From ABI Seminar on the availability of insurance for asbestos related risks and the impact of the new asbestos regulations
The ABI provided a series of well qualified and experienced speakers to address this topic from a selection of viewpoints. The delegates fortunate enough to attend came from a wide range of professions including consulting engineers, construction contractors, insurance brokers, insurance underwriters, research bodies, trade associations, government agencies, solicitors, surveyors asbestos removal contractors, regulators and analytical laboratories.
The scene was set by Bill MacDonald of the HSE who outlined the historic and future problems associated with asbestos. Currently asbestos related deaths run to around 3500 in the UK and are expected to rise until 2011, when the effects of improved working conditions and asbestos prohibitions will begin to kick in. However the nature of how the effects will diminish cannot be predicted. The new Regulations (Control of Asbestos at Work Regulations, 2002) react to conditions now, which indicate the greatest risk is due to occupational exposure within buildings, especially for workmen involved in internal and maintenance trades. The Regulations only apply to non-domestic properties
The Regulations impose a ‘Duty to Manage’ asbestos risk by assessing existing conditions, recording the findings, preparing action and management plans and advising/cooperating with others with respect to asbestos risks. The ‘Duty Holder’ is the person with contractual responsibility for maintenance repair of the building and may be the owner, occupier, managing agent, but in all cases will be ‘in control’ of the building.
The HSE advice is to: Adopt precautionary approach -NOW Carry out condition surveys – SOON Plan compliance strategy -START NOW These should take into account that compliance is a rolling process and that expenditure should be proportional to the level of risk. The HSE website has relevant information and guidance www.hse.gov.uk/campaigns/asbestos. HSE Information line 08701 545500
The background to why asbestos has become a major insurance issues was provided by Helen Hatchek of Royal Sun Alliance. The asbestos insurance market is global and it is the influence of the US experience, which is driving the market at present. Public liability claims are currently at $200 Billion and rising (equivalent to the twin towers x2), with average claims T $6-6.5Million. Under US law, most claims fall under public/product liability as employers cannot be sued. As such all industries in the supply chain are potentially affected. Class actions are normal, and due to joint and several liability, claimants target the defendant with most ‘funds available’. There has also been successful ‘unimpaired’ health claims, where compensation has been awarded for ‘worry’/ stress and cost of on-going health screening.
Although, all claims to date are related to Employers liability and judges currently set awards which is less emotive that those set by a jury, the UK market is showing signs of following the US. This has led to concern that additional claims may arise through public liability due to subrogation from Employers liability claims, ‘shake-down’, neighbours, product liability and corporate responsibility. The market has reacted by re-insurers excluding asbestos in its entirety, insurers have introduced exclusion and limitation wordings and in a market of declining appetite, some insurers have removed all cover, leaving limited availability.
Matt Farman of Howden Insurance Brokers discussed the developments in the PI market. They offer a bespoke scheme for UKAS accredited laboratories.
The current insurance market is hard with high premiums and restricted cover, but it should be borne in mind that insurers are commercial bodies and do not need to be exposed to high risks. Asbestos exclusions appeared in 2003, driven by the re-insurance market in light of huge asbestos related claims and losses suffered by the Employers Liability and Public Liability insurers worldwide, with an even more unsure future. In 2003 RICS voiced concerns about the lack of asbestos cover and set up a working party .to find a solution. This involved the asbestos cover being excluded by the re-insurers but with a ‘write-back’ clause added by the insurers reinstating some limited and very restricted cover. Typically this is around £250,000 on aggregate, ie the re-insurance limit. It is generally only available at the discretion of the insurers. The cover is limited to claims arising from negligence for rectification, remediation and loss in value, but excludes consequential loss and any form of bodily injury.
In the same way that ‘Pollution and contamination’ cover was originally withdrawn and the market softened so that it is now currently available on a restricted and ‘aggregated’ basis, asbestos cover may follow the same path, depending on how the re-insurance market responds to future events and information. However, in order to achieve the best available cover currently, professionals, their governing bodies and trade associations need to be pro-active to demonstrate sensible levels of risk assessment and management. This may include only offering suitable terms and conditions to clients, with restricted cover based on a multiple of fees and excluding consequential loss, using only experienced and qualified staff.
Insurance from a buyers perspective was discussed by Kevin Goodwin of AIRMIC Contractors Group. He noted that insurance was generally not available, but due to time lags over renewal dates, some contractors still had cover whilst others were unable to provide on-going cover, except where a ‘write-back’ clause could be negotiated. There is also a wide variation in the exclusion clauses seen with no apparent consistency.
In France and Germany, the problem is being addressed by government funding being provided to cover personal injury asbestos claims, but the UK government has not shown any sign of adopting a similar approach. Indeed, tightened regulations, which generate more asbestos ‘activity’, have coincided with the insurers pulling out of that market.
Liabilities with respect to asbestos for many can arise from a variety of sources. Typically those most affected are likely to be employers/property owners, consultants, contractors (licensed or not) and facilities manager. Insurance policies in all areas have responded to the asbestos risk.
Employers Liability: may exclude asbestos cover, but cover may be found based on demonstrable risk management, but unlikely for asbestos contractors.
Public Liability: possible total exclusions, of which there are numerous versions, with possible ‘write-backs’.
Professional Indemnity: check wording of exclusions, PI liability will probably be covered but all health hazard risk excluded.
Director and Officer Insurance: -exclusions possible. Beware of clauses such as ‘Board’s failure to act under Regulations.’failure to maintain insurance’ (which may not be available!),
Beware of ‘silence’ within any policy. This should be queried.
In all cases, to demonstrate risk management to be able to obtain the best terms available, compliance with Regulations 9,10 and 15 of the CAWR 2002 will be essential ie employer ensuring adequate training of staff, and limiting potential exposure to minimum levels. However, where insurance is difficult and costly to obtain, there is potential for growth of the ‘black market’ contractors, ie with no insurance.
Roger Flaxman explained how RICS, as a professional body representing members dealing with asbestos, are approaching the problem associated with lack of available cover for its membership. Generally chartered surveyors face a high risk/reward ratio and are in competition with lesser qualified /experienced ‘inspectors’. P402 is seen as a low technical standard and RICS members believe that they would be expected to provide a higher standard. If the surveyors work to a higher standard and hence risks are reduced, proof of this should make obtaining affordable insurance a greater possibility. To this end RICS have introduced the National Individual Asbestos Certification Scheme (NIACS). This requires proof of suitable professional qualifications as a foundation to membership, supported by increased training requirements, and individuals (not forms) being examined and audited on technical capability related to both asbestos and building construction. It is further proposed that the NIAS qualification will be linked to UKAS accreditation.
The introduction of the CAWR Regs 2002 has coincided with re-insurers withdrawing from the asbestos insurance markets due to a huge potential for future asbestos related claims worldwide. This has resulted in insurance policies all excluding asbestos. The only way cover can be obtained is under ‘write back’ clauses where insurers provide very restricted and limited cover aggregated within the limit of the re-insurance requirements. This cover does not include any bodily injury claims. This insurance is also only available at the discretion of the insurers , typically to established clients who have a good no-claims record and demonstrate an adequate level of risk assessment and management with respect to asbestos.
The market is currently uncertain and therefore hard. Once the true level of risk becomes clearer and the insurance purchasers recognise that there is an onus on them to educate the insurers and re-insurers of the actual asbestos related activities and associated risks for which cover is required, it may be possible to purchase more bespoke cover. This is the aim of qualifications such NIACS as proposed by the RICS.
However it is unlikely that cover for ‘bodily injury’ will ever become available and there is a case for governmental provision to cover some of the future uninsurable compensation claims arising from asbestos issues.
Report by Jo Strange Card Geotechnics
Footnote: Policy wordings are very variable and must be studied carefully.