Negotiations over an asbestos settlement have hit a new snag in recent weeks, as several key members of the alliance of businesses and insurance companies working on the bill have pulled out, advocating instead a fresh start to the already decades-old dispute.

The companies, nervous about the escalating price tag for a proposed, federally run trust fund to compensate asbestos victims, are fighting to drastically alter it, or scrap it altogether. If the trust fund is scrapped, the breakaway faction favors setting medical criteria for plaintiffs and continuing to allow cases to be heard through the courts.

The departures come two years after then-Senate Judiciary Chairman Orrin Hatch (R-Utah) convinced business and insurance lobbyists to unite behind the trust fund approach, despite prior divisions over whether to keep asbestos claims in the courts.

The companies that have split left two groups that backed the Hatch approach: the Asbestos Alliance and the Asbestos Study Group. The renegade companies now belong to a loose alliance called the Coalition for Asbestos Reform.

Federal Mogul Corp., an auto parts manufacturer and a leading member of the Asbestos Alliance, was the first to publicly break from the group. In an April 2004 letter to Senators, the bankrupt company explained that the Hatch-sponsored bill then under consideration would saddle the company with an $82.3 million annual payment and threaten its re-emergence. As the size of the proposed trust fund grew, so did the company’s obligation to it, and in December, lobbyists for the company helped organize the Coalition for Asbestos Reform.

Now, the group counts about 35 companies among its members, including such corporate giants as Exxon Mobil, DuPont and Foster Wheeler and such insurance powerhouses as AIG, Chubb and Liberty Mutual.

Some lobbyists close to the issue say the fracture among business and insurance interests threatens to derail the latest efforts at a Congressional fix to the asbestos problem.

Sen. Arlen Specter (R-Pa.), the committee’s current chairman, has tried to rush an asbestos bill through his committee as part of a package of legal reform measures. But since he took the gavel in January, Specter has consistently delayed a markup while he attempts to round up Republican support.

“What we thought would happen is the Specter process would hit a wall — and it has,” said a leading lobbyist with the coalition. “There’s no question in my mind the establishment of a business-and-insurance coalition opposed to that approach has had a galvanizing effect on the Republican side of the aisle and dramatically shifted their thinking. They now recognize the business community is not united behind the trust fund.”

But several lobbyists and Congressional aides disputed that contention, maintaining that Committee Republicans remain committed to working with Specter and that the bill could be put in final form soon after the spring district work period.

Sen. John Cornyn (R-Texas), who was tapped by Senate Majority Leader Bill Frist (R-Tenn.) to watch the issue, is optimistic, spokesman Don Stewart said.

The asbestos problem dates to the post-World War II era, when the material was used as an insulator and fire retardant in hundreds of products.

It was later discovered that the fibrous material lodges in the lungs, causing a deadly form of cancer. In the three decades since its harmful effects were discovered, more than 600,000 lawsuits have been brought against companies that used the material, according to a 2002 study by the Rand Institute of Civil Justice.

About 72 companies plagued by asbestos liabilities have gone bankrupt, according to the American Academy of Actuaries.

The debate now under way has high stakes, because of the huge sums involved, as well as the connection to some of the most powerful industries in Washington.

The Specter bill proposes to create a $140 billion trust fund, financed by insurers and corporate defendants, to pay claims. In exchange, the legislation would grant defendants some protection against future legal liability.

And the insurance and business industries aren’t the only lobbies involved: Trial lawyers have angled to keep caps off the fees they collect for the cases, while labor union groups have tried to increase the size of the fund.

The Asbestos Alliance, a coalition of businesses and insurance companies housed at the National Association of Manufacturers, has taken a lead position backing the Specter approach.

Darren McKinney, spokesman for NAM, said it was only natural that some of its members would disagree with its approach.

“If there are varying opinions about this bill in the business community, that would make this no different than any other bill that’s ever passed through Congress,” he said.

But one lobbyist close to the negotiations said NAM members who have broken ranks to join the coalition have registered their disapproval with their association’s lobbying on the issue.

A Feb. 7 letter from the association — cosigned by the Asbestos Study Group, the American Chemistry Council and others — reconfirmed NAM’s commitment to a solution based on a trust fund. But the letter lacked the association’s trademark letterhead — a result, the lobbyist said, of several coalition manufacturers pressuring the group to withhold it.

McKinney said manufacturing companies opposed to the association’s approach “have a right to disagree.”

“We will continue to make our case and keep the tent as large as possible,” he said. “But we’ve got to get this broken system fixed.”

A lobbyist with the coalition said member companies would leverage the grass-roots strength of their more than 250,000 employees to let Members home for the recess know of their opposition to the draft bill.

And when they come back, the lobbyist said, coalition members “will work Judiciary Committee members and leadership very, very hard. We’re going to knock down this version, and ensure our views are properly considered in connection with the second.”

The group is being coordinated by Foster Wheeler consultants in New Jersey and by lobbyists at Preston Gates Ellis & Rouvelas Meeds in Washington.