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Asbestos Lawsuits: Liability of Parent and Subsidiary Companies

Michigan legislation currently under consideration would allow any company that merged with another prior to the 1972 regulations, and as a result became mired in legal liability over asbestos production, to treat the acquired company as a separate subsidiary. Lawsuits would then be capped at the total value of the subsidiary company, rather than the value of the parent company.

bill.jpgHouse Bill 4601, from the state of Michigan, is a reintroduction of legislation introduced in the 2007-2008 (SB 591) and 2009-2010 (HB 5167) legislative sessions and would address the situation one successor corporation has experienced since acquiring a company that at one time made, sold, and installed asbestos insulation. The bill would limit the liability of a successor corporation that acquired or merged – before 1972 – with a predecessor corporation that had engaged in asbestos-related activities.

Currently, under the rule of successor liability, a successor corporation (one that acquires or merges with another) can be held liable for any civil actions filed against the business acquired (predecessor corporation), up to the total value of the successor corporation, even if it did nothing to create the liability or the liability had been created before the merger or acquisition.

CCS logo.gifOne company who would benefit from such legislation would be Pennsylvania-based Crown Cork and Seal. Crown did not manufacture any products that contained asbestos. They did acquire another company in 1963, Mundet Cork, which did manufacture products containing asbestos. Mundet Cork’s products that contained asbestos include the following;

  • Mundet Mineral Wool Finishing Cement
  • Mundet Mineral Wool Insulating Cement
  • Mundet Cork 85% Magnesia Asbestos Insulation
  • Mundet Block Insulation
  • Mundet Pipe Covering

This company DID install asbestos and was liable to pay a significant number of claims related to asbestos exposure – unless they convinced state lawmakers around the country to pick up the tab. Crown has paid out more than $700 million in asbestos claims and seen its bond rating reduced to junk status. The company that in 1998 employed 12,000 nationwide now has just 4,000 workers remaining.

Backers of the bill pointed to Halliburton, the energy company famously run by Dick Cheney before he became vice president, to make their case. In the 1990s, Halliburton acquired a company subject to lawsuits as a result of asbestos claims, but Halliburton kept its acquisition — Dresser Industries — as a separate subsidiary, ensuring that when Dresser went into bankruptcy, it didn’t affect its parent company’s books. The only people to actually speak in favor of this bill in the House Judiciary Committee were the company’s General Counsel and Rep. Joe Haveman (R-Holland), who sponsored the bill and said it shows that Michigan is “open for business.”

The bill was not voted on in the House Judiciary Committee and it is probable that the Committee Chair will hear more testimony in the weeks to come.

Similar legislation has passed in 15 other states.

What does this type of legislation mean to asbestos victims? Significantly less funds available to compensate those stricken with Mesothelioma, Asbestos related Lung Cancer and other asbestos related diseases. The is a limited about of funds available to compensate the numerous victims of asbestos exposure. Taking away or reducing the responsibility of a parent company reduces the drastically diminishing pool of funds available. In the case of Bill 4601, not only does it create a special exemption for one company, but it would force individuals (in this case, Michigan residents) suffering from asbestos poisoning who don’t have sufficient means or insurance into the state’s worker compensation system, Medicaid or Medicare, forcing Michigan taxpayers to assume all the risks for one out-of-state corporation failing to do sufficient research before approving a merger.

Asbestos victims are speaking out. The International Association of Heat and Frost Insulators made a public appeal for justice in a press release by President James E. Grogan dated November 30, 2011 declaring their opposition to the bill. The question remains…Can their voices be heard over the cacophony created by big business, insurance companies and the like trying only to protect their own interests?

medical reference books.jpgREFERENCES:

LEGISLATURE: Bill Introduced

LEGISLATURE: Bill Analysis

For additional information on Liability Issues see also: Product Liability in Asbestos Cases