"Somebody has to do something," Sullivan says. "The government, manufacturers -- somebody."
William E. Bailey, senior vice-president at the Commercial Union Insurance Co. in Boston, concurs. "We can't jam social-policy decisions through the tort system," he explains. "If we want total care for those who become sick, then we've got to identify that as a social-policy decision and move within the social framework."
Among the approaches that have been considered are legislative reform (Colorado senator Gary Hart's "white lung" bill, which would set minimum workers' compensation standards for the states, and Wisconsin senator Robert Kasten's bill, which would better define and restrict product liability), industry insurance pools, and a cooperative defense effort by manufacturers and other defendants.
But there has been little progress. Congress has thus far taken no action. Hearings have been held on Hart's legislation, and Kasten's staff is now refining the second draft of his bill, but neither is expected to pass during the current session; the Congress -- White House impasse over the budget has pushed such policy issues onto the back burner, and, even if a compromise is worked out, the bills face some tough going. The legal community, with its powerful voice on Capitol Hill, views product liability reform unsympathetically, considering it a threat to one of its major sources of income.
For their part, most of the manufacturers have been reluctant to link their assets with the risks of the other defendants. "We both have to defend the same cases," Sullivan points out. "We both have to spend money on attorneys. But the manufacturers simply won't join us in defending suits -- they claim it would be a conflict of interest, but we don't agree."
With no judicial or legislative reprieves in sight, and with no consensus for a commonsense solution (defendants, insurance companies, and the government might, says Sullivan, share the cost of asbestos liability), each person, each company, and each interest group has been left to fight for itself.
Recently, Sullivan and the heads of 13 other firms formed the Insulation Contractor/Distributor Defense Group (ICDDG), which wants manufacturers to indemnify them for their losses; the group has requested a meeting with 25 producers, but Sullivan is less than hopeful. "What's going to happen is that they're going to come, they're going to listen, and they're going to try to give us a stall job, and we'll turn around and tell our attorney, 'You get a complaint together.' We'll probably wind up having to sue them." But lawsuits, as everyone involved with asbestos has discovered, are generally the least direct route to relief; and Pacor is hurting now.
Not only is the company spending an inordinate amount of its income on attorneys and settlements, the gauntlet of litigation has also required extraordinary expenditures of time and energy. "It puts real pressure on your top executives," Sullivan explains. "They have to perform their regular work, and find time to answer interrogatories or write letters. Myself, Fraatzie [Paul T. Fraatz, president of Pacor], and Jim Brown [executive vice-president] are the only ones who talk about the problem. There's no point in bringing the rest of your management or your employees into it -- let them worry about running the department or whatever they're supposed to be doing."
In June 1981, Sullivan turned the presidency over to Fraatz, 40, and became chairman of the board. "I stepped down primarily to take care of asbestos," he says, "and also because of my health. We needed to provide for a good, orderly transition in case something did happen suddenly. But, at the same time, I was spending so much time with asbestos litigation that we needed someone to oversee the everyday operation of the company." Since then, Sullivan has adopted a part-time schedule. "I put in three days a week, and do nothing but work on the asbestos problem for the company. It isn't easy. By this time of night, I'm usually on the sofa, half asleep and half awake. My biggest problem is just breathing -- I get winded when I go to bed upstairs."
He had considered the possibility of retiring, but dismissed it: "I know more about the asbestos problem than anybody else, so, as long as I can do it, I'll stay in there and try to hammer this thing out."
But it is, he concedes, like defending a castle under siege. Each day, more lawsuits arrive and are processed, attorneys call, other distributors update him on their status, and, occasionally, when all of the defenses have failed, checks are written out to plaintiffs. "I still like running the company, but this has really taken the fun out of it," says Sullivan. "It's a battlefield every day.
"We had to hire one girl to do nothing but make copies of complaints. We have to make eight copies of each one that comes in, and that's all she does -- makes copies of complaints all day. And another girl spends about 25% of her time overseeing the first one, making sure that everything's perfect before it's sent out."
And for uninsured cases, every penny of the defense comes out of Pacor's profits. The company no longer has product liability coverage, and there's no escrow account for settlements. "We would like to have set something up years ago," Sullivan explains, "but Uncle Sam says you can't do it until after taxes, so we've elected to pay as we go.
"But you just can't stand it -- there's only so much profit you can make. I think quite a few small companies are going to have to go belly-up before the government finally steps in." He notes, with irony, that Pacor can't even seek relief in bankruptcy, generally the court of last resort. "If we went into Chapter 11, they'd decide what percentage of our assets should be put into reserve pending the outcome of the suits. In our case, that would be everything. All that we can really do is dissolve the company."
And, while Sullivan lives, while he can breathe at all, that will not happen. Instead, he will continue to fight the daily battle: copying complaints, conferring with lawyers, discussing cash flow with Fraatz and Brown, lobbying for legislative reform, praying for a new judicial climate, pressing manufacturers to indemnify Pacor and the other members of ICDDG for their losses -- and hoping against hope that his business will survive.
