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Inspecting the worst

Published 05/10/2007

The specialised sector of asbestos removal poses a dangerous threat to inspectors, maintenance workers and anyone who comes in direct contact with the deteriorating material. However, demand for insurance is still small as the industry continues to find its feet, writes Jamie Dunkley

To many observers, Hiscox’s announcement that it was set to launch a professional indemnity scheme for asbestos inspectors earlier this year answered the challenge set by fellow Lloyd’s insurer Canopius to help market the burgeoning product (Post, 15 February, p2).

Hiscox’s PI move was designed to take advantage of the latest asbestos regulations, which came into force in November 2006. These now require mandatory training for anyone liable to be exposed to asbestos at work, including maintenance workers and others who may come into contact with asbestos.

When asbestos work is now being carried out, the regulations also require employers and the self-employed to prevent asbestos fibre exposure. In short, the spread of asbestos must be prevented with the regulations specifying the work methods and controls to be used.

Simon Sheaf, actuarial director with Grant Thornton’s financial services group, says the future cost to the UK insurance industry of claims arising from exposure to asbestos will be between £4bn and £10bn.

He explains: “When a block of asbestos is in a good condition, it does not pose any danger as it will not release any dust particles into the air. It becomes dangerous if it is friable, which means it can be reduced to powder by hand pressure and that a touch can be sufficient to cause particles to become airborne. Once airborne, the particles can be inhaled, which can eventually lead to the development of an asbestos-related disease. A block of asbestos that is in a good condition can deteriorate over time to the point when it is friable.

“This is why the removal of asbestos is such a specialised area. Even if the asbestos is in a good condition, great care has to be taken not to expose members of the public or the workers removing the asbestos to dust particles,” adds Mr Sheaf.

Broker Richard House Group, however, believes it is no longer that difficult to find insurers willing to offer this cover with four openly offering it, and others willing to consider it on a case-by-case basis. However, the potential market remains small.

Group marketing manager Barry Wicks explains: “Demand for insurance on type one asbestos surveys is tiny. A very small number of individuals take the P402 course each year as there is little to be earned by professional surveyors focusing on type one surveys. Individuals taking the P402 course are employees of large organisations and local authorities wanting to conduct their own type one survey and can cover liability within their own arrangements. There are a small number of surveying and managing organisations requiring type one survey cover.

“On discovering possible asbestos, organisations tend to go directly to type two and three surveys. The number of established firms conducting these surveys is not large and new firms are scarce. Established firms have their insurance in place.”

Interestingly, RHG describes the Health and Safety Executive, which regulates the area, as “toothless”. It says evidence of enforcement cannot be found and is only “anecdotal” – meaning fewer firms feel the need to add cover. Despite this, it says it has identified potential within the marketplace and has been appointed to, or is in dialogue with, those organisations operating legitimately seeking specialist advice.

Heath Lambert, which has been engaged in the sector since the launch of ACAD Insurance Solutions in February 2006, says it has been able to open up the market place over the past year due to the “very high standards of health and safety and technical training evidenced by surveying and inspection business”.

Victor Rae-Reeves, a partner at Clyde and Co, says he expects the number of claims to rise significantly and argues that the focus should not solely be on bodily injury claims.

This was highlighted in a recent legal case after Southfield School for Girls in Kettering contracted an insured company, Briggs and Forrester Electrical Services, to undertake some general works. As asbestos ceiling tiles were present at the school, the firm contracted the removal of the tiles to a specialist asbestos subcontractor B&W Asbestos Removal Services.

“As a result of B&W’s negligence, asbestos was released into the atmosphere causing an enormous disruption and clean-up cost resulting in a claim of circa £6m from the school,” claims Mr Rae Reeves. “The asbestos specialist relied on its public liability cover but, interestingly enough, we also sued the architect for a contribution on the basis that they failed to highlight the problems with the asbestos tiles and this triggered their PI cover.

“This is not the only case of huge clean-up costs being generated through such negligence and it has the capability to be a very expensive area for insurers. Having found the asbestos removal industry to be somewhat cavalier, I hope insurers will be taking all precautions to ensure inspectors are accredited and have proper procedures in place.”

Double prosecution

In this case both the insured company and the subcontractor were prosecuted by the HSE. Mr Rae-Reeves claims insurers need to be aware of the potential cost of defending such prosecutions.

Emma Costin, partner at Simpson Millar, adds: “From the claimant lawyer’s perspective, an asbestos inspector – irrespective of any mandatory training – would be someone who a court would probably find to be well aware of the danger of asbestos inhalation, however slight, and, therefore, have a high duty to take care for their own safety.

“Given this knowledge, one would assume that any exposure that did occur would be minimal, possibly due to a failure in equipment or fault of a colleague. If so, the most likely bodily injury to occur (some 40 years later) would be mesothelioma. If the individual concerned could prove that there had been exposure, albeit slight, then they would have a claim against the company.”

Although there have been developments in the PI market for asbestos inspectors over the past year, it is clear that this is a market still finding its feet. If the HSE strictly invokes the regulations that were revealed last year, it is likely the insurance industry will find its role becoming ever more significant.

This article has been reprinted with permission of the Claims Standards Council

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