Asbestos recompense from U.S. court

Canadian claimants capture bulk of award
Thursday, January 19, 2012
By Don Pinchin

The presence of asbestos-containing materials (ACM), particularly friable ACM, affects the cost of ongoing maintenance, future renovations and, ultimately, the value of a building.

In the U.S., many owners have successfully sued the manufacturers of ACM to recover this financial loss but Canada’s different liability laws and shorter time limits on liability mean owners here have frequently been unable to pursue this remedy.

A mid-1990s case in Vancouver is noted for a protracted trial and a resulting comprehensive win for the manufacturer of sprayed ACM that effectively ended litigation for asbestos property damage in Canada. However, some Canadian property owners whose buildings contain the Limpet brand sprayed-ACM fireproofing have partially recovered their costs as part of a successful claim in the U.S. bankruptcy court.

This fireproofing material, which is made of either amosite or crocidolite asbestos, was applied widely in Canada. In the early 2000s, several manufacturers, including Federal Mogul, W.R. Grace & Co. and U.S. Gypsum Co., among others, filed for bankruptcy protection to settle their asbestos liability, thus, requiring the firms to seek settlements with primary classes of claimants.

Property owners whose buildings contained products manufactured by these companies were classified as property damage claimants. They were invited to submit claims to the bankruptcy court to participate in settlement negotiations. But, realistically, the time and cost involved to chase somewhat unpredictable results meant few building owners could justify undertaking the process on their own.

A Canadian environmental consulting firm served as a coordinator to organize prospective claimants in this country and procure representation from a U.S.-based legal firm with extensive experience in asbestos litigation. Together, the two firms took on the work of submitting, documenting, quantifying, negotiating and defending the cases on a contingency basis.

Interestingly, many qualifying claimants, including the federal and some provincial governments, declined to participate in the action. In the end, 38 Canadian clients with approximately 100 eligible buildings joined, representing a small percentage of the total of 3,741 international and U.S. claims, and submitted to the court.

Lengthy legal manoeuvres
Due to the timeframe for claims to be submitted to the Wilmington, Del., bankruptcy court and the need to collect the information for the claims, there was a rush in early 2003 to contact the affected owners, document the presence of Limpet and attempt to quantify the affected area. More than three years of legal wrangling followed as lawyers representing the bodily injury claimants – including a large number of unimpaired claimants who had no disease symptoms but claimed to have a fear of becoming ill in the future – promoted the interests of their clients.

The bodily injury group actually succeeded in having the original judge replaced on the trial and attempted to totally eliminate the property damage claims. It managed to reduce the size of the possible property damage settlement so most of the available funds would be allocated to the bodily injury class.

In February 2007, the legal representative for property damage claimants negotiated a settlement with Federal Mogul attorneys for approximately $36.2 million US, which, at the time, translated into a considerably higher Canadian dollar amount. By this time, the number of individual building claims remaining in the action had been reduced to 230 plus a certified South Carolina class (the Andersonville Memorial Hospital Class).

However, delays are somewhat inherent to the U.S. legal system and, in this case, various hearings, appeals and actions halted progress until mid-2009. Then, legal representatives were ordered to circulate one last series of advertisements in South Carolina to ensure all possible participants in the Andersonville Memorial Hospital Class were appropriately notified.

This elicited several hundred more claimants and, after careful assessment by the court appointed claims administrator, one of these claims has been allowed. The final report of the property damage claims administrator was submitted to the court on Oct. 31, 2011, and is expected to be approved later this fall.

Payout pending
That final report contains very good news for the Canadian claimants. Of the total of $36.2 million US settlement, more than $25.2 million US or about 70 per cent will be directed to Canadian claimants.

This ratio is somewhat unprecedented in awards from U.S. courts in this type of action and reflects the thoroughness of the claims and the quantity of Limpet in Canada. Of the original 106 Canadian building claims from 38 claimants, 93 have been approved. The unsuccessful claimants did not have Limpet or could not prove that they once had Limpet.

The Canadian awards range from $14,000 to $3.2 million per individual building.

Yet, this settlement is likely to be the last successful attempt to obtain compensation through the U.S. court system. Most manufacturers of ACM have now settled their claims or are bankrupt.

Don Pinchin is president of Pinchin Environmental Ltd. Pinchin coordinated the asbestos claim effort on behalf of Canadian clients.

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