Asbestos compensation funds falling short

by Peter Mac

It is becoming increasingly obvious that the funds set aside by 
James Hardie Industries will not be enough to meet compensation 
claims by victims of asbestos-related diseases. Rather than 
taking action to meet the likely shortfall, Hardie is ducking its 
responsibilities and insurance companies are looking to the NSW 
State Government to curb victim's rights.

In 2001 the company set up an organisation called the Medical 
Research and Compensation Foundation to handle funds required as 
a result of court action taken by victims of asbestos-related 
diseases. The company vested some $90 million in cash with the 
Foundation, as well as property worth some $210 million, which 
Hardie immediately leased back for its own purposes. The 
foundation estimates that it would have some $250 million 
available to meet compensation claims.

At the time, unions covering the company's employees stated that 
the sums held by the foundation would be inadequate to meet the 
likely extent of compensation claims against the company.

And now, lo and behold, the Foundation has said that its funding 
"might be insufficient to meet all future asbestos claims"! James 
Hardie claims that all liability for providing compensation now 
rests with the foundation only. In short, if the foundation's 
funds are inadequate, well that's tough.

Hardie's chief executive, Peter McDonald, claimed recently that: 
"There was no parent company liability before the establishment 
of the foundation, (and) there is no basis for legal action by 
the foundation against the former parent or any related entity".

The average amount of compensation awarded for cases to date is 
$250,000. Assuming that the inflation rate over the next 20 years 
is equivalent to the increase in the value of assets held by the 
foundation, only another 1000 claimants could be compensated at 
the current rate before all the Foundation's funds were 
exhausted.

And the grim reality is that there will be far more than this 
number of cases over the next 20 years.

The principal disease arising from asbestos contamination is 
mesothelioma. Because of the long delay that usually takes place 
before the disease manifests itself, the number of cases is not 
expected to peak for another 10-20 years. The number of cases of 
this disease has already risen from 16 to 685 in the period 
between 1980 and 2001.

Moreover, many of the cases brought to court to date have 
involved Hardie's former employees and tradespeople who worked 
with or near asbestos products. It is now expected that over the 
next few years there will be a surge in claims by "the 
bystanders", i.e. people who became contaminated by activities 
such as home renovation, and by cleaning the work clothes of 
Hardie's employees. Future claimants will also include victims of 
other related diseases such as asbestosis.

The Foundation's chairman Sir Llew Edwards has admitted that the 
shortfall is likely to be in the order of $800 million, and that 
all the funds allocated to the Foundation will be largely 
depleted within the next five years.

The NSW State Government is being pressured by insurance 
companies and by various business interests to limit by law the 
amount of compensation payable to the victims in future.

The government may be quite willing to do so, because it also 
faces hefty claims. Amaca, another company set up by Hardie to 
contest compensation claims, has successfully argued in the High 
Court that state government health inspectors knew of the risks 
associated with handling asbestos, but failed to pull the company 
into line — and is therefore liable for some or all of the 
compensation costs.

If the government does succeed in passing legislation to limit 
claims, it will join the company in taking action to avoid its 
responsibility to asbestos victims. It may have a more difficult 
task than Hardie's, which is now, believe it or not, officially 
based in the Netherlands, and claiming that it has no further 
legal liability for compensation.

Regarding the implications of the company's actions, asbestos 
plaintiff lawyer Amando Gardiman commented: "This is outrageous. 
It effectively allows any major corporation with long-tail 
liabilities to hive off those liabilities into an entity that 
lacks the ability to pay, thereby depriving the victims of a 
legal remedy and converting a public liability because those 
victims will be forced to the state government for compensation."

Hardie's' behaviour compares unfavourably with the other major 
producer of asbestos products, CSR, which two years ago more than 
doubled its funding allocation for compensation claims, in line 
with international precedent for the incidence of claims.

The NSW Labour Council is backing a campaign being mounted by the 
Australian Manufacturing Workers' Union, the Electrical Trades 
Union and the Maritime Union of Australia, for James Hardie to 
meet its obligations.