Toxic Torts

What If the Defendant in My Asbestos Lawsuit Is Bankrupt?

Since a bankrupt company can't be sued, claims against a bankrupt asbestos defendant might at first sound like a dead end.

If you're thinking about making an asbestos-related injury claim, you've probably heard that many asbestos defendants have gone bankrupt. But that doesn't mean you won't be able to recover. The major manufacturers and suppliers of asbestos have established trusts to pay claims against them.

Bankrupt Defendants Are Not Immune to Claims

The asbestos industry became significant to American commerce in the 1930’s, and reached its peak with the construction booms of the 1950's. The "miracle mineral" appeared in everything from insulation and theater curtains to cement and welder’s gloves.

The mining, milling, and supplying of asbestos fibers and the manufacture of very common products such as insulation, gaskets, and fireproofing were largely done by a handful of companies. Consequently, the early days of asbestos lawsuits targeted these same companies over and over, and over the years many of them have filed for bankruptcy because of these claims.

However, the conditions for filing for bankruptcy usually included establishing a trust fund to pay the claims of future asbestos plaintiffs.

Filing a Bankruptcy Claim

Your attorney will help you identify the products you were exposed to and determine which of the bankrupt asbestos companies might have liability for your injury. Generally the trust funds will need to know how long you worked with their products and which of their products you worked with. They will also need medical proof of your asbestos-related disease. If you are claiming economic loss, some funds will also want to see a detailed report on how you arrived at those numbers.

In most instances, this is the same information needed to file claims against still-solvent defendants, so there won’t be additional work needed on your end for this part of the case. However, you will need patience. The trusts receive thousands of claims. This means that it can take years for them to get through the backlog and disburse money to you.

Once the claim has been filed by your attorney and accepted as complete by the trust, there’s generally nothing your attorney can do to get money sooner than the trust will release it. Because the claims process is so lengthy, it’s to your advantage to turn all requested documentation and other evidence over to your attorney as soon as possible.

Settlements Are Relatively Low

The bad news here is that, because there are so many claims against these companies, the trusts assign a monetary value to your claim but pay only a percentage of that. The value of a given case is generally calculated based upon a pre-established combination of work history and disease type (for example, 5 years of exposure and lung cancer compared to 6 months of exposure and asbestosis). Some companies have higher percentages for more serious diseases or more extensive exposure.

There is variability among trusts depending on how much money they have and how many claims exist against them. One trust might value an injury at $10,000 and pay 40%, or $4,000. Another trust with the same level of exposure might value the same claim at $3,000 and pay 20%, or $600. Because the value of your case is established along with many others similar to yours, your attorney will not usually be able to negotiate either a higher value of the case or a higher percentage amount from the trust.

However, if your attorney thinks that you are not receiving a fair settlement from a particular trust -- perhaps because you have more exposure than the trust thinks you do -- your case could go to arbitration. Your attorney will let you know if your case qualifies.

Note: Your attorney’s contingency fee might be lower with regard to claims filed against asbestos trusts. Be sure to ask about this before you sign a fee agreement.

Defendants Who Don’t Have Bankruptcy Trusts

Because so many of the major manufacturers and suppliers of asbestos-containing products have gone into bankruptcy, your civil case will likely be against smaller, more local defendants, such as a construction contractor or a supply house. Occasionally one of them will need to file for bankruptcy as well during the course of your case. The bankruptcy might be related to asbestos claims, or it might be for another reason altogether.

When a company being sued for an asbestos injury files for bankruptcy, it might:

  • set up a bankruptcy trust
  • fold altogether and not try to reorganize, or
  • come back to life in a year or two.
If there is no trust, you will not be able to recover against this defendant unless it becomes solvent again.

There also may be potential defendants in your case who filed for bankruptcy many years ago and have not established any sort of trust. Unfortunately there is no way to recover any settlement money from these parties.

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