7 January 1999: Owens Corning, the Toledo, Ohio-based building materials firm, announced that it had reached an agreement to settle 176,000 asbestos claims against the company for a total of US$ 1.2 b…
7 January 1999: Owens Corning, the Toledo, Ohio-based building materials firm, announced that it had reached an agreement to settle 176,000 asbestos claims against the company for a total of US$ 1.2 billion. The settlement would close about 90% of the existing cases against the company and would establish procedures and fixed payments that resolve future claims without litigation for at least 10 years, according to a company press release. The company noted that it had stopped selling asbestos-containing products in 1972. Owens Corning said it intends to pay the bulk of the US$ 1.2 billion in claims in the years 1999 and 2000, and that payments would come from its available cash and credit resources and that its bank lenders had endorsed the plan. In addition, the company noted that future claims beginning in the year 2001 would be subject to an annual cap. The company established the National Settlement Program in response to the increasing costs of mesothelioma settlements and judgments and a 1997 Supreme Court decision that struck down an earlier class action asbestos settlement. Owens Corning intends to increase its asbestos reserves by US$ 1.4 billion in 1998, which would result in an after-tax charge to earnings of US$ 900 million. Payments would be made according to a compensation schedule based on the type and severity of the asbestos-related disease of each claimant and take into account the extent of exposure to Owens Corning“s former products. The future claims would require medical evidence of impairment. The claimants would receive prompt payment of claims and would be entitled to additional compensation should they develop a more severe asbestos-related medical condition. Owens Corning has the option to terminate the settlement programme with any law firm that has an unusually high number of clients who elect not to participate in the programme. If Owens Corning exercises that option, the company could seek resolution in the courts for those particular claims. “By agreeing to pay only those individuals in the future who meet agreed medical impairment criteria, the company expects that, beginning in 2002, the total annual cash outflow related to its asbestos liability will decline to less than US$ 200 million before the benefits of insurance and tax proceeds,” said Glen Hiner, chairman and CEO of Owens Corning. “For more than 25 years, our industry and tens of thousands of people have been stuck in the morass of asbestos litigation. The plaintiffs“ bar must be credited with exceptional vision and responsiveness to their clients by helping us to move the issue from the arena of litigation to the arena of settlement,” Hiner added. The settlement is a private agreement that was solved outside the court system, and therefore does not need approval from any court. Owens Corning was paying, on average, close to US$ 19,000 per case to settle claims. That number decreases to an average of US$ 6,800 per case with this settlement programme. The company said that the settlement programme could be applied to cases pending against its Fibreboard division. Although the cases against Fibreboard were resolved as part of a 1993 class action settlement, the Supreme Court is currently reviewing that settlement to decide if it meets legal requirements. If the Supreme Court strikes down the 1993 settlement, the Fibreboard cases could be settled under the National Settlement Program.