United States: Iowa Legislature Introduces Asbestos Litigation Reforms

I. Overview

Over more than four decades of asbestos litigation, many former manufacturers and suppliers of asbestos-containing products have since filed for bankruptcy and exited the tort system. ¹ While these entities now have the protection of the bankruptcy courts, asbestos bankruptcy trusts have been established to compensate individuals who were exposed to asbestos from their products. Individuals alleging harm by exposure to asbestos products can seek compensation both through the tort system and by filing claims with qualifying asbestos bankruptcy trusts.

Because there is no coordination between these two systems for recovery, however, several states have adopted measures to ensure that a plaintiff's exposures to asbestos from bankrupt entities' products, and any compensation received from trusts, can be considered in allocating fault against solvent defendants in the tort system. ² In March 2017, Iowa joined South Dakota as the second state this year to adopt such measures. Iowa Senate File 376 (the "Act") requires asbestos plaintiffs to file and disclose all available trust claims in the course of any pending lawsuit and permits defendants to introduce those materials at trial.

In the same legislation, Iowa also enacted several other reforms applicable to asbestos claims. Notably, the Act limits the potential scope of liability for certain asbestos defendants, precluding claims arising out of injuries from asbestos-containing materials made and sold by third parties. Plaintiffs alleging non-malignant diseases, moreover, will now be required to make a prima facie showing of causation before their claims can proceed. These measures go into effect immediately and mark a significant change for asbestos claims in Iowa.

II. Iowa Asbestos Bankruptcy Trust Claims Transparency Act

The first chapter of the Act, entitled the "Asbestos Bankruptcy Trust Claims Transparency Act," imposes the following measures to account for plaintiff's recoveries from asbestos bankruptcy trusts ("trusts") in Iowa tort claims.

• Required filings and disclosures

Under the Act, plaintiffs seeking damages for asbestos-related injuries must identify and file claims with any qualifying trusts within 90 days of filing suit. ³ On or before this 90-day mark, plaintiffs must provide a sworn statement signed by both the plaintiff and plaintiff's attorney that confirms that the plaintiff has investigated and filed all trust claims available to him. For any claims that have been filed, the plaintiff must indicate the status of that claim and disclose any documents submitted or received in connection with the claim. Any subsequent updates, such as filing an additional trust claim, must be reported within 30 days. Defendants are also permitted to seek relevant discovery from the trusts.⁴

• Use of trust information at trial

No later than 30 days before trial, the court must enter into the record a document identifying all trust claims made by the plaintiff. Trust claim materials and any trust governance documents received are presumed to be relevant and authentic and are admissible at trial. These materials can be used support a jury's finding that the plaintiff may have been exposed to products for which the trust is responsible.

In any asbestos action in which damages are awarded and setoffs are permitted under the applicable law, defendants are entitled to setoffs or credits in the amount the plaintiff has been awarded from the trust. If trial commences before a particular trust claim is resolved, there is a rebuttable presumption that the plaintiff will receive compensation from that trust.

• Provisions to ensure compliance

The Act also incorporates various provisions to ensure plaintiffs' compliance. Claims cannot be set for trial less than 180 days before the initial trust disclosures are received. If a defendant identifies an available trust claim that has not been filed, the defendant may file a motion to stay the action until the plaintiff files the claim or rebuts that it is entitled to compensation from that trust. ⁵Finally, the court has authority to impose sanctions if a plaintiff fails to provide relevant information, including dismissal of the lawsuit. Even if the judgment has already been entered, the court has authority to reopen and adjust that judgment to account for later-filed trust claims. ⁶

III. Significant Provisions in the Asbestos and Silica Claims Priorities Act

Following on these transparency-related measures, the Iowa legislature included a series of other reforms in a chapter entitled the "Asbestos and Silica Claims Priority Act." Two provisions that are likely to have significant impact on future claims, as discussed below, include a limitation on liability for products made and sold by third parties and additional threshold requirements for plaintiffs claiming non-malignant diseases to commence suit.

• Limiting liability for products made and sold by others

The Act sets forth the following limitation on liability for third-party products:

Asbestos-related lawsuits typically involve various claims against defendants that arise out of products those defendants did not make or sell. For example, premises owners or contractors are commonly sued in connection with asbestos-containing materials used at the plaintiff's worksite that were made and sold by others. Even certain product manufacturers, such as makers of pumps and valves, are often alleged to be responsible for asbestos-containing materials made and sold by others that were used with or near the defendants' products. As written, the Act precludes liability against these defendants and could considerably limit the number of viable defendants in future claims.

• New requirements for cases involving nonmalignant claims 

For individuals seeking compensation for non-malignant diseases, such as asbestosis, the Act requires that the claim first be compensable. Specifically, no action can be brought "in the absence of prima facie evidence that the exposed person has a physical impairment for which asbestos exposure was a substantial contributing factor."

Along with the complaint, these plaintiffs now must provide a detailed narrative medical report and diagnosis signed under oath by a "qualified physician" as defined by the Act, as well as a sworn information statement. These documents must include specified information regarding the plaintiff's diagnosis, the nature and extent of his exposures to asbestos, and a detailed review of his medical history. The qualified physician must conclude that the plaintiff's exposure to asbestos was a "substantial contributing factor" to his impairment and "not more probably the result of other causes."

If the plaintiff fails to make this prima facie showing, the court is required to dismiss the plaintiff's claims without prejudice. Defendants may also challenge the adequacy of the plaintiff's showing before trial.

IV. Conclusion

The Act creates new requirements for plaintiffs filing asbestos-related lawsuits in Iowa while potentially limiting the number of viable defendants in each case. While these provisions are likely to have a significant effect on future claims pending in Iowa, Iowa represents a relatively small proportion of the asbestos claims pending across the country. It remains to be seen whether legislatures in other states will look to Iowa's lead as a mechanism to manage the asbestos docket.

Footnotes

1 See In re Garlock Sealing Tech., LLC, 504 B.R. 71, 83–84 (W.D. Bankr. 2014).

2 Georgia, Ohio, Oklahoma, Wisconsin, West Virginia, Texas, Arizona, Tennessee, Utah, South Dakota, and North Dakota have adopted similar measures.

3 For claims initiated before the Act, however, plaintiffs can file within 90 days from the effective date of the Act.

4 The Act states that plaintiffs must provide any necessary consent to allow defendants to obtain this information.

5 Even if a plaintiff is entitled to compensation, he can alternatively show filing is not practicable because any compensation received would not exceed the cost of pursuing the claim.

6 This is provided, however, that any motion seeking relief is filed within a "reasonable time" and not more than one year after judgment is entered.

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