Asbestos kills: and more than just people: jobs, ethics, and elementary justice.

IT'S become a familiar scenario across the U.S.: A jovial air pervades this parking lot adjacent to a union hall that belies the serious purpose that has brought together a group of middle-aged men. For much of the afternoon they've been sipping coffee and waiting their turn to enter the trailer parked at one end of the parking lot. The trailer contains X-ray equipment, and they're about to have their lungs checked for asbestos-related diseases. They're here in response to postcards saying things like, "You Might Have Million Dollar Lungs!"

They know they're entering a lottery, one in which a tiny few may find they have cancer but many more will find themselves perfectly healthy yet entitled to receive checks from 20 or 30 different companies totaling as much as $60,000--of course, that's after their lawyers have deducted their 40 percent cut.

For decades, scenes like this have been played out in the parking lots of hundreds of union halls, motels, and strip malls across America. For most Americans, asbestos litigation, like asbestos itself, is now a dimly remembered artifact of an earlier age. But despite 30 years of sweeping efforts to remove every trace of asbestos from American life, more than 100,000 new claims of asbestos-related diseases were filed in 2003--the most ever in a single year. While there was a sharp fall-off in nonmalignant claims filed in 2004, many experts anticipate that hundreds of thousands of additional claims will yet be brought, joining the 850,000 that have already come forward.

GONE BUT NOT FORGOTTEN

After years of asbestos-removal programs, prominent medical researchers Kevin Browne, Edward A. Gaensler, and Andrew Churg have called asbestosis a "disappearing disease," and a condition that is "exceedingly rare." So how is it that thousands and thousands of claims continue to be filed? This is a question the new Congress is likely to be asking, because of the increased power of Republican critics of trial lawyers. Asbestos could become the poster child for tort reform. As one leading medical expert on asbestos-related diseases, Dr. James Crapo, has said, claimants are being compensated "for illnesses that, according to the clear weight of medical evidence, either are not caused by asbestos or do not result in a significant impairment--i.e., are not generally regarded by the medical profession as an illness."

Yet asbestos lawyers continue their vigorous pursuit of potential claimants--not just through labor unions, but also through radio and TV ads and the Internet. So far, employers and their insurers have paid out over $70 billion--with more than half of that sum going to those who have either no injury or no proof that asbestos caused their injury. (That, of course, leaves far less to be paid to those who are truly suffering as a result of terrible asbestos-related injuries.) An additional $150 billion is likely to be required before the asbestos gods have been satiated. So far, some 8,400 companies have been sued; more than 70 have filed for bankruptcy; as a result of this financial drain, an estimated 500,000 jobs have been eliminated or not created.

For a millennium, asbestos was "the magic mineral" because of its resistance to heat. In World War II, it was declared a "strategic and critical material" because of its value as insulation. After 9/11, experts said the World Trade Center would have burned more slowly, perhaps permitting more people to survive, had its asbestos insulation not been removed. And the O-rings in the doomed Challenger spacecraft would not have failed had they continued to contain asbestos.

But exposure to asbestos can cause cancer or asbestosis, a scarring of lung tissue. Between 1960 and 2003, some 75,000 people died of mesothelioma (tumors of the lung), and another 35,000 are likely to succumb before 2050. Knowledge of the hazards of asbestos dates back a century, and documents from the 1930s and 1940s revealed that two leading asbestos manufacturers had conspired to conceal the serious health threat posed to their workers. During World War II, naval officials ignored the consequences to 4.5 million shipyard workers--a cover-up that reached the highest levels of government. In the 1960s, Dr. Irving Selikoff of the Mount Sinai School of Medicine published research showing alarming rates of lung cancer and asbestosis among insulation workers, and a series of New Yorker articles by Paul Brodeur in the early 1970s helped focus public attention on asbestos. As awareness of the dangers grew, there was a sweeping campaign to remove asbestos wherever it had been used. Meanwhile, the growing awareness of the risks--and the cover-up--led to a spate of lawsuits, beginning in 1973 when the Fifth Circuit Court of Appeals allowed workers injured by exposure to asbestos to file a product-liability suit (in which juries determine the size of the award) rather than a workers'-compensation case (in which claims are paid according to a formula).

Much of the initial litigation targeted the Johns Manville Corporation, which had long been the nation's principal miner and fabricator of materials containing asbestos. In 1982, after some 16,000 suits were filed, Manville declared bankruptcy. It emerged from bankruptcy in 1988 under an innovative plan in which almost $2 billion of cash and most of the company's stock were transferred to the Manville Personal Injury Trust, and all asbestos claims were to be directed to the Trust. Claimants who submitted only minimal proof of exposure to a Manville product and asserted that they had an asbestos-related medical condition were paid according to a schedule of benefits. This set off a feeding frenzy: The Manville Trust quickly became insolvent after distributing nearly $680 million, including approximately $266 million to plaintiffs' lawyers. After this second Manville bankruptcy, lawyers turned their attention to smaller asbestos producers and to construction firms that used asbestos products.

Several critical legal principles fanned the flames of litigation. The principle of joint and several liability meant that a worker could sue several dozen companies, and any one of them could end up being held responsible for 100 percent of the claim, no matter how minor its involvement. Another key principle involved insurance coverage. Asbestos-related diseases take years to manifest themselves, so which liability insurers should pay the claims? Should it be the insurers at the time when the worker was exposed? Or the insurers when the disease was found? Or the insurers in the intervening 15 to 40 years, when initial exposures were slowly injuring a worker's lungs? In 1988, a court held that all three sets of insurers would be liable.

Originally, most asbestos litigation involved seriously injured claimants--those stricken with mesothelioma, asbestosis, or lung cancer. But since the Manville Trust and insurance companies were paying claims without demanding much in the way of proof, plaintiffs' lawyers began to seek compensation based on decidedly modest evidence of injuries and product exposure. For example, they obtained statements from doctors that an individual's lung conditions were "consistent with asbestosis"--even though anything from old age and obesity to smoking can account for the same lung condition.

READING THE B-READERS

The asbestos lawyers have created an entrepreneurial model to seek out potential claimants and send them to screening enterprises. The X-rays taken by the screeners are then sent for analysis to "B-readers," specialized radiologists retained by plaintiffs' lawyers. The comparative handful of B-readers regularly selected by plaintiffs' lawyers consistently diagnose 60 to 80 percent of those screened with mild asbestosis. But in a Johns Hopkins study, approximately 500 X-rays in which plaintiffs' lawyers' Breaders had found signs of asbestosis were reread by other radiologists who did not know who was hiring them. These B-readers found that, at most, 4.5 percent of the X-rays indicated lung conditions consistent with mild asbestosis. Only about 5 percent of potential B-readers are used by plaintiffs' lawyers, and they have earned substantial fees for their services.

They also seem to have made convenient shifts in their diagnoses. Until the mid-1990s, most asbestos claimants were diagnosed as having "pleural plaques," which are deposits of collagen fibers on the lining of the lungs. This typically produces no symptoms and does not increase the likelihood of contracting an asbestos-related disease, so many states do not allow suits based on pleural plaques. (In states that do allow such suits, however, juries have awarded damages as high as $1 million.) After a putative mega-settlement of asbestos issues proposed in 1993 placed no value on future pleural-plaques claims, the doctors hired by plaintiffs' lawyers almost immediately stopped diagnosing the newly screened as having pleural plaques; instead they found mild asbestosis.

In another very suggestive shift, on several occasions in which companies were entering bankruptcy, and their ability to pay claims dwindling, a number of witnesses suddenly recalled that the products they had handled were from companies that had not filed for bankruptcy. For example, in a deposition taken in October 1981, when Johns Manville was the premier target for plaintiffs' attorneys, one long-time New York Shipyard employee estimated that Johns Manville had supplied between 75 and 80 percent of the products containing asbestos. But when another witness was deposed in December 1982--several months after the Manville bankruptcy--that figure had shrunk to 25 percent and other companies were implicated instead.

"PRE-PACKED"--AND STACKED

Faced with this movable feast of claims, some 70 companies have followed Johns Manville into bankruptcy, with more to come. Many follow the Manville model and transfer assets to a trust which is to pay future claims. Thus, claimants need a viable company to emerge from bankruptcy and generate revenues for the trust. To help facilitate this, Congress in 1994 created statutory authority to channel all asbestos claims to these trusts, not to the companies. But one of the provisions of the legislation increased the proportion of tort claimants who had to agree before the "channeling" function of the trust could become effective. This created perverse incentives for lawyers to recruit more claimants--regardless of the merits of their claims--because that gave the lawyers more leverage over the bankruptcy process (not to mention additional legal fees).

Recently, companies facing insolvency because of asbestos claims have turned to "pre-packaged" bankruptcies in which attorneys for the asbestos claimants and the company agree on a plan of reorganization and then present it to the bankruptcy court for approval. In other settings, "pre-packs" can minimize litigation costs, expedite claims payments, and give the company a better chance of surviving. In an asbestos pre-pack, the company typically negotiates an agreement in which it settles a large number of pending asbestos cases for highly inflated values--to be paid by its insurance company--and in return, the plaintiffs' lawyers let the company retain a substantial portion of its assets when it emerges from bankruptcy.

Claimants whose lawyers are part of the pre-pack negotiations often receive highly favorable treatment in pre-packs. In December, the Third Circuit Court of Appeals turned down the proposed settlement in the Combustion Engineering bankruptcy, in which a pool of unimpaired claimants was supposed to get 95 cents out of every dollar they would have received in a pre-bankruptcy payment--while real cancer victims would get what was left: about 20 cents for every dollar of a pre-bankruptcy settlement. Moreover, the lawyer for the claimants was to get a $20 million fee from the company for putting together this deal. After lower courts approved this plan, 291 cancer victims appealed to the Third Circuit, which found that it did not meet the standards of fair treatment for all creditors required in a bankruptcy proceeding. Most judges, however, have been content to approve whatever is negotiated in a pre-pack.

There is little doubt that after 30 years of lawsuits, the biggest beneficiary of the asbestos mess has been the plaintiffs' bar--to the tune of $20 billion in fees so far, and counting. This has come at the expense of those who are seriously ill, as well as companies that had only a peripheral involvement in the asbestos industry. The process is also burdening the property and casualty insurance industry. The 205-year-old Providence Washington Insurance Co., once the third-oldest insurer in the U.S., succumbed to asbestos liability, as has the Kemper Insurance Co. No skin off your back? Insurers recoup their losses by raising their rates. Higher insurance costs will inevitably be reflected in higher product prices.

There have recently been some signs that the plaintiffs' bar has gone a step too far. The Ohio legislature passed a law limiting asbestos claims to persons who can demonstrate actual illness. Courts in Mississippi have demanded more rigorous proof of injury in asbestos cases. And the conflicts of interest of several advisers retained by one judge in several asbestos bankruptcies led the Third Circuit Court of Appeals to the highly unusual step of removing that judge from presiding over these bankruptcies. After resigning from the bench in response, that judge went to work for one of those advisers.

A CHANCE FOR FAIRNESS

Over the years, parties to the litigation have entered into periodic and always unsuccessful negotiations to settle the whole asbestos issue once and for all. Intermittent congressional efforts have been equally inconclusive. Last year, for example, the proposed Fairness in Asbestos Injury Resolution Act (FAIR) would have set up a $140 billion industry-funded trust fund to pay off all asbestos claims, including those of the non-sick, and put an end to further litigation. But trial lawyers and labor unions decided it wasn't enough and blocked the measure.

The November elections have not only brought additional advocates of tort reform to Congress; one key supporter of asbestos trial lawyers--Senate minority leader Tom Daschle--lost his Senate seat. After years of stasis in Washington, some believe the moment has arrived for congressional action. But given the political power of trial lawyers in Washington, many critics of the asbestos mess believe that other branches of government have a role to play in curbing this malignant enterprise. First of all, judges must be judges; they must put more emphasis on examining claims, making sure awards go to those who are truly injured--thus seeking fairness rather than simply seeking to clear their dockets.

In addition, law-enforcement agencies should be involved. There is abundant evidence that tens of thousands of claims may be based on bogus medical evidence. It is time for prosecutors to mount investigations of such issues as the practices of the screening enterprises, the B-readers who consistently misread X-rays, and the lawyers who prepare witnesses to testify falsely about their contact with asbestos products.

Until some branch of government takes action, the nation will continue to confront the perverse and expensive paradox of proliferating asbestos lawsuits amid a sharp decline in nonmalignant asbestos-related diseases. There are still some 5,000 people per year who will become seriously ill from asbestos exposure, and most of them will die as a result. They deserve substantial compensation. But just as asbestos has been removed from buildings around the country, the bulk of asbestos litigation should be removed from the legal system. The litigation spawned by a carcinogenic substance has itself become a malignant enterprise.

Mr. Brickman is a professor of law at the Cardozo School of Law at Yeshiva University. Mr. Shapiro is a financial writer and consultant in New York City.