The construction industry faces a peak in the numbers of sufferers of asbestos-related  diseases. David Wynn, partner at law firm Halliwells discusses the implications for employers.

ASBESTOS and its bi-products were regularly used in the construction industry from the 1930’s, and its use extended well beyond its usual recognised insulation purposes, in cladding, partitioning, roofing, ceilings and drains.

It has become more apparent in recent years that an increasing number of asbestos-related claims are uninsured.

This has a significant impact upon company balance sheets, particularly if the claim is of significant value. Given that symptoms of asbestos-related diseases only manifest themselves years after the initial exposure, asbestos liabilities are effectively hidden until the claim is notified to the company or its insurers.

After 1970, the majority of construction companies should have had Employers’ Liability Insurance in compliance with the Employers Liability (Compulsory Insurance) Act 1969.

However, some companies, particularly smaller building firms, did not carry employers’ liability cover prior to that date and therefore there is potential for a gap in cover for claims arising from exposure during the 1940s, 1950s and 1960s.

Not only is there a potential problem with lack of insurance. The company may have paid for insurance cover during those periods but if the insurance company has since gone into liquidation cover is no longer applicable.

All construction companies are potentially at risk of non-insured asbestos liabilities. It may well be the case that small builders have been taken over or merged over the years with larger companies and ultimately amalgamated into larger companies, which are recognised household names.

The longer a company has been in existence the greater its potential liability and therefore a greater recognition of the risk needs to be addressed.

With asbestos claims expected to peak within the next ten years and damages for the same ever increasing, it is imperative for the construction industry at all levels to recognise the potential risks and costs. In the example above, if the surveyors’ and architects’ documentation had not been located, then the claim may well have put a family business that had been trading for over 40 years on to the scrap heap.

The construction industry and its insurers, brokers and legal advisors have over the years reacted and dealt with numerous claims arising out of asbestos exposure.

The insurance industry now looks to be more pro-active with its approach to these claims.

Processes will need to be developed to assist in forecasting the potential risks from asbestos cases. There is no doubt that archived files and plans will be helpful evidence in a claim but set against that is the practicability of storage. However, it is strongly suggested that industry should liaise with brokers and insurance companies to check what policies were in place for all business including subsidiaries.

If possible, firms should collate a chronological insurance history and also identify individual policies. They should review the policies and check them for any asbestos exemptions and also check the specific wording of policies as there is pending litigation in relation to insurance companies seeking to avoid their liabilities on the basis of specific wording within the policy.

If the evidence is available then it may be possible to reasonably assess the future potential risk of claims and their potential value. If this is possible then it follows that financial directors of construction companies will be able to put aside sufficient funds a year to deal with the potential of these claims. It is better to be forearmed and forewarned.

Finally, it should be recognised that this is not just a stand alone pro-active approach to future asbestos risk, it is also applicable to uninsured deafness and vibration white finger claims which continue to cost both the industry and insurance companies a significant amount of money.