Workers' Compensation: Asbestos Bankruptcy: Workers Pay Price

When The Stephan Company filed for Chapter 11 bankruptcy protection on November 26, 2025, in the U.S. Bankruptcy Court for the Middle District of Florida, it became the latest entry in a decades-long chronicle of American companies using the bankruptcy system to manage crushing asbestos liabilities. But beneath the legal maneuvering lies a more profound crisis: a workers’ compensation system that has consistently failed those it was designed to protect.

The Stephan Company: A Brief History

Founded in Worcester, Massachusetts, in 1892, The Stephan Company began as a manufacturer of barber equipment and surgical tools before evolving into a premier distributor of barber, beauty, and personal care products. Operating primarily out of St. Petersburg and Fort Lauderdale, Florida, the company’s fate became intertwined with asbestos litigation through its 1988 acquisition of Old 97 Company, a Tampa-based firm founded in 1930.

Manufacturing Operations and Products

Old 97 Company manufactured and processed talc products, most notably Gold Bond talcum powder, at its Tampa, Florida, facilities. The subsidiary produced a wide range of cosmetics, toiletries, and household products sold throughout the South, including:

• Gold Bond talcum powder

• Easy Net Gel

• Hair and skin care products under the Old 97, Knights, and Tammy labels

• Private label manufacturing for various customers

The company merged Old 97 into its operations in 2016, inheriting both the subsidiary’s assets and its latent liabilities. By the time of bankruptcy, Stephan operated through three subsidiaries—614 Barber Supply, Inc., Bowman Beauty & Barber Supply, Inc., and Morris Flamingo-Stephan, Inc.—employing approximately 25 part-time and full-time workers and generating roughly $10 million in annual revenue.

The Avalanche of Asbestos Litigation

The lawsuits began in 2019, when The Stephan Company was first named as a defendant, alleged to be the successor-in-interest to Old 97. The claims centered on a familiar and devastating allegation: that talc products processed and sold by Old 97 were contaminated with asbestos fibers, leading to mesothelioma, ovarian cancer, and other asbestos-related diseases.

By the time of the bankruptcy filing, the numbers were staggering: - Over 700 total lawsuits filed - More than 500 active cases pending - Defense counsel teams managing litigation in at least 10 states - 15 cases settled - Approximately 200 cases dismissed on the company’s motion.

Despite never having been found liable in any talc lawsuit, The Stephan Company reported in court documents that its insurance coverage would eventually be exhausted by settlements or judgments, and that it lacked the financial ability to remain in the tort system.

Bankruptcy as Economic Engine

The Stephan Company’s bankruptcy filing under Section 524(g) of the Bankruptcy Code represents a now-familiar strategic use of the bankruptcy system. The filing seeks to establish a trust funded by an insurance settlement with Fireman’s Fund Insurance Company to handle current and future talc-related personal injury claims.

This bankruptcy-as-economic-engine model works as follows:

1. Automatic Stay: All pending lawsuits are immediately halted upon filing

2. Centralized Administration: Claims are channeled through the bankruptcy court rather than multiple state courts

3. Trust Fund Creation: A court-supervised trust is established to compensate victims

4. Liability Cap: The trust fund sets predetermined compensation amounts, effectively capping total liability

5. Future Claims: The trust handles both current and future claimants, providing finality for the debtor

As of September 30, 2025, The Stephan Company reported total assets of $10.3 million against total liabilities of $2.8 million—figures that pale in comparison to the potential exposure from hundreds of pending asbestos claims. The bankruptcy mechanism thus becomes an essential tool for managing liabilities that dwarf corporate assets, allowing the company to reorganize while providing a structured compensation system for victims.

The Workers’ Compensation Dilemma

For workers who developed asbestos-related diseases while employed at Old 97 or Stephan facilities, the bankruptcy presents a complex and often inadequate remedy. The intersection of bankruptcy law and workers’ compensation creates multiple layers of injustice:

Exclusive Remedy Trap

Under most state workers’ compensation statutes, employees who accept workers’ compensation benefits waive their right to sue their employer for the same injury. This “exclusive remedy” provision means that workers who might otherwise have substantial tort claims against their employer are limited to:

• Medical expenses (often subject to state caps and limitations)

• Partial wage replacement (typically two-thirds of average weekly wages, subject to statutory maximums)

• Permanent disability benefits (calculated on limited schedules)

• Death benefits (often capped at relatively modest amounts)

Workers’ compensation does NOT provide: - Pain and suffering damages - Loss of consortium - Punitive damages - Full wage replacement - Compensation for reduced quality of life

The average workers’ compensation payout for mesothelioma between 2021 and 2022 was just $44,179—a fraction of the average $1 million to $1.4 million mesothelioma settlement in civil litigation.

The Latency Period Problem

Asbestos-related diseases have latency periods of 10 to 50 years, creating nearly insurmountable challenges for workers’ compensation claims:

1. Statute of Limitations: Most states require claims within 1-3 years of exposure or injury. Workers who develop mesothelioma decades after exposure are often time-barred.

2. Employer Identification: Workers must identify the specific employer who last exposed them to asbestos—often impossible after 30 or 40 years.

3. Corporate Changes: Employers may have merged, dissolved, relocated, or otherwise become impossible to pursue.

4. Benefit Erosion: Benefits are calculated based on wages at the time of exposure, not diagnosis. Decades of inflation have eroded these values to a fraction of their real worth.

The Bankruptcy Impact

When a company like The Stephan Company files for bankruptcy:

1. Workers’ Compensation Carriers Keep Reimbursement Rights: If a worker receives workers’ compensation and then recovers from the asbestos trust, the workers’ compensation carrier typically has a right to reimbursement from the trust recovery. This means workers may see their modest trust payments reduced or eliminated.

2. Double Exclusion: Workers may be excluded from the bankruptcy trust if they received workers’ compensation (avoiding “double recovery”), yet their workers’ compensation benefits are grossly inadequate for the severity of their illness.

3. Future Claimants Disadvantaged: Workers who haven’t yet developed symptoms receive no workers’ compensation (no manifestation, no claim) but face uncertain compensation from a trust with limited funds and growing claimant pools.

The Economic Burden on Workers’ Compensation Systems

Asbestos-related disease has placed tremendous economic pressure on workers’ compensation systems nationwide. The numbers tell a stark story:

• Claims Volume: Despite representing a small percentage of total workers’ compensation claims, asbestos cases consume disproportionate resources due to their complexity and severity.

• Long-Tail Liability: With latency periods spanning decades, workers’ compensation carriers face ongoing exposure for exposures that occurred 30-50 years ago, making actuarial predictions and reserve-setting challenging.

• Insurer Withdrawal: Due to substantial underwriting losses, private insurance carriers have reduced the scope of workers’ compensation programs over the past two decades, cutting benefits and tightening eligibility.

• System Underfunding: Many workers’ compensation systems were never designed or funded to handle the scope and scale of occupational disease claims, particularly those with decades-long latency periods.

The Inadequacy of Workers’ Compensation for Asbestos Disease

Workers’ compensation was designed as a social compact: workers gave up their right to sue employers in exchange for guaranteed, no-fault benefits for workplace injuries. But this system fundamentally fails asbestos victims:

Limited Benefits

Workers’ compensation provides only economic damages—medical expenses and partial wage replacement. It cannot compensate for: - The terror of a terminal cancer diagnosis - Shortened life expectancy - Pain and suffering through aggressive treatments - Loss of family relationships and quality of life - The indignity of death from an entirely preventable disease.

No Deterrence

The workers’ compensation system’s no-fault structure removes any financial incentive for employers to maintain safe workplaces. For asbestos companies, it was actually less expensive to keep workers in hazardous conditions and pay limited workers’ compensation benefits than to provide proper safety measures.

No Accountability

Workers’ compensation shields employers from discovery, public scrutiny, and the full consequences of their decisions. The massive asbestos cover-up—documented through decades of litigation—remained hidden precisely because the workers’ compensation system prevented public lawsuits and discovery.

Recent Insurance Company Tactics

Insurance companies have deployed increasingly aggressive strategies to limit their asbestos exposure, with a direct impact on workers’ compensation reimbursement:

Civil Litigation Limitations

1. Policy Interpretation Battles: Insurers have fought to limit coverage under “products/completed operations” sections of policies, forcing claimants toward premises and operations coverage (which can have unlimited liability) but creating years of coverage litigation delays.

2. Settlement Reductions: As bankruptcy trusts have proliferated, defendants and their insurers increasingly seek “setoffs” against trust payments, reducing settlement values even when multiple parties share liability.

3. Evidence Requirements: Insurance companies demand extensive documentation of asbestos exposure, product identification, and causation—burdens that are difficult or impossible to meet decades after exposure.

Impact on Reimbursement

These tactics have significant consequences for workers’ compensation systems:

For Insurance Carriers: When injured workers recover from civil lawsuits or bankruptcy trusts, workers’ compensation carriers have subrogation rights—they can seek reimbursement for benefits paid. However:

• Aggressive settlement reductions mean smaller pools of money from which to seek reimbursement

• Bankruptcy trust payments are often subject to percentage payment schedules (paying only 10-40% of scheduled values), reducing reimbursement amounts

• Legal fees and costs of pursuing reimbursement can exceed recovery amounts

• Multi-party liability cases result in finger-pointing and reduced settlements

For Self-Insured Employers: Large employers who self-insure face even more direct impacts:

• They bear 100% of the cost of workers’ compensation benefits

• Their ability to recover through subrogation is similarly impaired by reduced civil settlements

• They face continuing exposure for decades-old exposures with no clear endpoint

• They cannot spread risk across an insurance pool

The result is a vicious cycle: limited civil recoveries mean limited reimbursement to workers’ compensation systems, which face pressure to reduce benefits, which in turn makes workers even more dependent on inadequate civil remedies from bankrupt defendants with limited trust funds.

The Historical Context: A Manufactured Crisis

The current crisis is not accidental. Historical evidence reveals a deliberate conspiracy by insurance companies and asbestos manufacturers to suppress knowledge of asbestos dangers:

• 1918: U.S. and Canadian life insurers stopped issuing policies to asbestos workers due to high mortality rates

• 1920s-1930s: At least 10 studies documented the asbestos-disease connection, which insurers and manufacturers suppressed

• 1928: Life insurers charged asbestos workers extra premiums due to 50% higher mortality rates

• 1935: Industry lobbyists amended workers’ compensation statutes to include asbestosis while severely limiting benefits and eligibility

• 1950s-1960s: Insurance companies and manufacturers actively conspired to prevent information about asbestos hazards from becoming public

The workers’ compensation system became a tool for this conspiracy—a way to compensate victims at bargain rates with no risk of public litigation or exposure.

Looking Forward: An Inadequate Remedy

As The Stephan Company’s bankruptcy proceeds, workers who developed asbestos-related diseases from exposure at its facilities face a grim reality:

Their workers’ compensation claims, if they can even file them within applicable time limits, will provide minimal benefits—perhaps tens of thousands of dollars for a fatal cancer. Any recovery from the bankruptcy trust will likely be reduced by workers’ compensation reimbursement rights. And the trust itself, funded by insurance settlements and limited company assets, will be divided among hundreds of current claimants and thousands of potential future claimants.

Meanwhile, the workers’ compensation system itself continues to buckle under the weight of asbestos claims, with insurers cutting benefits and employers facing mounting costs—all while providing inadequate compensation to the very workers the system was designed to protect.

The Stephan Company bankruptcy is thus not just a legal proceeding to manage corporate liabilities. It is a stark illustration of how America’s workers’ compensation system has failed as a remedy for occupational disease, how bankruptcy courts have become economic engines for managing mass tort liabilities, and how insurance companies have successfully insulated themselves and their clients from the full consequences of the asbestos disaster.

For the workers who inhaled asbestos fibers while manufacturing talc powder in Tampa, Florida, facilities decades ago, now facing terminal diagnoses of mesothelioma or other asbestos-related diseases, the bankruptcy offers neither justice nor adequate compensation. It provides only a managed, limited, and deeply insufficient response to an entirely preventable human tragedy.

The intersection of asbestos litigation, bankruptcy law, and workers’ compensation continues to evolve. This blog post reflects information available as of January 2026. Workers affected by asbestos exposure should consult with experienced mesothelioma attorneys to understand their full range of options for compensation.

The Stephan Co. Case No. 25-8937