December 16, 1998 During the last two decades,
as thousands of people have learned each year that they were ill or dying
because of exposure to asbestos, manufacturers that sold the versatile but
deadly mineral have given up fighting and settled claim with the notable
exception of Owens Corning, the building products company best known for its
pink fiberglass insulation.
But yesterday, Owens Corning said it was settling 176,000 cases,
nearly 90 percent of those pending, for $1.2 billion. After paying their
lawyers, plaintiffs will pocket an average of $4,600.
The Toledo, Ohio, company said the settlement, with more than 50
law firms, would help it remove investor uncertainty about the nation's
largest maker of building insulation.
The change in policy had no effect on Owens Corning's stock
price, however. It finished at $36.0625 share, unchanged.
Plaintiff lawyers who did not participate in the settlement said
the company faced years of litigation as about 3,000 people a month develop
asbestos-related disease and sue the company, a trend expected to continue
well into the next century even though Owens Corning last sold its Kaylo
pipe insulation in 1972.
Mr. Hiner said that was a fair assessment, but noted that
"in January I brought in a new general counsel and things have
changed."
Maura Abnel, the new general counsel, worked out agreements with
50 law firms to pay claims based on previous awards in each court
jurisdiction and on the record of the law firm in getting money for clients
based on their illness or death. Under the settlement two people with the
same illness from the same work site could get dramatically different
amounts of money if they hired different lawyers.
By 2030, nearly a century after the first asbestos case was
reported in the United States, about 300,000 people will have died because
of asbestos, said Dr. Philip J. Landrigan of Mount Sinai School or Medicine,
a leading authority on asbestos-induced illness.
Owens Corning sold $135 million worth of Kaylo between 1958 and
1972, Glen Hiner, its chief executive, said yesterday, but will spend nearly
$5 billion on claims before the issue becomes history. He said the company
made perhaps 1 percent of asbestos products over the years.
Plaintiff lawyers said that at construction sites Kaylo was a
major cause of deadly dust that caused mesothelioma, an always fatal cancer
caused by exposure to asbestos; lung cancer, and asbestosis, a disease that
impairs the ability of the lungs to bring oxygen to the blood stream and
expel carbon dioxide.
Thomas Hennessey, who for 10 years was the editor of Asbestos
Litigation Reporter, an Andrews Publication newsletter in Wayne, Pa., said
the company's refusal to settle was hurting it with juries.
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"Owens Corning had been notorious for years," he
said, "for maintaining a scorched earth policy, a general refusal to
settle, and consequently it was going to trial more than any other asbestos
company and we were seeing trial after trial go against the company and they
would appeal those verdicts."
Mr. Hiner said that was a fair assessment, but noted that
"in January I brought in a new general counsel and things have
changed."
Maura Abnel, the new general counsel, worked out agreements with
50 law firms to pay claims based on previous awards in each court
jurisdiction and on the record of the law firm in getting money for clients
based on their illness or death. Under the settlement two people with the
same illness from the same work site could get dramatically different
amounts of money if they hired different lawyers.
Perry Weitz of Weitz & Luxenberg, a Manhattan personal
injury law firm with 10,000 asbestos cases, said he was the first lawyer
Owens Corning approached about a national settlement.
"It is really important to emphasize that this will get the
victims money much sooner, rather than later, and we will use money that
would have gone to litigation to benefit clients," Mr. Weitz said.
"Owens Corning now knows what it will owe and the company can now
grow."
Several plaintiff lawyers who are not participating in the
settlement said that the company made no effort to settle the strongest
cases involving death from mesothelioma.
"This settlement creates tremendous
breathing room for them and is a tremendous accomplishment and is good for
them," said Shepard A. Hoffman, a Baltimore lawyer who has 30 cases of
people who died from or are dying from mesothelioma. "But it comes at a
cost because people who settle will do so at a discount while their lawyers
will be assured payment, and if you are a plaintiff lawyer looking at
getting, say, $50 million with no more risk it can be very attractive."
The settlement, Mr. Hiner said, "dramatically reduces the
high cost of legal defense and the risk of excessive verdicts against Owens
Corning, makes more predictable the costs of our asbestos liability going
forward, and enables the company to focus on capital-efficient growth."
The company will issue new debt and a form of equity to finance
two-thirds of the settlement and will generate the other third from cash
flow, Domenico Cecere, chief financial officer, said.
Mr. Hiner said that the company's average cost per case had been
running about $13,000, but jumped last year to $19,000.
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