Insurance for those undertaking any form of asbestos work has long been an issue as the insurance sector world wide are having to pay substantial sums of money to deal with claims from historic asbestos exposure.

In the UK we have three types of insurance that are applicable to those who undertake asbestos inspection work.

The first Employers Liability cover (EL) is a legal requirement for all businesses and is designed to provide cover for employees in the event of accidents or exposure to materials such as asbestos. The levels of cover are generally prescribed and is typically  £10,000,000 for each and every claim. This insurance is not capped and multiple claims can be made each having a maximum limit of £10,000,000. This is know as an ‘each and every claims basis’

The second type of insurance is known as Public Liability cover. As the name suggests this type of cover is in place to protect members of the public in the event of claims, for example a construction contractor dropping a hammer.

Many insurers who offer public liability cover include exclusions that mean asbestos related risks are not covered within the policy. So if the contractor disturbs asbestos within a shop for example, he would potentially be liable for any claim made by his employees, but not by any claim made by those working in the shop or indeed members of the public. Those working with asbestos as specialist contractors, asbestos surveyors and consultants have to “buy back” this cover at considerable cost. Typical levels of covers for asbestos specialists are £5,000,000 and again this is on an each and every claims basis.

The problem that asbestos presents is that typically claims can take years to manifest themselves and claims against the above types of insurance can only be made when cover is in place.

Those specialising in asbestos consultancy, asbestos surveying and testing should have in place a third type of insurance known as Professional Indemnity Insurance (PI or PII).

Organisations can take out varying levels of cover the higher level of cover the greater the cost. PI cover differs significantly from other forms of insurance in that claims are made on an aggregate basis. So for example if an organisation has a £250,000 of cover and a claim for £100,000 is made during the period of insurance then the effective cover will drop to £150,000. On this basis Companies with low levels of cover are at greater risk of defaulting upon insurance claims. It is for this reason that UKAS ensures that all asbestos inspection bodies have levels of cover commensurate with the type and volume of works performed. Typically cover will be between £1,000,000 – £5,000,000.

Given the potential latency of asbestos claims it is important to ensure that cover is applied retroactively, as PI policies will only apply for the period of cover stated. So for an organisation established in 1990 the retroactive date should be 1990 thus effectively providing clients in 1990 with the same level as cover as those in 2010.

Importantly when a company ceases to maintain PI cover all cover is lost for past works unless a product know as ‘run off cover’ is purchased. This will effectively guarantee the insurance for a period of time, typically 6 years. This type of cover is expensive to purchase, and is not readily purchased within the asbestos industry.

Having now explained the differing types of insurance it is important now to explain what is happening in the wider industry. UKAS require that all Asbestos Inspection Bodies retain appropriate levels of cover and hence it is not something that can simply be cancelled by UKAS Accredited organisations. Outside the accredited asbestos organisations reducing or cancelling cover can be an effective means of reducing costs.  This alongside minimal rates of cover, mean that non-accredited organisations can effectively undercut accredited organisations, but will generally not be able to provide clients with the type of long term guarantees available from accredited organisations.

Additionally with the growing requirements introduced with the HSG264: Asbestos, The Survey Guide such as auditing increased qualification etc many insurers are reconsidering those who they provide PI cover to and in a number of instances are deciding to withdraw cover.  This in essence may mean that only those organisations who can demonstrate competence via mechanisms such as UKAS will be able to retain insurance cover.

For information, contact john@thameslabs.co.uk of Thames Laboratories or visit: www.thameslabs.co.uk

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