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The U.S. Navy and the asbestos calamity

I recently received this note (which I reprint here with his permission) from Philadelphia toxic-tort attorney Nathan Schachtman of Phillips Lytle LLP (and formerly of McCarter & English LLP). It responds to and elaborates on my article of earlier this year on government and risk, "Dangerous When In Power":

Thank you for your essay in Reason on the government's role in the asbestos health crisis in this country. There is, however, one important fact you omitted from your narrative.

In the mid-1970s, amidst economic turmoil and declining military budgets, the US Navy found itself with a big problem. Payments to civilians under the FECA (Federal Employees Compensation Act), a statute that gives civilian employees of shipyards the equivalent of workers' compensation benefits, came right out of the Navy's budget for shipbuilding. The Navy had no insurance for FECA payments, and suddenly it found itself facing a large uptick in the number of claims made by civilians for asbestos-related injuries.

About the same time, many states adopted some version of strict product liability, some stricter than others. None was likely stricter than Pennsylvania's version.

The FECA gives the government liens against any recovery in third-party actions. The JAG lawyers, faced with a blooming docket of FECA cases, started to encourage the workers compensation plaintiffs' lawyers to file third-party actions. Indeed, in Philadelphia, the lawyers who stepped into the forefront of asbestos personal injury actions had been workers comp lawyers with a large FECA docket (Gene Locks; Joe Shein).

The cruel irony of the FECA (or workers' comp) statutes is that the employer pays regardless of fault, that the employer can't be sued in civil actions, and that the employer can recover ~80% of its payments from settlements or judgment proceeds from a civil defendant.

Ultimately, the plaintiffs' bar found that recoveries and settlements were too certain to encumber themselves and their clients with government liens, and they stopped filing their FECA cases altogether.

The government's role in fueling the explosion of asbestos civil actions has never, to my knowledge, been discussed in the media. When I was a young lawyer, my first trials were in defense of companies that were dragged into litigation over having sold asbestos products to the Navy, often pursuant to government specifications. These cases, filed in the late 1970s, up for trial in the mid-1980s, often had a letter in the claimant's personnel file from the JAG officer, noting that the man had been diagnosed with asbestosis and urging him to seek legal counsel to consider a civil suit against the Navy's suppliers. Unfortunately, I don't have any of these documents anymore, but they may not be too difficult to obtain.

What a story is hidden away in those old files! Not only did the Navy know of the asbestos hazards, hide them from its civilian workers, but when those workers got sick, the Navy turned on its outside suppliers by encouraging its workers to sue the suppliers, while hiding behind the exclusive remedy provision of the FECA.

More linkage and discussion of "Dangerous When In Power" here.

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Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.