Asbestos Payments per Resolved Claim Increased 75% in the Past Year—Is This Increase as Dramatic as it Sounds? Snapshot of Recent Trends in Asbestos Litigation: 2012 Update

Wed Aug 01 16:24:00 EDT 2012
By Mary Elizabeth C. Stern and Lucy P. Allen

In their annual review of recent trends in filings and settlements in asbestos litigation, NERA Vice President Mary Elizabeth C. Stern and Senior Vice President Lucy P. Allen use publicly available data to analyze trends in asbestos-related liabilities for more than 150 companies.

The authors find that, from 2010 to 2011, average payments per resolved claim increased 75%. Although this increase in dollars per resolved claim may at first appear to be a dramatic adverse event for defendants, the report shows that further review of the underlying data suggests that this increase in payments per claim is not due to a significant upward trend in asbestos liabilities. Instead, the authors find that this increase can be explained by a change in the claim disease mix.

In particular, the increase in average settlements per resolved claim appears to be consistent with a reduction in the number of non-malignant claims resolved rather than upward pressure in individual settlement values. The authors find that, on average, resolved claims dropped and dismissal rates continued to decline -- both effects consistent with a decrease in the number of non-malignant claims being resolved, as backlogs are cleared out and new filings hold constant.

According to the report, overall the litigation appears relatively stable for defendants -- total indemnity payments exhibited only a small increase this past year; filings have continued on the plateau reached in 2007, at only 20% of 2001 levels. However, the picture may be different for insurers who have exposure across many different companies, as a number of insurers increased reserves over the past year.