Despite huge asbestos-related payouts in the US and other countries in recent years, Australian insurers say they are well placed to minimise the risks involved with asbestos exposure.
It’s no secret that the vast majority of buildings built in Australia before the 1980s contain significant amounts of asbestos products, including the building material ‘fibro’.
It’s also no secret that many of these asbestos products caused people to develop asbestosis and mesothelioma.
According to Asbestos Diseases Research Institute Director Dr Nico van Zandwijk, some 700 new cases of mesothelioma are diagnosed in Australia each year.
In recent years, the media spotlight has been on James Hardie, which was one of a number of companies involved in the manufacture, distribution and mining of asbestos and its related products, such as building materials, insulation, pipes and brake linings.
Through a special compensation fund, James Hardie and its subsidiaries have been providing millions of dollars’ worth of compensation for victims of its operations since the 1980s.
Sterling Insurance Liability Technical Manager Chris Dardaneliotis says there are two critical exposures that must be considered.The first is property damage.
“For asbestos, this nearly always involves contamination and clean up,” he says. “In fact, the single biggest claim we’ve had was an asbestos contamination of a printing business. The clean-up costs were well into six figures – but the consequential loss was also substantial.
”The second is injury that arises from individuals being inadvertently exposed to asbestos.“
These circumstances are sensitive and emotional for all concerned,” Dardaneliotis says. “But from experience, we know that establishing that the asbestos illness arose from a specific exposure to asbestos is the most difficult aspect.
“Once the cause/effect relationship has been established, then the compensation calculations are relatively academic – even though they are expensive.”
However, with some asbestos-related diseases having a latency period of up to 40 years, the uncertainty of future claims is a major concern.
“It will be difficult for asbestos victims to pursue the producers like James Hardie and CSR, so we are expecting more injury claims over the next 10-30 years,” Dardaneliotis said.
“Even though a proportion of these claims will be unfounded, significant investigative, legal and medical costs will be incurred before liability is successfully rejected.
“However, there will be some substance to the balance of the claims and it will be interesting – and possibly troubling – to see how a court will apportion damages.
“They could do this on a time- exposure basis or simply allocate all damages to the party which can affordto pay – that is, with the asbestos liability underwriter.”
Removal of asbestos
Insurers also have to account for the actual extraction of the asbestos material, according to Tudor Insurance Managing Director Mark McNamara.
700 new cases of Mesothelioma are diagnosed in Australia each year.
Insurers have to ensure that asbestos contractors and others are properly accredited and licensed; and that the asbestos is properly identifiedand removed in a ‘safe’ fashion in accordance with specified regulations.
“The material must be then transported to an EPA-controlled environment such as a waste recycle station or landfill site,” McNamara says.
Contractors must have a general liability cover under a specific dedicated occupational liability policy setup as well as cover taken out for their own employees.“
A commercial operator has to be qualified to remove two types of asbestos: the bonded asbestos found in eaves and roofs; and the more fibrous material, such as insulation and lagging, which is found around hot water pipes,” McNamara says.
There are specific policies available for industrial, commercial and residential asbestos removal. Then there is the procedural expectation, which deals with the method of removal and transportation.
But, the bottom line is any asbestos removal – whether at an industrial, commercial or residential site – should not proceed with without the relevant insurance cover and appropriate accreditation and qualifications.
Checking the policy
Clients would need to ensure their entire business was covered against potential statutory fines and penalties.
Don McKenzie of Stream Group says that it’s important for insurers to carefully check the wording of liability policies held by their trade providers, not just whether they are licenced to undertake asbestos work.
“Most standard public liability policies in Australia have limited or no cover for asbestos,” he says. “Whilst a provider may be licenced to undertake asbestos work, they may not be adequately insured.”
Take the example of a roofing contractor undertaking an asbestosre-roof. If a piece of asbestos falls from the roof and dints the insured’s car, many standard liability policies won’t cover the damage to the car because the material hitting the car is asbestos.
An even greater risk is if the roofing contractor causes contamination of the insured’s property. If the liability insurance of the contractor does not cover asbestos-related issues then the insurer will need to undertake the decontamination and recover from the roofing contractor.
Fines and penalties
McNamara says civil penalties can easily ruin a business – occupational health and safety fines can be as high as $550,000 and environmental fines as high as $5.5 million.
According to Liberty International, existing public liability and professional indemnity policies would most likely exclude coverage for fines and penalties.
Clients would need to ensure their entire business was covered against potential statutory fines and penalties.
McNamara says insurers currently inspect asbestos removalists to find out their experience, qualifications, and the type of material to be removed.
“Without all the boxes being ticked we turn them away ... it’s as simple as that,” he says.
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