Blog Question on the Asbestos Exclusion

Asbestos Warning SignI received the following question: #insurance #liabilityinsurance #casualtyinsurance #asbestos

Hi Allan,

I am trying to establish when & how the asbestos exclusion clause was introduced to the Australian Insurance market. Any direction you may provide in this instance will be appreciated.
Kind Regards,

Andre [surname and email provided]

I wrote back to find out on what type of policy, as there are exclusions in both liability and in some property policies. Andre confirmed it was in liability policies that he was interested. I then replied as follows;

Hi Andre,

From memory, insurance companies began writing exclusions for asbestos in the 1980’s, around the same time that asbestos was finally banned in Australia, which was 1985.

The exclusion was originally driven by the reinsurance market, due to the frequency and increasingly massive awards that were being handed out to the unfortunate victims of the terrible disease(s) that breathing asbestos causes.

Asbestos was mined in Australia and was widely used for fire protection, insulation/lagging, brake pads and in building materials. It was a very popular building product, due to its properties of not being effected by white ants or vermin, rot, rust etc; particularly for buildings near the ocean or in corrosive environments.

The reality is that it is a great product, but for the terrible effect it has on people once it is breathed. Regrettably, the product is still causing illness and death to this day in Australia, including among those in the insurance industry, who came in contact with it often 20 or more years ago.

While it has been banned in Australia, asbestos is still in our community in most buildings that were built or renovated between the 1940’s and 1985, unless it has been specifically removed. Hence the health hazard to the public and, therefore, the exposure for insurers continues.

This is not so in all countries and there are parts of the world where the asbestos exclusion is not so harsh, as it is in Australia and cover at various types and levels have been able to be purchased from about 1990.

One thing that I am critical of with the typical Australian exclusion is that it is so all encompassing. A typical exclusion reads:

2. Asbestos

For any liability whatsoever for any claim or claims in respect of Personal Injury or Property Damage directly or indirectly arising out of, resulting from or in consequence of, or in any way involving asbestos, or any materials containing asbestos in whatever form or quantity. [emphasis mine]

Where I think this is going too far is say, someone such as a third party is up on an asbestos roof of a building and they fell through it, or off the roof for some reason and broke their arm. The owner of the building would have no cover to defend themselves against an action by the injured third party, nor would they have protection for any damages awarded based on the standard exclusion.

The real purpose of the exclusion is to stop claims arising through the breathing in of asbestos fibres, not all claims arising from the asbestos per se. To me, there is no greater risk for the underwriter in this example than if the roof was PVC or fibreglass.

As such, when I am asked to review an insurance program, I seek and in most cases am granted, a write back for cases where the claim is for property damage or bodily injury where it is not associated with a disease caused by asbestos.

I hope this answers your question.

Allan

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