Johns-Manville Legal Department Presentation to the Board on Asbestos Litigation (1980)

The outline, list of transparencies and 29 pages of charts that G. E. Parker, Johns-Manville's senior vice president for law, and R. B. Von Wald, its corporate counsel, used to brief the board of directors at its meeting at the Old Baldy Club in Saratoga, Wyoming, on July 31, 1980. They reported 493 new asbestos health cases in the first 28 days of July (the outline calls it "staggering"), against monthly averages of 181 in 1980, 146 in 1979 and 65 in 1978, and 3,313 asbestos health cases open at June 30, 1980. J-M's average share of the cost of disposing of a case had risen to $30,950 in the first seven months of 1980, from $11,033 in 1979. Two projections of new plaintiffs put the total cost of the claims at $975,250,000 or $1,204,716,000 (the charts give thousands of dollars), and in both the insurance proceeds the charts counted on ran out by the middle of the decade.

What it shows

The charts track the growth of the suits year by year. New asbestos health cases rose from 157 in 1976 to 779 in 1978 and 1,754 in 1979, and 1,268 had already been filed in 1980 by late July. In 1979 the new plaintiffs included 707 shipyard workers, 541 insulation workers and 81 of J-M's own employees. The company's spending on the asbestos cases rose from 2.6 cents per $100 of sales in 1977 to 15.2 cents in 1980.

On trials, the lawyers counted 21 cases tried, beginning with Borel in 1974, with 9 verdicts or judgments for plaintiffs and 12 for the defense, and J-M's average cost per case tried at $35,000. The one loss of the past year was Hogard, "first Los Angeles shipyard case," where the verdict was $1,229,491 and J-M's share $799,173. The summary slide reports that in no case had punitive damages been awarded and that "no significant new facts have been uncovered." It also notes the Rudkin decision in California, which "allows employees to sue outside workers' compensation" if they prove fraud and aggravation of injury, and that California courts, like all others but the federal court for the Eastern District of Texas, had refused to apply collateral estoppel on the state of the art.

Projections and insurance

A statistical projection made in June 1980 forecast 4,798 new plaintiffs in 1980 and 10,665 in 1981. The department's own estimate was lower: 2,500 in 1980, 3,000 in each of 1981 and 1982, then 2,000 and 1,000. The cost of each plaintiff was assumed to grow from $30,000 in 1980 to $80,000 by 1986. On the statistical method (18,963 plaintiffs) the cumulative cost reached 1,204,716 thousand dollars by 1986, and the "insurance proceeds balance" fell below zero in 1984. On the internal method (15,500 plaintiffs) the cost reached 975,250 thousand by 1989, and the balance fell below zero in 1985. The plaintiffs already in the files, about 5,000, were costed at 303,750 thousand dollars.

The last part of the presentation dealt with J-M's four lawsuits with its insurers, including the declaratory judgment action it filed against the Home Insurance Company and others in San Francisco on March 31, 1980. Among the reasons the slides give for suing is the "desire to control the case," being "the plaintiff not the defendant." A "What if?" slide weighs the risk of losing on concealment, which "depends on when concealment arose and how long it lasted (how long before insurance companies knew)": "certainly 1964 - on (Selikoff) = knowledge," so the worst case was losing the 1934 to 1964 coverage, "$67 million"; the slide calls no concealment "most likely." Under the manifestation theory J-M would have $431 million of coverage left after self-insured amounts, under the exposure theory $507 million. A final chart notes that London insurers had cancelled J-M's products program effective May 1, 1980, and that a renegotiated program gave $20,500,000 of coverage a year.

Beside the public statements

The board minutes record only that Parker and Von Wald gave "a detailed analysis of the Company's asbestos health litigation" (they are written up with the other minutes of 1980 to 1982). Seven months later, J-M's Form 10-K for 1980 and the 1980 annual report told shareholders that the ultimate liability could not "be estimated with any degree of reliability" and that "no reasonable estimate of loss can be made."