Chicago-based USG Corp., the nation's leading maker of wallboard, filed for Chapter 11 reorganization on June 25, making it the eighth company in the past 18 months to turn to bankruptcy court to shield it from crippling asbestos litigation. Asbestos has been shown to cause lung cancer, asbestosis and mesothelioma, all potentially fatal conditions. The company has insurance coverage of $76.3 million, but it will need more than $1.1 billion to settle all anticipated asbestos lawsuits. USG intends to follow a similar reorganization plan as former asbestos defendant Johns Manville Corp., a company that filed bankruptcy in 1982 and was able to reorganize and stay in business.
According to a report this week by the Rand Institute for Civil Justice, more than 500,000 asbestos liability claims have been filed against asbestos manufacturers. So far 40 companies subject to civil action have sought bankruptcy protection, and many more are likely to do the same. USG began using asbestos - a mineral that has been used as a fire retardant and as insulation - in the 1930s and stopped sale of products that contained it (plasters and joint compounds) in 1972.
USG said that as a result of the creation of the bankruptcy trust, the bankruptcy court would issue a permanent injunction that would channel all asbestos-related claims to the trust. As a result, the newly reorganized company would be not be liable for any pending or future asbestos-related claims.