Liability claims for bodily injury and property damage arising from the inadvertent disturbance of asbestos is the #1 source of expensive claims on the Contractors Pollution Liability insurance policies sold to restoration firms. In contrast, professional asbestos abatement firms rarely get claims made against them for damages resulting from exposing people or property to asbestos. The key difference is the inadvertent disturbance of asbestos.
When an asbestos abatement firm gets to a job, they know there is asbestos to deal with and nothing bad happens. Usually when a fire and water restoration firm gets involved with asbestos, no one knew it was at the job site. If a restorer can avoid the inadvertent disturbance of asbestos, bad things would not happen to them either. The July/August edition of C&R magazine has a good article on testing protocols for asbestos.
Asbestos is an airborne contaminate; when it is sitting in a solid state, asbestos is not hazardous. Asbestos is a naturally-occurring crystalline rock composed of silicate that was commonly used in building products. It has very thin fibers like fiberglass but much smaller in diameter. Asbestos is strong, relatively light, and does not burn, making it an ideal raw material for insulation and other building materials like tile floors, building siding, construction adhesives, caulk, and shingles.
It’s when asbestos fibers become airborne when the potential liability trouble begins. The air movers used every day by restoration firms are capable of creating some really significant airborne particulates in a building. Any time asbestos and air movers get connected in a liability insurance claim, I expect a $250,000 problem on a good day.
In my 43 years in the insurance brokerage business, I have seen a lot of asbestos liability claims. My first job out of college, a manufacturer of asbestos in the United States, filed bankruptcy in 1981. At the time, I never dreamed we would still have asbestos claims on insurance policies 40 years later or that my #1 source of expensive claims while specializing in insuring restoration firms would be related to asbestos.
Much to my surprise, in 2006, asbestos raised its ugly head again in my career, and almost erased five years of research and development investments that I had made in pioneering the GL/CPL/Professional package insurance policy for restoration firms. To this day, package policies are the only insurance design that work reliably for a restoration firm, and they almost went away because of one asbestos claim during the incubation period of insurance product development.
It was the typical homeowner’s insurance water damage claim. The ice maker leaked; the kitchen floor was warped under the linoleum sheet. The homeowner’s insurance company, through its 1-800 number, had referred an IICRC-certified restorer to perform a direct repair. The restorer showed up on time and wrote the estimate within the performance metrics of the direct repair network. The restoration project moved forward quickly with everything going according to plan, the way these kinds of projects get completed hundreds of times per day.
It was a simple job: pull out the linoleum floor, expose the wood, bring in dehumidifiers and air movers, pull out and replace the water-damaged wood, put in the new subfloor, and finally finish replacement flooring. Total cost: under $10,000 per Xactimate pricing. The homeowner’s insurance company approved the work plan as proposed by the restorer.
The wise restorer following the IICRC S500 guidance recognizing the older floor as a possible source of asbestos. Samples of the flooring were sent to a lab to test for asbestos, the results came back negative. The job proceeded per the work plan.
When the restorer got to the area under the refrigerator, the workers hit a type of flooring tile that was a different color and size than in the rest of the kitchen. But it came up easily and the work progressed, and the air movers were moving air during the removal of the flooring,
The homeowner who had lost a family member to mesothelioma, the lung disease that is caused by exposure to asbestos fibers, was hyper alert to potential asbestos in the one-hundred-year-old home. The homeowner brought in a certified industrial hygienist to sample the flooring under the refrigerator and the rest of the house looking for asbestos dust. The tests revealed asbestos in the flooring and even in the baby’s clothing upstairs.
The homeowner, who was not living in the house during the remediation, alerted the restorer of the CIH’s findings. Work at the home stopped immediately.
The scope of work needed to be revised; now the home would require a complete asbestos decontamination by a professional asbestos abatement firm. The cost estimate for that work was $40,000.
Before the asbestos abatement company could perform the decontamination work, the homeowner made arrangements to demolish the home with a bulldozer. It was a million-dollar home. A $10,000 water damage homeowners insurance claim was now a $1 million asbestos-related claim being made against my client. The good news was the insurance policy I had found for the remediator paid the claim, no problems at all. All I had to deal with was a sad but not mad insurance underwriter.
The homeowner’s insurance company paid for the total loss of the home of $1 million, then turned to the direct repair network for the additional damages to the house above the $10,000 original cost to fix the floor. It was a $990,000 liability claim on the restorer’s liability insurance policy.
But that one claim wiped out all the underwriting profit for the insurance company I had convinced that insuring restoration firms for mold damages under a Contractor Pollution Liability (CPL) policy was a good idea. We expected CPL claims from mold, not claims from asbestos within a home, and we did not expect million dollar claims from $10,000 projects.
A general liability insurance policy purchased after 1986 will provide no coverage at all for claims arising from asbestos. Claims arising from asbestos will be excluded under the general liability insurance policy by the pollution exclusion. For a belts and suspenders approach to avoid claims from asbestos insurance companies routinely add an Asbestos Exclusion and a Silica Exclusion. Which is one of the reasons restoration firms need CPL coverage. CPL insurance is designed to fill the coverage gaps created by these exclusions in the general liability policy.
CPL policies provide liability insurance for claims arising from irritants or contaminants. Off the shelf, a CPL policy should cover claims arising from the inadvertent or even the intentional disturbance of asbestos. Unless the CPL policy excludes claims arising from asbestos or silica, which some do.
It is pretty hard to totally avoid asbestos hazards in the restoration business. What restorers can do to manage the asbestos risk is to train employees to be on the alert for potential asbestos sources at a job site, test suspected building material for asbestos, bring in asbestos abatement contractors when asbestos is identified on a job site and make sure the Contractors Pollution Liability policy does not have specific coverage gaps for asbestos or silica.