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Litigation time bombs: three mass tort trends to watch.

Enterprising plaintiff lawyers are always looking for the next asbestos case--and who can blame them? A large mass tort case can bankrupt corporate defendants and make millions for plaintiffs' attorneys. Recent examples include not only asbestos, but silicon breast implants, the Dalkon Shield contraceptive and Fen-phen, to name just a few.

Although manufacturers and others in the distribution chain of allegedly harmful products are first on the firing line, it is also the insurance industry, which underwrites the risks and pays the claims, that must be vigilant for potential financial black holes. Of course, correctly assessing the threat--or, more likely, the lack of a threat--may also create profitable opportunities for insurers.

While a variety of concerns could potentially become serious mass tort issues, many insurance and legal experts believe that three particular issues could become the next big thing in mass tort litigation. These three are at different stages of the litigation life cycle: the "worried, but no litigation yet" stage, the nascent pre-trial stage, and the early trial results stage, which allows for a partial assessment of the risks involved.

Nanotechnology

Nanotechnology refers to the use of submicroscopic particles of conventional chemical compounds measuring less than 100 nanometers (or one ten-millionth of a meter) in product design and manufacturing. The most common chemical compounds currently used in nanotechnology engineering are silver, carbon, zinc, silica, titanium and gold. These compounds can be found in thousands of consumer products including cosmetics, shampoos, deodorants and sunscreens, as well as stain-resistant clothing, household appliances, paints, electronics and sporting goods such as bicycles, golf clubs, tennis rackets and ski equipment.

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Many believe that nanotechnology has the power to revolutionize health care, construction and transportation. These advances are sure to benefit all industries, but insurers must be careful to weigh the risks against these possible gains. Uncertainty surrounds nanotechnology because, at the nanoscale, the engineered nanoparticles may have different properties than the same materials do at their normal "bulk" scale. Some scientists question whether chemical compounds not usually considered harmful to humans at the bulk scale may, in fact, carry some risk at the "nano" level.

Specifically, some studies have found that engineered nanoparticles are more easily absorbed through skin and inhaled by humans because their unnaturally small size makes them impervious to some of the human body's normal defense mechanisms. Just because they permeate the body in different ways, however, does not necessarily mean that nanoparticles are harmful. Ultimately, research into this realm is only just beginning.

The possibility that some nanoparticles may be carcinogenic made headlines last year with the results of two studies. The first study (known as the "Poland Study") concluded that certain carbon nanotubes can induce a pathologic response in the cells of mice similar to the initial stages of the development of mesothelioma. (As anyone even tangentially involved in asbestos litigation knows, mesothelioma is a virulent lung cancer almost always associated with asbestos exposure. This strong association and the inevitably fatal nature of the disease made it the signature asbestos claim, usually resulting in large settlements.)

The second study, conducted by the National Institute of Health Sciences in Japan, actually induced mesothelioma tumors in mice exposed to carbon nanotubes. Critics highlighted shortcomings in both studies, however, including the fact that the nanotubes were injected directly into the abdominal cavity of the mice rather than introduced through inhalation, which would more closely simulate the type of exposure humans would be expected to face.

This distinction is critical because earlier studies had shown that mice exposed to carbon nanotubes through an inhaled mist demonstrated no significant adverse effects on their lungs. One of the studies also used a species of mice genetically engineered to be susceptible to cancer. The studies also warned against extrapolating their results to humans by noting that asbestos fibers can remain in the human body for years and may be carried from initial inhalation into the bronchial passages before moving into the lungs and coming to rest in the surrounding tissue. Neither of these possibilities has been established for carbon nanotubes. The studies also involved the injection of large quantities of carbon nanotubes into the mice to generate adverse health effects, and researchers admitted that it was unknown whether humans would ever be exposed to such high doses.

Due to the scientific uncertainties surrounding the assessment of the risk and the practical difficulties of even defining "nanotechnology," most insurers have taken a "wait-and-see" approach to modifying their policies to address nanotechnology concerns.

Insurer Continental Western, however, has announced that all of its future CGL policies will include a nanotechnology exclusion. Rather than opting for an outright exclusion that might leave their policyholders without any coverage, other insurance industry insiders advocate limiting the underwriting exposure through the use of sub-limits or "claims-made" policies. Many insurance industry commentators also point out that some environmental and property damage risks posed by nanotechnology may also be interpreted to fall under applicable pollution exclusions.

Bisphenol-A

Bisphenol-A (BPA) is a synthetic chemical compound often used by consumer product manufacturers in food and drink packaging. In 2008, the litany of harmful health effects allegedly associated with exposure to BPA were widely publicized in the media and became the focus of continued litigation.

Notwithstanding that BPA has been used for more than 50 years in consumer packaging and scientists estimate that measurable amounts of BPA would be found in the urine of 90% of the U.S. population, the current focus for the media, tort lawyers and potential regulators is on the alleged harmful effects stemming from the leaching of BPA into baby bottles, "sippy" cups and formula containers.

The Food and Drug Administration (FDA) previously deemed BPA safe for food and medical products. It reiterated that position in December 2008 despite the fact that, earlier in the year, a panel of independent science advisors criticized the FDA's position as "scientifically flawed." Two well-publicized studies were also published in September 2008, escalating concerns about BPA exposure. A Yale University study concluded that low-level BPA exposure can alter brain function and bring about mood disorders in monkeys.

More noteworthy was a study in the September 17, 2008 issue of the Journal of the American Medical Association. In the first large-scale epidemiological study of the effects of BPA on humans, the study found that people with higher BPA concentrations in their blood than those of the general public were almost three times more likely to have cardiovascular disease and diabetes.

The publicity surrounding BPA has already caused Canada to ban the compound in baby products and, this year, Chicago, Minnesota and Suffolk County, Long Island, followed suit. A similar bill passed the California Senate but was narrowly defeated in the state assembly in August 2008. Proponents plan to reintroduce the bill.

The urgency for government regulation may have abated somewhat, however, as public backlash has prompted many baby bottle makers to voluntarily remove BPA from their products while major retailers have begun refusing to carry products containing BPA.

Still, product liability suits and class actions have been filed in federal and state courts around the country, primarily against major baby bottle manufacturers, including Gerber, Evenflo, Avent, Playtex and Dr. Brown's. A separate class action suit was also filed under California's Consumer Protection Law against Nalge Nunc, the maker of popular Nalgene water bottles, alleging that the company suppressed information about BPA hazards.

Manganese

Since the middle of the century, manufacturers of welding rods have been active defendants in asbestos litigation. Then, beginning in the late 1990s, plaintiff attorneys began filing suits claiming that exposure to manganese in welding fumes can cause a neurological injury that produces damage resembling the symptons of Parkinson's disease.

The plaintiffs have had very limited success in state courts. In 2003, a jury in the notorious "Judicial Hellhole" of Madison County, Illinois, returned the first welding rod verdict for a plaintiff (Elam v. Lincoln Electric Co.). Though the verdict awarded only $1 million, the victory was trumpeted loudly by the plaintiff's bar and alarmed corporate defendants and the insurance industry. But it may have been a false alarm.

It was the first verdict in nine trials and remains the only one at the state court level. In fact, defendants recently scored a victory when they received a verdict in California (Elbert Thomas v. A.O. Smith Corp.), which may be a bell-weather decision for the state. The victory was even more notable in that it took place in Alameda County, another jurisdiction recognized by the American Tort Reform Association as a "Judicial Hellhole" for defendants. Although the jury found that the welding defendants had failed to warn users about the dangers of their products, it also found that the failure was not a substantial factor in causing injury to the plaintiff.

Plaintiffs have had some success at the federal level, however. In June 2003, almost 6,000 federal cases around the country were consolidated as part of a multidistrict litigation before Judge Kathleen O'Malley in Cleveland. The first multidistrict case (Ruth v. Lincoln Electric Co.) settled just prior to trial in September 2005 for $1.625 million. But of the next six cases, plaintiff attorneys dismissed three, and the remaining three that went to trial resulted in defense verdicts.

But just when it looked like multidistrict litigation was proving to be a favorable venue for defendants, plaintiff attorneys rejoiced in December 2007 when a Cleveland jury returned with a verdict of $20.5 million in Tamraz v. Lincoln Electric Co. and then, four months later, a Mississippi jury returned a plaintiffs verdict of $2.9 million in Jowers v. Airgas-Gulf States Inc. Defendants returned to their winning ways, however, with a defense verdict in the Byers v. Lincoln Electric Co. case in November of 2008.

It it tough to say whether this trend will continue or whether manganese-related litigation is something that companies should be seriously concerned with. But much like nanotechnology and BPA, it is at the very least something that all companies must keep on their radar as the next potential class action development.
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Comment:Litigation time bombs: three mass tort trends to watch.
Author:Kavanagh, John
Publication:Risk Management
Geographic Code:1USA
Date:Sep 1, 2009
Words:1675
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