Asbestos-related risks are now excluded from virtually all professional indemnity insurance policies. So what help is available and what can consultants and their clients do to assess the risks and availability of cover?
01 April 2005
Asbestos-related risks are now excluded from virtually all professional indemnity (PI) insurance policies. It may be possible for some consultants to buy back some cover (limited both in amount and the risks covered) but this is likely to be very expensive. This is due in part to the hard insurance market which has seen insurers limiting PI cover generally. Insurers are particularly shy of asbestos-related claims because of the extraordinary level of personal injury claims, past, present and expected in the future, arising out of the presence of asbestos, primarily in the United States (but elsewhere too). This has led to reinsurers refusing to cover such risks. With no reinsurance behind them, primary insurers can only offer limited cover. This will affect all consultants, not just those who undertake asbestos inspections, surveys or reviews, but any consultant who may come across problems with asbestos in the course of their work.
What cover is available?
The cover that is available varies between insurers and from policy to policy. It may have been possible to buy cover at the last renewal that will not be available at the next - the position is not static. Some consultants will find that they are not able to obtain any cover, for personal injury or any other claims.
Some consultants may be able to buy limited cover, for example for a costs-inclusive, aggregate amount or for negligence claims only. In this event, there would be no cover for:
death or bodily injury
reduction in value of land (as opposed to buildings)
loss of profits, loss of use or relocation costs
damage to other areas of the property, rather than the area which required reperformance or remediation
delays to project programme, for example as a result of finding asbestos
Because cover is excluded and then bought back, the burden of proof would be on the consultant to show that any claim comes within the cover afforded. The wording of the policy or endorsement is therefore critical. Moreover, PI insurance is written on a claims made basis, meaning that it is the cover available at the time the claim is made that is relevant.
Regulation 4 applies to non-domestic premises. It imposes a duty to ensure that a suitable and sufficient assessment is carried out in order to ascertain whether asbestos is or is likely to be present and if so, to take appropriate measures. The duty is imposed not only on owners and occupiers but also on those with a contractual responsibility for maintenance and repair (such as facilities managers and project managers), such as the dutyholder. The regulation sets out specific steps that a dutyholder has to take, both in relation to the assessment and in the event that asbestos is found to be present or likely to be present. Failure to comply could give rise to criminal prosecution for breach of health and safety law. Further, if injury or damage results, it could give rise to civil liability for breach of statutory duty or breach of contract.
What can be done?
Both consultants and their clients need to realistically assess the risks and the availability, or more likely unavailability of insurance cover. Consultants will need to:
Discuss with their brokers the cover that they have now and are likely to be able to get in the future
Consider the work the practice does, their exposure to asbestos-related claims and the liabilities the practice is prepared to accept
Explain the position to their clients and negotiate appropriate terms of engagement
Clients will need to:
Discuss with their consultants the type of cover they have now and that they are likely to be able to get in the future
Consider their exposure to problems related to asbestos
Consider whether or not asbestos specialists need to be employed
Negotiate appropriate terms of engagement
The terms of engagement should be clear about the scope of the consultants' duties. If the consultants are not specialists, then it may well be appropriate to exclude any responsibility for advising on or carrying out work in relation to asbestos. In the light of the restriction on cover to claims in negligence only, it would therefore not be appropriate for the contract to include any strict liabilities.
Any limitations on the consultants' liability should be agreed and the terms of engagement reflect the agreement. If the consultants decide to take on no duties in relation to asbestos, it may be appropriate for all liability to be excluded. If however some liability is accepted, the contract might limit liability to a fixed amount or to the amount of insurance cover, if any, available to the consultants in the event of a claim (this is sometimes called an 'evaporation clause'). This will offer no protection to the consultant for personal injury claims, for which it is not possible to exclude liability.
Consultants cannot contract out of or modify statutory obligations under Regulation 4, if they have any. But what they might be able to do is limit the circumstances in which contractual liability could arise. In addition, limitations in their terms of engagement will not protect them against any claims by third parties (unless of course their clients have given an indemnity against such claims).
This is an edited version of a liability briefing published by the Construction Industry Council (www.cic.org.uk/liability)