AC&S, a Lancaster, Pennsylvania, insulation contracting firm, is now entering the last stage of its five-year Chapter 11 “restructuring” plan. The company collapsed under the weight of over 500,000 asbestos claims back in 2002, which was the beginning of the period during which asbestos litigation reached an all-time high in the U.S. Three hundred thousand of those claims had yet to be paid at the time they filed for bankruptcy.
Under the terms of the bankruptcy, AC&S–a division of the Irex Corporation, a holding company for several construction and contracting firms–will set up a trust fund in order to pay any current remaining and future claims.
The plan calls for half a billion dollars to be used for the resolution of these claims, a little under 10 percent of which will go to the law firm that represented the plaintiffs. This figure resulted from negotiations with the company’s insurer, Travelers Casualty, last September. AC&S and Travelers had been wrangling for several years over the latter’s obligation to cover the cost of asbestos claims. In September 2007, Travelers finally agreed to set aside $449 million, which should earn another $10 million in interest by the time the Chapter 11 plan is approved by a New York court. Plaintiffs were represented by a firm in Washington D.C. that has specialized in litigation against insurance companies that balk at covering damages for client companies that are the target of lawsuits. The bankruptcy judge in the case, Judith Fitzgerald, will approve the AC&S plan once it was been voted on by the company’s creditors.
AC&S provided asbestos-containing insulation materials to the marine industry as well as the U.S. Navy, where it was used for pipe lagging and ship construction. Sadly, naval veterans are greatly over-represented among mesothelioma and asbestosis victims. There has been some speculation that the AC&S bankruptcy–like those of similar companies–was caused in part by lawsuits filed on behalf of plaintiffs who were not truly sick or had no symptoms of asbestos disease. If true, it compounds what is already a tragic and messy situation. While there is no doubt that corporate criminals should be held liable and pay for the injuries caused by their products, the fact is that not everyone who is exposed to asbestos will develop diseases. Is justice really served when settlements are paid to healthy people, thus taking resources away from those who really suffer from disease?