Transcript Financial Risks of Silica Exposure and Related Health Effects

Silica
Litigation & Regulation Risks
and
Liability Risk Reduction
February 4, 2004
Henry Chajet, Esq.
SILICA
A WHITE OR COLORLESS CRYSTALLINE
COMPOUND, SiO2, OCCURING ABUNDANTLY
AS QUARTZ, SAND, FLINT, AGATE, AND
MANY OTHER MINERALS AND USED TO
MANUFACTURE A WIDE VARIETY OF
MATERIALS, NOTABLY GLASS AND
CONCRETE.
American Heritage Dictionary, 2d C Ed, 1991
Potential Silica Related Illness
• “Chronic Obstructive Lung Disease” (also known as “chronic
obstructive pulmonary disease”):
– Characterized by a limitation of airflow in the lung which develops over
time and is not totally reversible
– Two major diseases associated with disease are emphysema and chronic
bronchitis
• “ Silicosis is a chronic fibrotic pulmonary disease caused by the inhalation,
deposition, and retention of dust containing crystalline silica.” NIOSH
– (Diagnosed by chest x-ray and occupational history of exposure to silicacontaining dust)
– “IARC Carcinogen” Crystalline silica, inhaled from occupational
sources, is categorized as a Category 1 carcinogen (known human
carcinogen) by the International Agency For Research on Cancer of the
World Health Organization.
Potential Silica Liability Theories*
•
Workers Comp – Defined / Limited Awards for Occ Illness or Injury,
Regardless of Fault – No Jury –No Pain and Suffering or Punitive Damages
•
Intentional Tort Action By Employee – Illness or Death Claim, Outside Workers
Compensation System, With Potential Jury Award.
•
Tort Claim By Non Employee – Potential Jury Award for Claims By
Contractors, Visitors, and Citizens
•
Product Liability Claim – Potential Jury Award For Harm by Defective Product
(Including Inadequate Warning)
•
Strict Liability Tort Action – Potential Jury Award For Harm Caused by A
Product That is Inherently Dangerous
•
Environmental Law Claims – Potential injunctive relief and damages resulting
from private or government suits under statutory provisions
*We
note that we have taken substantial liberties in condensing complicated legal theories for this presentation and that the
presentation should not be construed as legal advice or legal opinions.
Medical costs associated with obstructive
lung disease:
• In 2001, estimated at $8.5 billion for occupational
asthma and other occupational lung diseases
• In 1996 alone, for chronic obstructive pulmonary
disease:
Medical and administrative expenses:
$2.8 billion
Lost wages, lost benefits, etc.: $2.2 billion
Total estimated cost: $5 billion
Source: BNA, Occupational Safety & Health Daily (January 15, 2002)
Is silica “the next asbestos” crisis ?
• $54 billion spent in asbestos settlements to date
• $210 billion to settle pending/ future asbestos claims
• 68 companies in bankruptcy because of asbestos
• 22 filed for asbestos related bankruptcy since Jan, 2000
Source: Rand Institute for Civil Justice (Santa Monica, California)
Selected Asbestos Caused Chapter 11 Proceedings
Company
Date
No. of
Claims
Owens Corning
10/00
460,000
$5
Harbison-Walker Refractories
2/02
200,000
$4.1 (reserve)
Federal-Mogul
10/02
365,000
$2.1 (reserve)
ABB
2/03
204,326
$2.1
W.R. Grace & Company
2/01
325,000
$1.9
Babcock & Wilcox
2/00
385,000
$1.6
GAF
1/01
500,000
$1.5
Pittsburgh Corning
4/00
435,000
$1.2
USG
6/01
250,000
$1.1 (reserve)
Armstrong World Industries
12/00
455,000
N/A
Kaiser Aluminum
2/02
112,400
$.06
Source: New York Times (April 24, 2003)
Cost (in billions)
Silica Verdicts
Lee v. Dresser Industries – Texas state court (1990)
• 47 year old foundry worker alleged that the defendant
manufacturer failed to warn about possible health
hazards on product package containing silica flour.
• Jury verdict for plaintiff: $750,000
Silica Verdicts
Estate of Robert Altvater v. Clay Craft Co. – Ohio state
court (1994)
• Brick manufacturer employee died of silicosis while in
his late 50s. Estate alleged 1) employer intentionally
exposed him to silica via dusty work conditions; and
2) the union had complained about dust
• Jury verdict for plaintiff: $800,000 compensatory and
$500,000 punitive damages: Total $1.3 Million
Silica Verdicts
Plaintiffs v. Exxon, et al. – California court (1997)
• Class action (28) plaintiffs with a range of physical
conditions from alleged exposure to substances
including silica).
• Employers failed to properly warn or to provide
instructions for safety equipment
• Jury verdict for plaintiffs: $13,724,863
compensatory damages
• A mistrial was declared re: punitive damages claim
• Matter under appeal
Silica Settlements
• Frame v. Consolidated Rail Corp. (New York, 1997): $750,000 (suit by
53 year old locomotive engineer under the Federal Employer’s Liability
Act, arguing that the plaintiff was exposed to sand through defects in the
locomotive cab; company denied that he had been exposed to harmful
quantities of silica and argued that he did not die from silicosis)
• Regaldo v. Texas Mining Co. et al. (Texas, 1999): $750,000 (sandblaster
sued marketers and manufacturers for failing to warn of the dangers of
exposure to silica over a ten-year period; defendants argued they provided
warnings that met government requirements and that plaintiff’s employer
was required to warn him of the dangers of working with silica-based sand)
• Garcia v. Lone Star Industries (Texas, 1996): $40,000 settlement (42
year old with silicosis from work-related exposure sued silica manufacturer
for failure to warn; company argued that silica was not used, and that
plaintiff’s employer was liable because it did not provide him with proper
PPE)
Source: American Lawyer Media Jury Verdicts
Silica Settlements
• Tompkins v. U.S. Silica Co. et al. (Texas, 2001): Case
remains on appeal after jury found the defendant acted
maliciously and awarded $7,500,000 to the estate of a
66 year old deceased sandblaster. (Punitive damage
claims settled for $600,000). Plaintiff alleged
manufacturer’s failure to warn; company responded
that health hazards related to silica are common
knowledge in the industry and that the deceased’s
employer was required to inform and protect its
workers from silica hazards.
Silica Defense Wins
• Franklin v. C-E Minerals et al. (Michigan, 1992): defense
win on statute of limitations grounds (case appealed –
resolution unreported)
• Long et al. v. Raymond T. Opdenaker & Sons, Inc. et al.
(Pennsylvania, 1992): 9 plaintiffs alleged silica exposure and
failure to warn at refuse company when one defendant dumped
a truckload of crystobalite; defendants responded that they had
no knowledge of the truck’s contents and that the plaintiffs had
assumed the risk. (no appeal filed)
Silica Defense Wins
• Kessinger et al. v. Grefco, Inc. (Illinois, 1994):
– Employees alleged asbestos and silica exposure from diatomaceous
earth sold to their employer, w/o proper warning labels.
– Defendant argued that plaintiffs had not been exposed to dangerous
amounts of silica and did not suffer from silicosis.
– Defendants argued the employer knew or should have known
employees were being exposed to potentially harmful materials.
– Jury found that none of the employees suffered from silicosis and
therefore found for defendant.
– Appellate court reversed and remanded for new trial but Supreme
Court of Illinois upheld defense verdict.
Silica Defense Wins
• Glaser v. Bussen Quarries et al. (Missouri, 1995): suit against sand
suppliers for failure to warn; defense that plaintiff’s employer had
not complied with OSHA regulations, that failure to implement
safety precautions was the sole cause of the plaintiff’s illness, and that
if used properly, silica sand is a safe product (no appeal filed)
• Carlson v. Southern Pacific Transportation Co. et al. (California,
1996): alleged failure of employer to provide PPE and to take
appropriate precautions 54 years earlier; defense that employer had
taken appropriate protective measures based on info available at the
time, and that plaintiff’s injuries were the result of a subsequent job.
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(no appeal filed)
Silica Defense Wins
• Powers v. Exxon-Mobil Corp. (Texas, 2002): estate of
deceased sandblaster sued employer for failing to provide safe
work environment, failing to provide PPE and failing to warn of
known health hazards; company defended that the deceased had
been instructed to use appropriate PPE and that his death
was due to an unrelated disease.
• Lockheed Martin v. Gordon. (Texas, 2000): Product liability
claims by 140 foundry workers re silica sand supplied by a
company purchased by Lockheed dismissed based on analysis
of contract terms of acquisition. Parts of case on appeal.
Silica Defense Wins
• Cofer v. Ferro Corp. (Texas Court of Appeals, 2003):
former employee of brick company sued 78
defendants, including Ferro Corp. The appellate court
held that the 10-yr. Statute of limitations protected the
company, which designed and built kilns for plaintiff’s
employer. The court did not address the claim that
Ferro Corp. fraudulently concealed the dangers of
silica because Cofer had produced no evidence of that
fact.
Silica Defense Wins
• Gray v. Badger Mining Corporation (MN, 2003): Minnesota
court of appeals reversed trial court ruling that supplier had a
duty to warn plaintiff of health hazards from exposure to silica.
(plaintiff was a foundry worker (four decades) who sued
Badger, among others, alleging that Badger failed to warn of the
dangers of inhaling silica. Badger asserted that it has no duty to
warn plaintiff of such dangers because plaintiff’s employer was
a sophisticated buyer of silica and was in the best position to
warn and to protect its workers.) (On appeal)
Silica Defense Wins
• Gary Gordon, et al. v. Aearo Co., et al. (Texas, 2003): On
December 10, 2003, a Texas jury refused to award damages to
nine plaintiffs, concluding two models of 3M respirators worn
by the plaintiffs were not responsible for their silicosis and
other pulmonary problems. Plaintiffs alleged the respirators
were defective and 3M did not provide adequate safety
instructions and failed to properly test the masks. (Plaintiffs
originally filed suit against numerous sand suppliers, equipment
manufacturers and employers in state district court; only 3M
remained as a defendant by the time trial concluded; the other
defendants settled or were dismissed.)
Selected Pending Cases
1. Consolidated Cuyahoga County Silica Cases
(64 named company defendants). Multiple plaintiffs
allege: negligence, strict liability, breach of warranty, fraudulent
concealment and representation, product liability, and loss of
consortium.
2. Consolidated Philadelphia Silica Products
Liability Cases (97 plaintiffs). Court seeking a case
management order. Dispute over silicosis medical criteria pending.
3. Desormeau v. American Rock Salt (US Dist Ct
in NY). Suit under envir. laws (CERCLA) to stop rock salt
mining/storage operations due to health effects from diesel, salt,
silica, lead, zinc. Fear of cancer alleged.
Latency period issues:
•
Asbestos-related diseases can take up to 40 years to
materialize
– Estimated that only 10% of current asbestos claimants have
asbestos-related disease: balance are individuals who were
exposed
•
Studies have shown that latency period for silicosis can be
several years to several decades
– Substantially increases difficulty in identifying source of
exposure leading to illness
Plaintiffs counsel adopts “shot gun” posture, suing all possible
sources of exposure for plaintiffs with and without symptoms.
Effect of latency problem on statute of
limitations:
• Barnes v. Clark Sand Co.: in a lawsuit by an employee against a
sand manufacturer, a Florida appeals court ruled that 12-year statute
of limitations did not begin to run until the plaintiff discovered
that his silicosis was caused by occupational exposure. (1998)
• Alix v. Badger Mining Corp. (December, 2002) and Cocroft v.
Badger Mining Corp. (April, 2003): Wisconsin appeals courts held
claims not automatically barred because of delay in tying
workers’ medical conditions to defective respirators. Cases
remanded for plaintiffs to show they had been “reasonably
diligent” in discovering link between their illnesses and the
defective PPE.
Effect of latency problem on statute of
limitations:
• Youngblood v. U.S. Silica Co. (Texas, 2003): Texas appeals court reversed
in favor of silica supplier, ruling that trial court erred in ruling that plaintiff’s
suit was time-barred. (plaintiff worked at Kilgore Ceramics from 1959 to
1999; required to have chest x-ray when hired and every two to three years
thereafter; informed by doctors overseeing chest x-ray program in 1992 and
again in 1997 to consult personal physician for further evaluation; never
provided a diagnosis that he had silicosis and asbestosis until Dec. 1997.
Plaintiff filed suit against U.S. Silica Co., on Aug. 28, 1998; trial court
determined suit was barred by statute of limitations. On appeal, court found
that plaintiff had demonstrated that he had used due diligence in determining
the cause of his respiratory problems, but neither knew nor could have
known his illness was work-related until being provided diagnosis on Dec. 5,
1997.)
Selected Silica Defenses:
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Statute of limitations
Intervening cause / defendant
No silica
Insufficient exposure to cause illness
No illness or not silica-related
Assumption of risk
Warnings were adequate
“Sophisticated User” defense
Acquisition / contract terms
Sophisticated User Defense
• Theory: A manufacturer who sells a potentially hazardous
product to a customer, who knows or should know of the
dangers associated with that product, is not liable for harm
caused to the purchaser’s employees, if the purchaser fails
to protect its employees properly from harm caused by the
product.
• Defense recognized in some states, in a broad range of
contexts. Defense eroding in the states where it exists??
Forum Shopping:
66% US Asbestos Cases in Five Jurisdictions:
– Texas
– Mississippi
– New York
– Ohio
– Maryland
International litigation potential:
– Newmont Gold Peru Mine Mercury Claims Brought in US
Courts
– Rio Tinto Zinc Namibia uranium mine employee sued for
silica exposure in UK, location of company headquarters.
Regulatory Impact on Liability Risks
• Regulations Help Define Standard of Care And New
Regulations Can Increase It.
• Regulatory Violations May Be Used As Evidence of Harm or
Fault
– (e.g. overexposures, training failures, failure to provide respiratory
protection, failure to warn)
• Regulatory Findings (e.g. “willful conduct”) May Be Used
As Evidence of Intent or Fault
• Regulatory Action Increases Public Awareness
• Regulatory Action Creates A Repository of Public Evidence
• Based on the Asbestos Experience, Regulations Do Not Stop
or Reduce Illness or Lawsuits.
Regulatory Impact On Liability Risks:
• MSHA / OSHA Current Exposure Limit, Rules and
Protective Measures Define Minimum Duties
• MSHA / OSHA Special Emphasis Program Produces
Increased Sampling / Enforcement / Press
• New MSHA Training / Haz Com Creates New Duties &
Increased Employee Awareness
• Non Consensus Standards / Recommendations Impact
Duties, Rulemaking and Litigation:
• ACGIH
• IARC
• NIOSH
New Silica Regulations?
• October, 2004 OSHA releases draft silica regulations for
general industry/maritime and construction for small
business review.
• Small business review panel convened in November 2004
(reps from OSHA, SBA OMB and small business
representatives); held 4 meetings / conference calls.
• Small business panel report concludes: OSHA should not
adopt the draft and instead focus on enforcement of current
standards and consulting and assistance for small business.
New Silica Regulations?
• Draft OSHA silica regulation, estimated to cost $1Billion by
OSHA; $3-5 Billion for construction alone by Patton Boggs
• Standard would result in significant reduction in jobs and
elimination of entire industries.
• Draft OSHA standard neither feasible, nor justified.
New Silica Regulations ?
Current Status
• OSHA reviewing the Small Business Panel Report
• MSHA to begin a silica rulemaking May, 2004
Draft OSHA Silica Rule
• New Permissible Exposure Limit (PEL) Options:
50, 75, or 100 µ/m3 with action levels at 50%
• Compliance Hierarchy: engineering controls and
workplace practices mandated (but employee rotation
prohibited); respirators are supplemental.
• Construction: Option 1: certain jobs presumed above action
level, mandate listed protections, unless air monitoring
shows otherwise. Option 2: Mandate air monitoring, and
use exposure results to trigger mandated actions.
Draft OSHA Silica Rules
• Designation of a Competent Person to establish
Regulated Areas where silica concentrations exceed
or could reasonably be expected to exceed the PEL.
• Air Monitoring/Exposure Assessment Requirement
(2x per year under consideration)
• Implement Respiratory Protection Program.
Draft OSHA Silica Rules
• Protective Work Clothing: disposable protective clothing or
non-disposable protective clothing with clean change room.
(also, provisions for maintenance, removal and storage of
contaminated clothing).
• Hygiene Facilities and Practices: options under
consideration for clean change rooms, clean lunchroom
facilities, and shower facilities. Prohibition of dry sweeping
and use of compressed air for cleaning.
Draft OSHA Silica Rules
• Housekeeping: requiring clean-up of accumulation of silicacontaining material with HEPA-filtered vacuum cleaner or
equally effective filtration or dust collection method.
• Health Screening:
– Pre-placement screening (physical exam by health care professional
with knowledge of silica-related disease, work and health history,
chest x-ray interpreted by board-certified radiologist or NIOSHcertified B-reader, and baseline pulmonary function test;
– Periodic examinations (annual exam and work history and two
options for chest x-rays).
Draft OSHA Silica Rules
• Medical Removal Protection (under consideration).
• Hazard Communication Program: labels, material safety
data sheets and information and training.
• Information and Training.
• Recordkeeping.
Congressional Action On Asbestos ?
The move to reform asbestos litigation is accelerating and
beginning to achieve some bipartisan support in Congress:
One proposal would limit the right to sue to those who
are actually sick and extends the statute of limitations to
provide relief for individuals who subsequently become
sick
Another proposal would create a federal trust fund from
which pending and future claims would be paid based on
criteria still undefined
Congressional Actions Re Silica
• No Silica Lawsuit Limitations Introduced
• Energy Employees Occupational Illness
Compensation Program Act (EEOICA) Passed
– Compensates former Atomic Energy workers for
illnesses due to beryllium, uranium and silica exposure
– Sets comprehensive medical standards (20 C.F.R. Part
30) for defining illness
– Creates payments for workers and surviving families
– Administered by NIOSH
Risk Reduction Actions
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Review and Improve Current Insurance
Recover and Preserve Old Insurance Policies
Review Potential Acquisition Documents & Records
Implement Improved Protective Programs
– On-site coverage: employees /non-employees
– Off-site coverage: customers/community
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Implement Effective/State of the Art Warnings
Review and Improve Contractual Provisions
Review and Improve Contractor Use Programs
Monitor Silica Government Actions and Respond
Litigation / Crisis Management Planning And Simulations
Insurance Review
Silica-Related Insurance Coverage
• Workers Compensation Insurance
• Commercial General Liability – provides coverage for third
parties (not employees) but often subject to pollution/silica
exclusions
• Pollution Legal Liability Coverage – specialized coverage
for pollution risks, but complex and expensive, and can
exempt silica
Careful Review Required of Current,
Old And Future Policies
Commercial General Liability policy
standard pollution exclusions (current) :
“This insurance policy does not apply to: …
f. Pollution
(1) “Bodily injury” or “property damage” arising out of the
actual, alleged or threatened discharge, dispersal, seepage,
migration, release or escape of pollutants..”
Pollutants means any solid, liquid, gaseous or thermal
irritant or contaminant, including smoke, vapor, soot,
fumes, acids, alkalis, chemicals and waste. Waste
includes materials to be recycled, reconditioned or
reclaimed.”
Commercial Pollution Liability Policy
Supplements CGL, except for exclusions:
• Willful or deliberate noncompliance with any statute,
regulation, ordinance, administrative complaint…
• Insured vs. insured: claims by employees against insured
parties; claims arising in the scope of employment;
• Asbestos, lead and recently silica containing products or
materials have been excluded.
• Prior knowledge/non-disclosure of claims
• Products liability: claims arising from the company’s products
….have been sold or otherwise given
Insurance Recovery Programs
Find the Hidden Assets
•Old Policies Can Cover Claims Caused / Initiated While They
Were In Effect
•Old Policies Contain Fewer Exclusions
•Silica Related Claims Generally Develop Over 20+ Years
•Old Policies Issued by Companies That Were Purchased Or
Merged, May Continue to Have Viable Successors
•Put Old Policy Insurance Companies On Notice
Risk Reduction Actions
• Document review to avoid future failure to warn, fraudulent
non disclosure and punititive damage claims.
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MSDS & Labels,
Training,
Promotional & Instructional Materials,
Minutes,
Financial Requests,
Acquisition Documents,
Contracts, Purchase Orders and Sales Documents,
Government Actions
Employee / Customer Complaints
Risk Reduction Actions
• Voluntary Medical Surveillance & Air Monitoring
– Pre-employment and annual exams
– Collect / update work (and smoking) history
– Give workers medical exam & respirator test results
– Maintain medical and personnel records
– Conduct periodic air sampling
– Provide air sampling results to workers
Audit for claim potential and address risk.
Risk Reduction Actions
•Contractor / Customer Risk: Generally, No Workers Comp Shield
•All Contractors / Subcontractors / Customers / Visitors -- Entitled
To The Same, Highest Level of Protection As Our Employees
• Examine Communications For Consistent, Repeated Messages:
Warnings, MSDS, Labels, Postings, Signs, Instructions, Invoices,
Web Site, Weight Slips, Training Materials
•Examine Contract Provisions, Purchase Orders,–Include Hazard
Acknowledgement, Regulatory Compliance Duty and Safe Use
Provisions
•Audit Contractors, Customers, Transport Providers
Suggest / Demand – Corrective Actions
Risk Reduction Actions
Monitor and Address Government Actions
•Violations –Program to Prevent Future Ones
•New Regulations – Examine Needs and Feasibility
For Voluntary Efforts
•Participate in Rulemaking Process
•Retain Expert Consultant And Counsel To Assist –
Establish privilege claims in anticipation of
litigation
Risk: if silica is the “next asbestos:”
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Increasing defense costs and monetary awards to plaintiffs
Increase in insurance premiums or coverage unavailability
Downgraded credit rating, diminished access to capital
Burdens of continued litigation
Negative impact on company/shareholder value
Diminishing value of retirement funds
Plant expansion restrictions
Others
BUT SILICA IS NOT THE NEXT ASBESTOS,
AT LEAST NOT YET!
Risk Reduction Actions
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•
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Review and Improve Current Insurance
Recover and Preserve Old Insurance Policies
Review Potential Acquisition Documents
Implement Improved Protective Programs
– On-site: employees/non-employees
– Off-site: customers/ transportation/ community
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•
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Implement Effective/State of the Art Warnings
Review and Improve Contractual Provisions
Review and Improve Contractor Use Programs
Monitor Silica Government Actions and Respond
Litigation Defense Planning And Simulations
THE BEST DEFENSE IS PREVENTION
THE NEXT BEST DEFENSE IS A STRATEGIC RESPONSE
BASED ON EXPERTISE AND KNOWLEDGE
Comments or Questions re Patton Boggs Risk Reduction Services
contact:
Henry Chajet or David Farber
Patton Boggs, LLP
2550 M Street, NW
Washington, DC 20037
(202) 457-6000
[email protected]
[email protected]
Mark Savit or Cole Wist
Patton Boggs, LLP
1660 Lincoln Street
Denver, CO 80264
303-830-1776
[email protected]
[email protected]
PATTON BOGGS--SEEING THINGS DIFFERENTLY
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