Owens Corning Announces National Settlement Program
With Firms Representing 176,000 Asbestos Cases
Settlements with More Than 50 Law Firms
Resolve 90 percent of Owens Corning's Asbestos Backlog
TOLEDO, Ohio, December 15, 1998 - Owens Corning (NYSE:OWC)
announced today a National Settlement Program (NSP) under
which over 50 plaintiffs' law firms have agreed to resolve
more than 176,000 asbestos cases against the company. The
program settles close to 90 percent of the company's
existing backlog and establishes procedures and fixed
payments for resolving future claims without litigation, for
a term of at least 10 years.
Under the NSP, Owens Corning, which stopped selling asbestos-
containing products in 1972, will make payments for pending
claims of approximately $1.2 billion, primarily in 1999 and
2000. Payments will be made from the company's available
cash and credit resources, including its existing bank
lines. The company's bank lenders have endorsed the plan.
Under the NSP agreements, payments on future claims would
begin in 2001 and will be subject to an annual aggregate
cash flow cap.
Glen Hiner, chairman and chief executive officer of Owens
Corning, said, "The National Settlement Program is a major
achievement towards resolving Owens Corning's liabilities in
one of the largest and longest-running mass tort litigations
in the history of the United States. It dramatically reduces
the high cost of legal defense and the risk of excessive
verdicts against Owens Corning, makes more predictable the
costs of our asbestos liability going forward, and enables
the company to focus on capital-efficient growth."
The company established the National Settlement Program in
response to the rising cost of mesothelioma settlements and
judgments, as well as significant changes in the legal
environment, such as the 1997 Supreme Court decision
(Georgine v. Amchem Products, Inc.) striking down an
asbestos class action settlement. Reflecting these
developments and the substantial new information about
pending and future claims gained in the NSP negotiations,
the company in 1998 intends to increase its asbestos
reserves by $1.4 billion, resulting in an after-tax charge
to earnings of approximately $900 million.
"By agreeing to pay only those individuals in the future who
meet agreed medical impairment criteria," stated Hiner, "the
company expects that beginning in 2002 the total annual cash
outflow related to its asbestos liability will decline to
less than $200 million before the benefits of insurance and
tax proceeds.
"The NSP," continued Hiner, "focuses on doing the right
thing - getting fair compensation in a timely manner to
those most directly in need. For more than 25 years, our
industry and tens of thousands of people have been stuck in
the morass of asbestos litigation. The plaintiffs' bar must
be credited with exceptional vision and responsiveness to
their clients by helping us to move the issue from the arena
of litigation to the arena of settlement."
Terms of the Agreements
Under the NSP agreements, Owens Corning will pay both
current and future claimants through an administrative
procedure according to compensation schedules that take into
account each claimant's type and severity of asbestos-
related disease, and the extent of exposure to Owens
Corning's former products. Payment on the future claims
will require medical evidence of impairment.
The agreements allow claimants to receive prompt payments
under the NSP. Settling claimants will also be entitled to
additional compensation if they develop a more severe
asbestos-related medical condition in the future. Payments
for pending and future claims will be managed by Integrex, a
wholly owned Owens Corning subsidiary, devoted to efficient
and timely claims processing.
Owens Corning would also be entitled to terminate an NSP
agreement with an individual law firm, and continue to seek
resolution in the courts, if an unusual number of the
clients of that firm elect not to participate in the NSP.
Benefits to Claimants and the Courts
The NSP allows claimants to receive substantial and timely
payments without the risk of costly and protracted
litigation. The company estimates that under current
conditions, due to the tremendous backlog of cases and the
time-intensive nature of litigation and settlement
negotiations, many claimants would otherwise have to wait 10
to 15 years before payment of their claims.
Maura J. Abeln, senior vice president and general counsel of
Owens Corning, said, "This settlement program resolves 15
years of pending cases and establishes a fair process to
resolve future claims. It is a major step forward for all
concerned, reflecting Owens Corning's commitment to pay fair
and meritorious claims.
"Clearly, the success of the program depends on making
payments only to those who meet appropriate medical criteria
and can demonstrate exposure to Owens Corning's former
asbestos-containing products. Plaintiff lawyer cooperation
with Owens Corning reflects our shared view that fair
settlements can be negotiated within the confines of the
existing legal system," stated Abeln.
Perry Weitz, a prominent asbestos attorney, of Weitz and
Luxenberg, said, "Owens Corning and the plaintiffs' bar have
come a long way to arrive at a comprehensive settlement
program that will fulfill our mutual commitment to provide
compensation on an expedited basis to people who have been
injured through exposure to Owens Corning's former asbestos
products. We have all learned that the parties are capable
of resolving complex mass tort litigation through private
administrative settlements, proving that the tort system can
work for all involved."
The Fibreboard Settlement
Owens Corning also said the NSP agreements could settle
asbestos cases that are pending against the company's
subsidiary, Fibreboard Corporation. Those cases were
resolved as part of a 1993 global settlement with its
insurers and representatives of a class of future asbestos
plaintiffs. The U.S. Supreme Court reviewed that global
settlement earlier this month to decide whether the class
action meets legal requirements.
If the Supreme Court upholds the Fibreboard global
settlement, the liabilities will be resolved through
insurance funds by the terms of the global settlement.
If the Supreme Court strikes down this global settlement,
Fibreboard plaintiffs' claims, which are typically identical
to plaintiff filings against Owens Corning, will also be
paid under the terms of the NSP. A separate 1993 insurance
settlement between Fibreboard and its insurers, which
received final court approval, will establish an insurance
fund of approximately $2.0 billion to be administered by
Owens Corning to resolve all remaining Fibreboard asbestos
claims. A Supreme Court decision is expected during the
second quarter of 1999.
Owens Corning is a world leader in high performance building
materials systems and glass fiber composites with
approximately 20,000 employees worldwide. The company had
1997 sales of $4.4 billion, and is positioned to achieve $5
billion in sales in 1998. The most recent discussion of the
company's asbestos liabilities including its current reserve
and estimated indemnity and defense costs and insurance
coverage, is set forth in Note 11 to the company's Consolidated
Financial Statements included in its Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998.
This news release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of
1934, as amended. These forward-looking statements are
subject to risks and uncertainties that could cause actual
results to differ materially from those projected in these
statements. Further information on factors that could affect
the company's financial and other results are included in
the company's Form 10-Q and 10-K, filed with the Securities
and Exchange Commission.