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Silica Litigation & Regulation Risks and Liability Risk Reduction February 4, 2004 Henry Chajet, Esq.

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Presentation on theme: "Silica Litigation & Regulation Risks and Liability Risk Reduction February 4, 2004 Henry Chajet, Esq."— Presentation transcript:

1 Silica Litigation & Regulation Risks and Liability Risk Reduction February 4, 2004 Henry Chajet, Esq.

2 SILICA A WHITE OR COLORLESS CRYSTALLINE COMPOUND, SiO 2, 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

3 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 silica- containing 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.

4 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.

5 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)

6 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)

7 Selected Asbestos Caused Chapter 11 Proceedings CompanyDateNo. of Claims Cost (in billions) Owens Corning10/00460,000$5 Harbison-Walker Refractories2/02200,000$4.1 (reserve) Federal-Mogul10/02365,000$2.1 (reserve) ABB2/03204,326$2.1 W.R. Grace & Company2/01325,000$1.9 Babcock & Wilcox2/00385,000$1.6 GAF1/01500,000$1.5 Pittsburgh Corning4/00435,000$1.2 USG6/01250,000$1.1 (reserve) Armstrong World Industries12/00455,000N/A Kaiser Aluminum2/02112,400$.06 Source: New York Times (April 24, 2003)

8 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

9 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

10 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

11 Silica Settlements Frame v. Consolidated Rail Corp. (New York, 1997): $750,000 (suit by 53 year old locomotive engineer under the Federal Employers 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 plaintiffs 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 plaintiffs employer was liable because it did not provide him with proper PPE) Source: American Lawyer Media Jury Verdicts

12 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 manufacturers failure to warn; company responded that health hazards related to silica are common knowledge in the industry and that the deceaseds employer was required to inform and protect its workers from silica hazards.

13 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 trucks contents and that the plaintiffs had assumed the risk. (no appeal filed)

14 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.

15 15 Silica Defense Wins Glaser v. Bussen Quarries et al. (Missouri, 1995): suit against sand suppliers for failure to warn; defense that plaintiffs employer had not complied with OSHA regulations, that failure to implement safety precautions was the sole cause of the plaintiffs 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 plaintiffs injuries were the result of a subsequent job. (no appeal filed)

16 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

17 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 plaintiffs 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.

18 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 plaintiffs employer was a sophisticated buyer of silica and was in the best position to warn and to protect its workers.) (On appeal)

19 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.)

20 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.

21 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.

22 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.

23 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 plaintiffs 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.)

24 Selected Silica Defenses: 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

25 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 purchasers 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??

26 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.

27 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.

28 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

29 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.

30 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.

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33 New Silica Regulations ? Current Status OSHA reviewing the Small Business Panel Report MSHA to begin a silica rulemaking May, 2004

34 Draft OSHA Silica Rule New Permissible Exposure Limit (PEL) Options: 50, 75, or 100 µ/m 3 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.

35 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.

36 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.

37 Draft OSHA Silica Rules Housekeeping: requiring clean-up of accumulation of silica- containing 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 NIOSH- certified B-reader, and baseline pulmonary function test; –Periodic examinations (annual exam and work history and two options for chest x-rays).

38 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.

39 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

40 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

41 Risk Reduction Actions 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 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

42 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 Insurance Review

43 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.

44 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 companys products ….have been sold or otherwise given

45 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

46 Risk Reduction Actions Document review to avoid future failure to warn, fraudulent non disclosure and punititive damage claims. –MSDS & Labels, –Training, –Promotional & Instructional Materials, –Minutes, –Financial Requests, –Acquisition Documents, –Contracts, Purchase Orders and Sales Documents, –Government Actions –Employee / Customer Complaints

47 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.

48 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

49 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 Government Relations Efforts

50 Risk: if silica is the next asbestos: 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!

51 Risk Reduction Actions 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 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

52 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 hchajet@pattonboggs.com dfarber@pattonboggs.com Mark Savit or Cole Wist Patton Boggs, LLP 1660 Lincoln Street Denver, CO 80264 303-830-1776 cwist@pattonboggs.com msavit@pattonboggs.com 52 PATTON BOGGS--SEEING THINGS DIFFERENTLY


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