Understanding the ramifications of new Asbestos Condition
One Insurer has introduced a new Asbestos Condition that they impose where they are aware that the insured building contains asbestos.
The wording of the new endorsement reads:
(a) This policy only insures asbestos physically incorporated in an insured building or structure and then only that part of the asbestos which has been physically damaged during the policy period by one of these Listed Perils:
Fire; smoke; explosion; lightning; windstorm; hail; direct impact of vehicle aircraft or vessel; riot or civil commotion; vandalism or malicious mischief; or accidental discharge of fire protective equipment.
This cover is subject to all limitations in the policy to which this exclusion is attached and, in addition, to each of the following specific limitations:
- The said building or structure must be insured under this Policy for Damage by that Listed Peril.
- The Listed Peril must be the immediate, sole cause of the Damage to the asbestos.
- The Insured must report to Insurers the existence and cost of Damage as soon as practicable after the Listed Perils first damaged the asbestos. However, this Policy does not insure any such Damage first reported to Insurers more than 12 (twelve) months after the expiration, or termination, of the policy period.
- Insurance under this Policy in respect of asbestos shall not include any sum relating to:
(i) any faults in the design, manufacture or installation of asbestos;
(ii) asbestos not physically damaged by the Listed Perils including any governmental or regulatory authority direction or request of whatsoever nature relating to the undamaged asbestos.
(b) Except as set forth in the foregoing Section, this Policy does not insure asbestos or any sum relating thereto.
This endorsement considerably reduces the cover afforded by the standard Mark IV and Mark V ISR wordings.
In simplest terms, the ISR policy provides cover to reinstate buildings damaged by a peril that is not excluded to a condition equal to but not better than new. The policy goes further than this and provides cover to meet any requirements of any local government or statutory authority. In most jurisdictions, the WorkCover Authority will require the removal of all the asbestos material from the site including asbestos cement roofing and wall sheeting once the building suffers damage to this material.
The introduction of this endorsement removes these long standing covers afforded by the ISR policy and which have been included in the price and only offers cover for the area of asbestos cement material actually damaged.
Further there is a lot in the endorsement about the asbestos being in sound condition before the event. This I see leading to heaps of disputes between an adjuster who is seeing the material after a storm or fire and insured who may or may not be familiar with it beforehand.
I would be very reluctant to accept this endorsement for a client and if I could not get it removed I would seriously consider whether I would change insurers.