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Mesothelioma claims and insolvent companies: What if a company responsible for your injuries files bankruptcy?

More than 45,000 people died of malignant mesothelioma from 1999 to 2015, a federal report recently found. Most of these deaths involve occupational asbestos exposure to people working in industries such as manufacturing, construction, mining and shipbuilding.

Manufacturers, suppliers, and even sometimes employers bear a great deal of responsibility for exposing workers to deadly asbestos. After all, the risks of asbestos exposure are so great even workers' families can be exposed just by washing a loved one's clothing.

But how do you hold these companies, or maybe your family member's employer, accountable when a company files bankruptcy?

Trust funds for asbestos exposure damages

The short answer is that you aren't out of luck just because a company files bankruptcy. In the asbestos area, often times the company that files for bankruptcy continues operating and employing its workforce.

(For a non-asbestos example, think of how Delta Air Lines filed bankruptcy and yet the airline never ceased its daily operations.)

When a company with asbestos liabilities files bankruptcy, usually it too continues operating; it's just that some of the assets of the bankrupt entity are transferred to a trust fund specially set aside to compensate asbestos victims. In fact, at least 60 trust funds have been set up in this manner to pay for asbestos-related damages.

How does the compensation procedure work?

These trust funds are there so that a company can't just declare bankruptcy to get out of paying compensation to people for present or future mesothelioma claims. Instead, the trust funds provide a compensation procedure for those claims.

The compensation procedure can be complicated and usually involves both medical and product exposure requirements. Even if those requirements are satisfied, the compensation through the trust fund is still just a fraction of what it might otherwise been. It can still be meaningful and worthwhile compensation however, especially when the compensation from each trust fund is added together.

This procedure, where a company who files bankruptcy has a trust fund set up, is important because it generally takes 20-50 years for symptoms of disease to develop asbestos exposure. Over that span of time, a lot can happen to a company. But when there's a trust fund, even if a company files bankruptcy, a pot of money may be set aside to compensate people injured by the company's use of dangerous asbestos.

Johns-Manville set the precedent

The precedent for companies to establish trust funds to compensate asbestos victims was set by Johns-Manville Corporation in the 1980s.

Throughout the 1970s, the large manufacturing company Johns-Manville was named as the defendant in multiple lawsuits for asbestos damage. The company filed for Chapter 11 bankruptcy in 1982 and hired the champion golfer Jack Nicklaus to serve as a pitchman in TV commercials seeking to shape a positive public image.

As part of its bankruptcy proceedings, Manville also put $2.5 billion into a trust fund to compensate people injured by the company's use of asbestos in its products.

Current status of the funds

In the past 35 years, numerous large manufacturers have followed Manville's example, using federal bankruptcy laws to get out from under asbestos claims. Fortunately bankruptcy courts do not ignore the rights of asbestos victims, and the result is that about 60 trust funds have now been created to pay asbestos claims.

Most of the trust funds remain active. A few do not. Some are pending and have not been established yet. That is why, at Summers, Rufolo & Rogers, we constantly monitor the status of asbestos trust funds to protect the interests of our clients.

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