Companies hard put to limit the damage from damage claims

Asbestos, methyl isocyanate, intrauterine devices -- in each case American corporations have found themselves at the receiving end of a barrage of consumer lawsuits aimed at products they have made. And in each case, legal costs have soared and eventual damages could cripple the corporations.

The problem for Manville Corporation, Union Carbide, A. H. Robins Inc., and other companies has been not so much whether their products have been harmful but just how many people have been harmed and how they are to be compensated.

Union Carbide is in the midst of litigation involving the Bhopal, India, disaster. It faces more than 25,000 claims and $15 billion worth of damages (see related story).

Manville, once a leading maker of asbestos products and now under bankruptcy protection, last week announced an offer to settle $2.5 billion in claims from asbestos victims by setting up a trust fund.

Manville's attempt to pay personal-injury claimants this way, says analyst Timothy W. Hurckes of Donaldson, Lufkin & Jenrette, has several things going for it. Claimants will probably find this their best opportunity for settlement, Mr. Hurckes says. Stockholders might ultimately go along, too, he says, even though the Manville proposal would significantly dilute their shares. And Manville bondholders might favor the proposal.

But people seeking compensation for asbestos-related property damage (usually asbestos found in heating ducts or insulation) probably will oppose the deal, Hurckes says. The Manville trust would put up only $50 million for property damage, and there are $69 billion in such claims outstanding.

Value Line analyst Allen K. Bachrach says the Manville case will probably have to go to the US Supreme Court to see if it is legal to set up such a trust fund to shield the main company from future suits.

Like Manville and Union Carbide, A. H.Robins has had thousands of claims filed against it by women who claim medical problems due to the contraceptive product.

Last week, lawyers for some of the plaintiffs filed a motion in federal court both to consolidate claims into a nationwide class-action suit and to find Robins liable for all Dalkon-Shield injury claims. Robins, which has vigorously fought many of the claims, supports consolidation but opposes automatic liability.

The Robins case -- and others like it -- make insurance companies much less willing today to grant liability coverage to pharmaceutical companies, says Rudolph Carryl, who follows drug stocks for Value Line.

You've read  of  free articles. Subscribe to continue.
QR Code to Companies hard put to limit the damage from damage claims
Read this article in
QR Code to Subscription page
Start your subscription today