Unions also warned they plan to boycott James Hardie products on building sites until the company fully funds a foundation it set up to handle claims by victims of asbestos-related disease, estimated at $1.5 billion.
Instead of pouring more money into the foundation, James Hardie Wednesday proposed that the NSW government legislate to set up a statutory scheme - similar to a workers' compensation scheme.
The company said it was willing to help fund such a scheme - although it did not specify how much that might cost or what other parties might have to contribute.
James Hardie said such a scheme would be "speedy, fair and equitable" and would help reduce legal costs for victims.
It would also be better for victims than simply allowing the foundation to become insolvent, the company argued.
"Assuming such a scheme could be suitably structured, and subject to shareholder approval, James Hardie Industries NV would be prepared to make contributions to that scheme," the company said.
"The manner in which the scheme would operate and how the contributions by James Hardie could be structured is something which can only be determined after consultation."
The proposal was made in James Hardies' submission to a NSW Special Commission of Inquiry, which is looking at whether the company has sought to avoid its liabilities for asbestos-related illnesses.
In 2001, James Hardie set up a foundation to handle the asbestos liabilities of two former James Hardie subsidiaries that manufactured asbestos.
The company gave the Medical Research and Compensation Foundation (MRCF) $293 million, but current and future compensation claims are now estimated by actuarial reports to be $1.57 billion.
Unions and victims Wednesday rejected James Hardie's scheme proposal and have instead demanded that the company fully fund the MRCF.
Australian Manufacturing Workers Union NSW secretary Paul Bastion described the James Hardie offer as "a cynical attempt to continue to evade its responsibilities to compensate its victims".
"What we see here is an attempt yet again (by James Hardie) to limit their liability... to short change its victims and even attempt to shift some of its liability on to the public purse," Bastion said.
"This is not about tort law reform.
"(James Hardie) are 100 per cent responsible, they have to fix it 100 per cent."
Construction, Forestry, Mining and Energy Union state secretary Andrew Ferguson said his union planned to boycott James Hardie products from building sites and would seek a wider ban from the NSW Labor Council at a meeting Thursday.
"We believe that if we jeopardise the massive profits of James Hardie, we have a got a better prospect of getting justice," Ferguson said.
Labor Council spokesman Mark Lennon said he expected the ban to receive unanimous approval.
Submissions by other parties will be made public on July 28, and inquiry Commissioner David Jackson, QC, is expected to hand down his findings on September 21.
Financial analysts say investors have already factored in the worst-case scenario into James Hardie's share price - that the commission might order it to fork out $1.5 billion or more.