Owens Corning, driven into bankruptcy by personal injury lawsuits, is set to find out what it will cost to settle hundreds of thousands of claims by people who say that asbestos in the company’s products made them sick.

District Judge John Fullam began hearings yesterday in Philadelphia to calculate how much Owens Corning, the largest American insulation maker, may owe to at least 200,000 people who have lodged claims. An estimated 650,000 people could become sick in the future, say plaintiffs’ lawyers who argue Owens Corning should pay at least $18.6 billion. Creditors of the bankrupt company, led by Credit Suisse First Boston, contend Owens Corning’s asbestos liability is as low as $1.4 billion.

Mr. Fullam’s decision will determine how much is left over after Owens Corning’s bankruptcy for creditors and investors once any asbestos-injury claims are paid. The decision may also set a precedent for asbestos claims made in the bankruptcies of Federal-Mogul Corporation, USG Corporation, W.R. Grace & Company, and other companies, said lawyers involved in those cases, including Andrew Rahl, who represents Owens Corning bondholders.

“Everyone is going to be watching this,” Mr. Rahl said. “There are billions of dollars at stake in Owens Corning and tens of billions at stake with the other asbestos defendants.”

Owens Corning, which stopped making asbestos products 33 years ago, is among at least seven public companies advancing bankruptcy-recovery plans in federal court. Federal-Mogul, USG, and W.R. Grace also plan to have cost estimation hearings on claims. Injury suits have forced at least 69 companies that once made products with asbestos into bankruptcy since 1982.

“You’ve got this huge unliquidated collection of claims and that creates arguments,” said a lawyer for asbestos claimants in a dozen corporate bankruptcies, Elihu Inselbuch. “You have to litigate what the claims are worth.”

President Bush said in a January 7 speech that “frivolous and junk lawsuits,” including some asbestos claims, cost the American economy about $240 billion a year.

“We’re spending $80 billion on asbestos litigation, and that could end up being $200 billion over time,” he said.

As many as 90% of all asbestos-injury claims filed in recent years are without merit, according to a study released in January 2004 by a Benjamin Cardozo School of Law professor in New York, Lester Brickman.

Mr. Brickman, who is being called as a witness for creditors in the Owens Corning trial, said a massive effort by trial lawyers to recruit clients is behind the surge in new injury cases.

We’re looking for a “fair allocation of the value of Owens Corning,” said Martin Bienenstock, a lawyer representing Credit Suisse, which is the agent for the bank group. “If improper claims were paid in the past, they should not be paid in the future. That’s the big issue for the court to decide.”

Asbestos, a heat-resistant material used in insulation, auto parts, and construction products, causes respiratory illness and has been linked to a rare and particularly lethal form of cancer that can surface years after exposure.

At least 700,000 asbestos claims were filed against 8,400 American companies between 1982 and 2004. That number may go as high as 3 million, according to the American Academy of Actuaries.

Litigation has cost $70 billion so far, including the $5 billion Owens Corning paid out before filing for bankruptcy in October 2000. The Rand Institute for Civil Justice estimated the total cost for companies could reach $265 billion.

Owens Corning and other large bankruptcy cases are moving through the court system as Congress mulls a $140 billion national trust fund to compensate asbestos injury victims and end the litigation. The possibility of legislation is complicating court proceedings as creditors and investors push for delays.

“We would be a year and a half further along if Congress hadn’t started considering asbestos bailout bills,” said Mr. Inselbuch.

A draft bill before Congress would prevent a majority of a company’s shares from being used to pay asbestos claims. Companies forced into bankruptcy by asbestos suits must now give injury claimants at least a 50.1% stake in the reorganized company. Under the legislative proposal, companies in bankruptcy will pay about 1.5% of 2002 revenue over a 30-year span. In the case of Owens Corning, that would total $74 million.

Mr. Fullam has scheduled testimony on the cost issue for up to seven days. He may rule on the matter at the trial’s conclusion or write an opinion later.

Completing the claims estimation hearing is a “key step” toward ending a bankruptcy in its fifth year, said Owens Corning’s general counsel, Stephen Krull.

Owens Corning in June reached a preliminary compromise with asbestos claimants on a recovery plan. It measures the company’s injury liabilities at $16 billion.

The company’s proposal would give bondholders, lenders, and suppliers about 38.5% of the $3.2 billion they’re owed. Asbestos claimants would get nearly all of the company’s other assets, aside from stock options going to workers and management. Shareholders would get nothing.

Owens Corning will be a neutral contributor at the hearings as asbestos claimants square off with the company’s creditors and investors, Mr. Krull said.

The company “isn’t advocating a specific asbestos number in our estimation hearing,” he said. “Our role in the hearing is to ensure that Judge Fullam receives all of the data and information that he needs to render a fully informed decision.”