Asbestos Bankruptcy Trust Claims

If you or a loved one was exposed to products made by a company that later went bankrupt, you may still have a valid claim — and you may not be aware that money was set aside for exactly that purpose and is still there. We can work out which trusts your history reaches before you decide anything.

By the 1980s the companies that had mined asbestos or manufactured asbestos products were facing liability of a kind no ordinary defendant faces: claims that would keep arriving for decades. Because the latency between exposure and disease is long — the CDC describes it as usually 20 to 40 years — a company could know with certainty that people not yet ill, and in some cases not yet diagnosed for another thirty years, would eventually have claims against it.

However, ordinary bankruptcy handles known creditors. It handles poorly a class of claimants who cannot be identified because they do not yet know they are injured. Paying present claimants in full would exhaust the estate and leave future claimants nothing.

Accordingly, Congress addressed this with a mechanism specific to asbestos. The reorganizing company funds a trust that assumes its asbestos liabilities and pays present and future claims on consistent terms, while the company itself emerges free of that liability.

The scale is substantial. In its 2011 review the GAO reported that 60 trusts had been established since 1988 holding roughly $37 billion in assets, up from 16 trusts holding $4.2 billion in 2000.

The mechanism sits in 11 U.S.C. § 524(g), and three features matter to a claimant.

The trust assumes the liabilities. The statute contemplates a trust that assumes the asbestos personal injury liabilities of the debtor and is funded in whole or in part by the debtor's securities and by its obligation to make future payments, including dividends. Funding the trust with equity and a future payment stream is what allows it to pay claims arriving decades later.

A channeling injunction redirects the claims. The court issues an injunction enjoining entities from taking legal action to collect or recover on a covered claim against the reorganized company. In practical terms this means you generally cannot sue that company — the claim goes to the trust instead. This is the feature people find most surprising, and it is why the existence of a trust changes the shape of a case.

Claimants must approve it. The statute requires that a separate class of the claimants whose claims will be addressed by the trust votes, by at least 75 percent of those voting, in favor of the plan. The court must also make fairness determinations before the injunction takes effect.

Note that the result is a parallel compensation system: administrative in character, applying published criteria in place of a jury's judgment, and available for companies that are no longer suable in the ordinary way.

Every trust publishes a document — the Trust Distribution Procedures, universally called the TDP — that governs how it evaluates and pays claims. Reading the applicable TDP is the practical starting point for any trust claim, because the trusts differ from one another in every respect that matters.

A TDP typically sets out:

Disease levels. A schedule of compensable conditions, commonly running from non-malignant conditions such as pleural disease and asbestosis, through lung cancer and other cancers, to mesothelioma at the top. Mesothelioma is generally the highest-valued category.

Medical criteria per level. What is required to establish each condition — pathology, imaging findings, pulmonary function results, and in some cases a specified latency interval between first exposure and diagnosis.

Exposure criteria. What must be shown to connect the claimant to that particular company's products: the site, the period, the product, and often a minimum duration of exposure.

Scheduled values. A stated dollar figure for each disease level.

The payment percentage. The fraction of scheduled value actually paid — discussed below.

Keep in mind that because criteria differ between trusts, the same person with the same diagnosis and the same work history may qualify against one trust and not another. That's a feature of the system, and it's worth expecting.

Most trusts offer two routes, and choosing between them is a real decision.

Expedited review applies the schedule. If the claim meets the published medical and exposure criteria for a disease level, it is paid the scheduled value for that level multiplied by the payment percentage. It is faster, more predictable, and requires less development. The trade-off is that it does not account for anything unusual about the individual case — a claimant with exceptional damages receives the same scheduled value as anyone else at that level.

Individual review evaluates the claim on its particular facts, and can produce a higher value where the circumstances justify it — significant lost earnings, a claimant who was young at diagnosis, unusual liability strength. It takes longer, requires more evidence, and may be subject to a cap. It can also produce less than the scheduled value.

Overall, which route serves you better depends on the individual facts, on the trust's own history in applying individual review, and on how the trust claims fit alongside any civil litigation. It's a judgment, and it should be made deliberately.

A trust does not pay the scheduled value. It pays the scheduled value multiplied by a payment percentage, which is generally well below the full scheduled amount.

The reason follows directly from why the trusts exist. A trust must pay present claimants and claimants who will arrive for decades, out of a fixed pool of assets. If it paid full scheduled value to everyone who came first, later claimants — who by then may be the majority — would receive nothing. The payment percentage is the mechanism that spreads a finite fund across an extended and uncertain future.

Two consequences follow. First, a scheduled value is not what a claim pays; the arithmetic has to include the percentage. Second, payment percentages change. Trustees adjust them as claim volumes, asset performance, and future liability estimates change, and adjustments can go in either direction. A percentage quoted in an old article or on a general information site may no longer be current, which is a specific reason to check the trust's own published materials rather than a secondary source.

In addition, percentages vary a great deal between trusts, so a claimant with claims against several trusts will see very different recoveries from each.

Trust claims are documentary. With no hearing and no jury, the file is the case.

Medical evidence. The pathology report establishing the diagnosis, imaging and reports, pulmonary function results where the disease level requires them, and the date of diagnosis. Criteria are specific, so what satisfies one trust's requirements may not satisfy another's.

Exposure evidence. Proof connecting the claimant to that specific company's products, at a specific site, during a specific period. This is the part most claims turn on, and it is reconstructed from Social Security earnings records, union records, military service records, employer records, and co-worker affidavits. The exposure and occupation cluster covers how those histories are built for each setting.

Claimant information. Employment history, dependents, and the documentation the particular trust specifies.

Two practical points. A person exposed over a working life almost never has a claim against only one trust — a career in the trades typically involved many manufacturers' products, so trust claims are usually filed in parallel across several trusts, each with its own criteria and percentage.

Furthermore, trust claims interact with civil litigation in ways that require deliberate handling: filing, timing, and disclosure obligations differ by jurisdiction, and several states legislate on how trust claims and tort suits relate. That interaction is covered in trust claims and tort suits.

A manufacturer's bankruptcy is the thing people most often take as the end of the road. It generally isn't. The liability moved into a trust, and those trusts are still paying.

Working out which of them your history reaches is what we do. There's no cost to that, and no fee unless we win. If you'd rather begin on your own, the useful starting material is the same as for any claim: where you worked, when, and any product or brand names you can still name.

It costs nothing to find out where your family stands.