09:30 AM CST on Monday, February 6, 2006

Bloomberg News

The U.S. Senate may block a proposed $140 billion fund for asbestos victims that has drawn opposition from companies such as Exxon Mobil Corp. and BorgWarner Inc. and lawmakers in both parties.

The companies, along with insurers, are fighting the fund because they say they would pay too much to finance it. The legislation has generated as much opposition from Republicans as Democrats, even though the top Senate Republican, Majority Leader Bill Frist, has called it a key priority and brought it up for debate today.

Supporters of the fund, such as USG Corp., the world's largest wallboard maker, say the legislation would end costly litigation that puts too much money in the pockets of trial lawyers and leaves too little for victims. Asbestos lawsuits have forced almost 80 companies into bankruptcy.

"The Democrats are indicating pretty strong opposition and the insurance industry is against it for the most part," said Senator Trent Lott, a Mississippi Republican. With Republicans and "the corporate world" divided over the measure, its prospects may be bleak, he said. Lott said he has his own reservations about the plan.

The House has taken no action on the issue, awaiting developments in the Senate.

If the bill doesn't pass this year, Chicago-based USG will have to pay $3.1 billion to settle asbestos claims as part of a plan to emerge from bankruptcy. That is in addition to the $900 million it agreed to pay Jan. 29 as a down payment for the bankruptcy settlement, the same amount it would pay into the fund over 30 years.

Lobbying Congress

USG Chairman William Foote was on Capitol Hill last week to lobby for the measure. The fund would be financed by companies that made or sold asbestos products and their insurers. While it wouldn't require any government funding, critics say there is still a danger taxpayers would be on the hook if the trust can't pay all claims.

Irving, Texas-based Exxon Mobil, the world's largest publicly traded oil company, and auto-parts maker BorgWarner, based in Auburn Hills, Michigan, are among the opponents of the legislation.

The fund would provide from $25,000 to $1.1 million for those with respiratory diseases or cancer, depending on the severity of the illness caused by inhaling asbestos, a fibrous mineral used to make roofing, building materials and brakes.

While Frist, a Tennessee Republican, says 11 Democratic senators have pledged to support the fund, Democratic leader Harry Reid of Nevada says the plan would be unfair to victims.

Day in Court

In a Jan. 30 letter to Frist, Reid said victims -- "especially those close to death" -- would be unable to go to court and would be deprived of any legal remedy between the time the legislation is enacted and when the fund starts paying claims.

For example, Sandy Linden, 56, of Omaha, Nebraska, suffers from a rare form of cancer caused by asbestos called mesothelioma. She wants Congress to defeat the measure, giving her a chance to win a court award or settlement. The mother of five said she was exposed to asbestos that clung to the clothes of her late father, a truck driver.

"I just want to have my day in court," said Linden, who has undergone operations to remove her diaphragm, left lung, two ribs and the sac around her heart. "I live three months to three months."

Procedural Obstacles

Under Senate rules, Reid's opposition to the fund will require Frist to muster 60 votes just to start debate. Republicans control the Senate with 55 members. There are 44 Democrats and one independent.

While there are probably 60 votes to permit debate, other procedural obstacles could prove fatal, lawmakers from both parties said.

"We face very, very substantial hurdles here," said Senator Arlen Specter, the Pennsylvania Republican who is the legislation's chief sponsor.

Organized labor also is split. The AFL-CIO, the labor movement's umbrella group, opposes the bill. Unions representing painters and asbestos workers have endorsed the measure, as has the United Auto Workers. The UAW represents workers at companies facing asbestos litigation such as Federal-Mogul Corp.

The extent of potential Republican opposition is reflected in the Senate Judiciary Committee. Last July, seven of the 10 Republican members cited "serious reservations," even after they had agreed to send the measure to the full Senate.

Medical Criteria Questioned

Among those seven, John Cornyn of Texas and Jon Kyl of Arizona said they are concerned the medical criteria for determining eligibility might be too lax, compensating some without serious illnesses caused by asbestos. They also questioned whether the fund would run out of money.

The Congressional Budget Office projected $140 billion may be inadequate and the fund would have to borrow $8 billion in the first 10 years of operations to meet its obligations.

The budget office, a non-partisan arm of Congress, estimates that the fund would receive claims totaling $120 billion to $150 billion over 50 years. At most the fund would collect $140 billion from corporate contributors, the budget office said in a Dec. 19 analysis.

"Some people are going to be surprised in what they find," Cornyn said. He said he wants to see the measure amended and wouldn't rule out some Republicans joining a Democratic-led filibuster to kill the fund. Filibusters are a parliamentary tactic allowing unlimited debate.

Cost Issues

Specter said he is trying to resolve issues over the fund's potential costs with Senator Judd Gregg, the New Hampshire Republican who heads the Budget Committee. Gregg hasn't said whether he would raise the objections himself.

"The chairman is currently reviewing his options," said Gregg's spokeswoman, Betsy Holahan.

Liberty Mutual Group Inc., a Boston-based insurer that opposes the bill, employs more than 1,400 people at a data processing center in Portsmouth, New Hampshire.

Gregg and North Dakota Senator Kent Conrad, the Budget Committee's ranking Democrat, said in a Nov. 14 letter to Frist that there are "major unresolved questions about the budgetary impact of the bill." They urged the Senate to defer action until the questions are resolved.

These include how much money the trust would have to borrow from the U.S. government to begin operation and pay the most urgent claims while it is assessing contributions from companies.

Budget Committee staffers estimate that the fund could come up $150 billion short over its 50-year life, Conrad said in a Jan. 27 interview.

"I am concerned about this bill being badly under water financially," Conrad said. "This thing doesn't add up by a big margin."