Why Do Asbestos Trusts Want to Destroy Documents?

Four of the largest bankruptcy victim compensation funds aren’t saying why they plan to destroy thousands of documents in what may be a new asbestos coverup.

Pursuant to these proposed record retention policies, the trusts plan to begin the destruction of data and documents in for resolved claims that were paid more than one year ago or withdrawn more than one year ago.. The trusts will, however, continue to maintain claimant releases, any records required for trust purposes, and records that must be kept to comply with applicable law.

According to the trusts, the proposed updated record retention policies enhance the protection of personal and sensitive information. On the other hand, if allowed, the destruction of data and documents relating to resolved claims would inhibit trust transparency efforts and data needed for debtors and other parties to conduct discovery in pending or future bankruptcies.

Congress amended Section 524 of the Bankruptcy Code in 1994 to allow for the creation of settlement trusts that would pay both current and future asbestos claimants. As of March 2025, approximately 60 bankruptcy trusts are in operation. Claimants today generally file claims with numerous trusts for alleged harms caused by bankrupt companies’ asbestos products.

The Grace Company VCF

Federal courts created most bankruptcy victim compensation funds in the 1980s and 1990s. Companies like W.R. Grace filed bankruptcy so they wouldn’t have to answer liability lawsuits and their nefarious actions stayed under the radar.

At one time, Montana-based Grace & Company supplied most of the country’s vermiculite insulation. Vermiculite is similar to asbestos in many ways, but by itself, vermiculite isn’t toxic. However, Grace’s vermiculite was laced with asbestos. The company knew about the problem and did nothing about it. 

Sooner or later, all coverups unravel. By 2001, the jig was up for Grace and some 65,000 victims had filed claims. Apropos of nothing, the mediocre 1998 John Travolta legal thriller A Civil Action is based on the Grace Company’s shenanigans.

After several false starts, in 2008, a federal judge approved a Chapter 11 reorganization plan that included provisions for a massive victim compensation fund, reportedly around $800 million. But the company’s legal woes continued, especially regarding environmental cleanup. Grace shipped asbestos-laced vermiculite all over the country, meaning that sites in almost every state became Superfund sites. Grace finally resuelta the last of the cost recovery lawsuits in 2011.

The nationwide distribution of asbestos-laced vermiculite created an untold number of industrial and environmental exposure victims.

Until about 2000, most asbestos exposure victims were industrial exposure victims. Tese individuals either handled asbestos-laced products, like auto parts, HVAC components, and building materials, or they worked in asbestos-laced facilities.

Going forward, most asbestos exposure victims may be environmental victims. 9/11 and talc-asbestos are two leading examples. More on that below.

What to Expect in a VCF Claim

Although Grace’s EPA and other legal problems are over, there’s still the matter of compensating thousands of exposure victims. 

Incidentally, EPA cleanup efforts and rules, such as the March 2024 asbestos ban, reduce the number of future victims. But these things do nothing to compensate exposure victims. Only an asbestos exposure lawyer can do that.

$800 million sounds like a lot of money, and it is a lot of money. But considering the number of Grace Company exposure victims, and the massive losses these victims sustain, that money won’t last forever. So, if you think you have a case, reach out to an asbestos exposure lawyer ASAP.

Exact VCF procedure varies among different funds. In general, these claims are very easy to file and very difficult to resolve.

No adverse lawyer challenges the victim’s evidence or legal theories. Therefore, issues like liability and damages are usually straightforward. That’s especially true if the victim has a terminal illness and qualifies for fast-track review. In these cases, Fund Administrators are often willing to write checks without asking too many questions.

Alas, then comes the hard part. The lack of court supervision becomes a curse instead of a blessing. SInce a judge doesn’t oversee settlement negotiations, Fund Administrators are free to make low-ball or take-it-or-leave-it settlement offers.

Because of this difficulty, many bankruptcy VCF claims settle for about fifty or sixty cents on the dollar. However, in many cases, that’s the best possible result. Legally, Chapter 11 replaces the “old” company with a “new” company, which is usually not liable for the negligence of the “old” company.

Discovery Issues

Now, we get to the central issue of this post, which is why asbestos trusts want to destroy documents. In general, people only destroy records, from incriminating ATM withdrawal receipts to resolved VCF claim documents, if they have something to hide.

After trust funds destroy documents, an asbestos exposure lawyer cannot compare previous awards with new claims. Lawyers typically rely heavily on prior awards to establish a claim’s settlement value. For example, if Amy files an industrial exposure claim in 2026, she can expect about the same settlement that industrial exposure victim Lisa received in 2010. But without the paper trail, there’s no way to compare the two settlements.

Furthermore, bankruptcy VCF documents are relevant in civil proceedings. These documents often establish a pattern of misconduct, which is relevant to the amount of punitive damages a court awards.

The WRG Asbestos PI Trust and its brethren may have an even more sinister motive. Destroying the paper trail makes it easier to launch a second asbestos coverup to deal with the next wave of lawsuits. Industry insiders probably reason this strategy worked once, at least on a long-term temporary basis, so it may work again.

The Second Asbestos Cover-Up and Wave of Lawsuits

Unless the controversial Johnson & Johnson Texas Two-Step bankruptcy goes through, no VCF will be available for the next wave of asbestos exposure victims. These victims must normally seek redress in civil court, which is not a bad thing.

The foundations for a coverup are already in place for the two types of environmental exposure victims mentioned above. 

Internal company documents suggest that Johnson & Johnson knew as early as the 1970s that the talcum powder it aggressively sold to women, especially women of color, was laced with asbestos. For 9/11 exposure victims, the coverup is more passive. No one denied the fact that the toxic cloud which blanketed much of New York City on that fateful day was laced with asbestos. But very few people are talking about the long-term health risks associated with 9/11.

A victim compensation fund has already been established for 9/11 victims. But Congress funded it, and Congress can unilaterally pull the plug. Additionally, only a few 9/11 victims are eligible for money from this fund.

Asbestos exposure lawsuits are incredibly complex. The good news is that building a case is usually the most time-consuming portion of a civil claim. Once an asbestos exposure lawyer files legal paperwork, most civil claims settle out of court. The settlements are based solely on the victim’s circumstances, not on the victim’s circumstances and the amount of money remaining in a VCF.