Convenient Bankruptcies

Just as the ongoing epidemic of asbestos-caused mortality and injury has been overshadowed by the controversy over litigation, the origins of asbestos lawsuits have been buried beneath claims that litigation has "bankrupted" dozens of large U.S. companies, and that Congress must put an end to asbestos litigation in order to protect more companies from going bankrupt in the future.

But neither the flood of asbestos lawsuits, nor contemporary proposals to end it, should have been necessary at all. The controversy could have been avoided if the very same companies now pressing for "asbestos litigation reform" had acted responsibly and compassionately decades ago, when their highly detailed, proprietary knowledge showed that asbestos posed mortal risks to millions of their workers, and to tens of millions of Americans who came in contact with the deadly substance in their homes, schools and workplaces.

Instead of fair and respectful consideration for their workers and others, asbestos and insurance companies offered only cold, unrelenting resistance. The companies aggressively fought requests for financial or medical aid and support; they callously, and notoriously, hid unambiguous scientific evidence of asbestos exposure, injury and death. Indeed, no meaningful proposals for help of any kind were forthcoming from asbestos industries and their insurers until a handful of people, out of hundreds of thousands whose lives had been destroyed by asbestos illnesses and death, went to court seeking justice because they had no other choice -- and began to win.

Proponents of congressional action to block asbestos lawsuits now argue that this litigation must be stopped because it is "bankrupting" asbestos companies, their insurers, and by some accounts, the entire U.S. economy. Political speeches, and many media accounts, routinely refer to companies that are "bankrupt" as a result of asbestos litigation. As this section explains, "bankruptcy" connotes a degree of business distress that is rarely experienced by companies that have been sued by people with asbestos-related health problems.

Not the Usual Bankruptcy

When most people hear that a company is going bankrupt, they think liquidation of assets, massive layoffs, and shutting down the business. With asbestos bankruptcies this is the very rare exception. Most "bankrupt" asbestos companies, especially the larger corporations typically offered as examples of asbestos-induced economic havoc, remain very competitive within their industries during bankruptcy, and often flourish afterwards.

This is because an asbestos bankruptcy is a reorganization authorized under Chapter 11 of the bankruptcy code, not a liquidation that occurs under Chapter 7. It is a way to stop ongoing and future litigation, consolidate liability, and protect the company and all of its subsidiaries from future liability. While not painless, it is a relatively smooth and equitable way for a company to assist the families of workers and others injured or killed by asbestos.