commonly used on building sites, in locomotive construction and repair, at the oil refineries and in premises which specialized in motor, marine, chemical, heating and electrical engineering. Grossly unhealthy working conditions produced high levels of exposure: "occupational health standards in relation to asbestos were particularly poor in the Turner's Asbestos Cement factory in Clydebank and also in the Clyde shipyards and building sites. Widespread exposure to asbestos in these workplaces, especially from the 1920s to 1960s, incubated a mesothelioma time bomb which is currently exploding across Scotland."

The active participation of former workers in this project has produced testimony which is as dramatic as it is precise: "I'll never forget till the day I die the first impression of that place (Turner's factory). It was like walking into Dante's inferno without the fire. It was just hell. The noise was unbelievable... Dust was flying through the air everywhere, clouds of dust." Another witness said: "The worst of the whole thing was the clean-downs. You had to clean the machine once a shift. You had big steel tools like scrapers, and they were for all the world like a big broad blade 6 or 7 inches long, that was made out of steel. And eh, you scrapped off all the hardened asbestos cement from round the sides of the machine with high pressure hoses and these scrapers... And because you were working with high pressure hoses you got an awful lot of splash-backs and you were covered in wet asbestos cement." A Clydeside insulation engineer summed up the situation as follows: "If you put a guy into a car and push him down a hill with no brakes in it and it crashes at the bottom and kills him, you've murdered him. Well, it's the same with us. They made us work with poisonous materials that were killing us, and never told us." Throughout the asbestos century "society tolerated a certain level of death and disability, and for far too long employers and managers were allowed a virtual free hand by a cautious state unwilling or unable to implement the tough measures needed to protect citizens effectively, both in the workplace and in the community." Scientists predict that by the year 2025, twenty thousand Scots will have died from asbestos diseases.

The Asbestosis Research Council

What was the Asbestosis Research Council (ARC)? On the surface, the Council was a 1957 initiative set up in response to the continuing escalation of the incidence of asbestosis in the UK. According to its Constitution, the ARC's prime objective, as stated in 1976, was "to foster research into the causation and prevention of asbestosis and any other diseases possibly associated with exposure to asbestos." Projects by scientists such as Drs J.M.G. Davis, S. Beckett, J. Beattie, D. Holt et al were funded at universities in Reading, Cambridge, Leeds and Manchester and institutes such as the Strangeways Laboratory, the Institute of Diseases of the Chest and St. Luke's Hospital, Institute fur Lufthygiene (Dusseldorf) and the ARC Foundation at the Institute of Occupational Medicine. By the time the Council closed, several hundred papers on ARC sponsored research had appeared in scientific journals. Officially recipients of ARC funding "always had complete academic freedom to publish their work." Or did they? Not according to Dr. Barry Castleman who states: "By 1963 and onwards, it was the ARC's policy to require approval by all member companies, of any publication by ARC-funded research. Researchers... regularly submitted pre-publication manuscripts for review, and they were directed to make numerous changes before approvals were granted... Papers approved by the ARC Research Committee had to afterwards be approved by the ARC Management Committee before publication was authorized."

Historian Geoffrey Tweedale concurs. Ten years after the ARC closed down, Tweedale has reassessed its role in his paper: Science or Public Relations?: The Inside Story of the Asbestosis Research Council, 1957-1990. The impression of an independent science-based organization could not have been further from the truth. The ARC began and remained commercially motivated. Tweedale points out: "the ARC was run by industrialists and not by scientists." The growing importance of the ARC to industry was reflected by a fifty-fold increase in its budget from 4,100 in 1957 to 230,000 in 1982. Seven million pounds of contributions bought its members, British Belting and Asbestos, Cape Industries and Turner and Newall, control: "Strategy was set by the management committee, which in turn responded to the wishes of the sponsoring directors... these men did not see the ARC as fundamentally a council for scientific research. Ultimately, it was an attempt to capture the scientific agenda and influence public policy." The name of the ARC was well-chosen; the combination of words sounds quasi-official and reassuringly medical. The impression created of independent, benevolent concern was manipulated by industry to great effect. While statements by asbestos manufacturers would have been disbelieved, information disseminated by the ARC and later the Asbestos Information Center was readily digested. From the 1970s, the ARC published and distributed brochures on various subjects including: "a code of practice, a technical note on dust counting and a number of 'control and safety guides' on such subjects as asbestos spraying and handling consignments of asbestos fibre... Their leitmotif that asbestos was a 'safe' material was contentious even at the time. The ARC leaflet on asbestos spraying, for example, aimed to bolster a technology that was about to be banned in America and that even the ARC knew greatly exceeded official safe dust levels."

Compiled by Laurie Kazan-Allen
Jerome Consultants

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