GAO Report shines light on secretive asbestos trusts

The Government Accountability Office has released a new report analyzing asbestos injury trusts, shining some light on a multi-billion-dollar system of plaintiff claims and payouts that operates largely in secret.

The report, Asbestos Injury Compensation: The Role and Administration of Asbestos Trusts, reviewed 52 asbestos-related bankruptcy trusts that "have paid about 3.3 million claims valued at about $17.5 billion."

The GAO found that while the majority of the trusts made general data available, very few provide detailed information about their activities without being directed to by a court of law: "Most asbestos trusts we reviewed publish for public review annual financial reports and generally include total number of claims received and paid.  Other information in the possession of a trust, such as an individual's exposure to asbestos, is generally not available to outside parties but may be obtained, for example, in the course of litigation pursuant to a court-ordered subpoena."

In fact, the report found that only "one trust's financial report contained claimant names and amounts paid to these individuals."

Forbes reporter Daniel Fisher, in a review of the GAO findings, wrote that the report "gives fuel to critics who say the plaintiff lawyers who largely oversee the operation of these trusts prevent them from sharing information about how much their clients have been paid. That allows some plaintiffs to hit up multiple trusts with claims that may contradict each other."

The month-old report was given to the House Judiciary Committee on September 23, at the request of Texas Republican Lamar Smith, the committee chairman, and is now being released to the public following a 30-day hold.

Accompanying the release of the report was a statement from Lisa Rickard, president of the U.S. Chamber Institute for Legal Reform. Rickard said, "It is becoming clear that rather than acting to prevent abusive claims, the asbestos trusts are effectively encouraging fraud by inhibiting claims information sharing between the trusts and the tort system. We hope that Congress's growing attention to this important issue will ensure that the trusts operate in a manner fair to asbestos victims and job-creating businesses, not plaintiffs' lawyers and fraudulent claimants."

Fisher's analysis of the report pinpoints several findings of processes in the current trust system that could result in fraudulent claims:

The GAO report said 98% of trust claims go through "expedited review" process that requires only a claim form with "documented evidence" of exposure such as work history, invoices, or deposition  testimony of plaintiff or coworkers plus a medical report. Prior investigations have shown how a tiny number of physicians have submitted tens of thousands of diagnoses of asbestos-related disease, many of them subsequently found to be incorrect.

One solution would be to require the trusts to share basic claims information in a central database. But the GAO said 65% of trusts reviewed treated claims information as confidential under rules that consider information submitted as part of a legal settlement process as privileged. Defendants and insurers say the trusts should be treated as non-adversarial settlement vehicles. They frequently seek information about claims paid so they can set off any court award by the amount the plaintiff has already obtained elsewhere.

The report itself does not claim to have documented any regular occurrences of fraud, however, and includes review of the trust distribution procedures (TDP) that each trust has in place: "Although the possibility exists that a claimant could file the same medical evidence and altered work histories with different trusts, each trust's focus is to ensure that each claim meets the criteria defined in its TDP, meaning the claimant has met the requisite medical and exposure histories to the satisfaction of the trustees. Of the trust officials that we interviewed that conducted audits, none indicated that these audits had identified cases of fraud."