Under the 58-41 vote by which the Senate failed to garner the 60 votes to overcome a budget point of order, the bill is now sent back to Sen. Specter's committee.

The original vote to recommit was 59-40, but Sen. William Frist, R-Tenn., Senate majority leader and a supporter of the bill, moved to leave his options open to further floor action by changing his vote to “no.”

Sens. Specter and Leahy said after the vote they still have hopes of resurrecting the measure.

“We have just begun to fight,” Sen. Specter said in a statement. He said Sen. Inouye, D-Hawaii, the missing senator, told him he would vote to waive the budget rule and permit debate to continue, meaning “we may win this one yet.”

One of the most visible opponents of the bill made clear after the vote that the industry will continue its efforts to create legislative alternatives to the present claims resolution system that it can support.

Chris Winans, a spokesman for American International Group, the nation's largest insurer, said his company is “pleased with the Senate's action as it opens an opportunity now to craft an alternative bipartisan medical criteria solution to the nation's asbestos litigation problem.”

Sen. Specter's legislation would create a $140 billion trust fund that an administrator within the Department of Labor would use to compensate claims resulting from exposure to asbestos in the workplace.

The fund would be financed by contributions from defendants and insurers over a 27.5-year period. After that, claims would revert to the tort system, a sticking point for the insurance industry as well as its supporters in Congress.

Besides AIG, industry opponents included The Hartford; Chubb; Allstate; American Re, a reinsurance provider; Chubb Corp.; Liberty Mutual; Nationwide Insurance; and Zurich Financial.

Insurance industry supporters of the bill included St. Paul Travelers, MetLife and ACE.

Other opponents included trial lawyers, the AFL-CIO and some large corporations facing large asbestos claims. But many medium-sized companies strongly support the bill, according to several insurance industry sources.

Dennis Kelly, a spokesman for the American Insurance Association, said in reaction to the vote, “We regret that the Senate was unable to pass meaningful asbestos reform legislation.

“Insurers have long agreed that there was a need to address out-of-control asbestos litigation,” Mr. Kelley said, adding that AIA was among the first to work with former Judiciary Committee Chairman Orin Hatch, R-Utah, and Majority Leader Frist.

Mr. Kelly said that under Chairman Specter, and Ranking Minority Member Leahy, AIA participated in numerous stakeholder meetings, all in pursuit of meaningful reform.

“Regrettably, the AIA has had to oppose the current bill, but has worked to seek improvements that would enable our membership to support the bill,” he said. “AIA remains hopeful that Congress would continue in its pursuit of meaningful reform.”

David Winston, senior vice president for government affairs for the National Association of Mutual Insurance Companies, responded by saying, “NAMIC commends the Senate's action this evening to reject the Specter-Leahy asbestos trust fund legislation.”

Mr. Winston added, “NAMIC believes it is critically important that Congress immediately address asbestos litigation reform.” He explained that NAMIC opposed the bill because of its numerous flaws, “among which are leakage to the tort system and a lack of certainty and finality.”

The bill was shipped back to Sen. Specter's committee on a budget point of order raised by Sen. John Ensign, R-Nev.