Asbestos: the elephant in the living
In case you thought everything was okay on
the asbestos horizon, this particular 'elephant' is still very much
there and isn't showing signs of going away any time soon, cautions
Asbestos. Remember that little word? It's the
three-syllable utterance that used to make strong men cringe,
underwriters turn pale and brokers reach for brown paper bags to
control their breathing. It's the word that led to a thousand
sinking feelings as (re)insurers watched their reserves drain away
into a bottomless pit of claims.
"But that was in the old days," I hear you mutter.
"Asbestos is no longer a problem. It was all taken care of." Wrong -
dead (pardon the pun) wrong. Asbestos is still a weight around the
neck of the (re)insurance industry. It's the elephant in the living
room that just won't take the hint to go away and bother someone
else. Presuming that it has gone away on its own is no way to deal
In other words, the pachyderm is still blocking
your view of the TV.
Let's take another look at asbestos, for those in
the industry that have just joined and are still wet behind the
ears. Put simply, it's the substance that almost destroyed Lloyd's
of London and inflicted a vast amount of financial harm on the
Initially, the discovery and development of
asbestos promised substantial benefits. Asbestos can be used to
produce a wide range of heat insulation and retardant substances,
varying from lagging for pipes to roofing sheets. The building and
shipping industries were just two of the industries that made
widespread use of the mineral, with the latter finding it
particularly useful in the shipping boom that went on during World
Then the drawbacks turned up. Asbestos is not a
very nice substance, to put it mildly. There are three main types of
the mineral: blue asbestos (crocidolite); brown asbestos (amosite);
and white asbestos (chrysotile). All are made up of tiny,
microscopic fibres with widths of less than one micrometer. And
there is where the main problem lies - these fibres can be inhaled
quite easily when released into the atmosphere, and the effects of
inhalation can be lethal.
As asbestos fibres enter the lungs, they settle on
the interior surface and can then embed themselves. As time goes on,
the lungs deal with these intruders by forming scar tissue over
them. The more fibres the more scar tissue - and we all have
asbestos in our lungs, as it's a modern-day fact of life. However,
naturally people who work with asbestos or who come into very close
contact with it can be exposed to large amounts of fibres - enough
to have a serious effect on lung function.
Asbestos fibres can lead to three main conditions:
pleural plaques, mesothelioma and asbestosis. The first is
debilitating but not necessarily lethal; the other two are effective
Pleural plaques are round areas of fibrous tissue
that grow on the covering of the lungs (known as pleura) years after
exposure to asbestos. They are not malignant, but they do have some
effect on lung function if they are present in large numbers.
Asbestosis is very different, and is far more
serious. Here asbestos fibres cause large amounts of scar tissue to
form, which radically inhibit lung function. In other words, it
becomes hard to breathe, and many sufferers are forced to rely on
oxygen masks. The condition is irreversible and effectively
untreatable; 75% of those affected die within one year.
And finally there's mesothelioma. This is a
long-term disease, which tends to emerge anything between 20-40
years after exposure to asbestos, which means that it can affect
people quite late in their lives.
Mesothelioma is a cancerous tumour of the pleura
(lining of the lung and chest cavity) or peritoneum (lining of the
abdomen). The tumour can spread rapidly to involve the pericardium
(sac around the heart), mediastinum and the other pleura. Worsening
pain and shortness of breath can occur. Unless it is caught in the
very early stages, it too is irreversible and untreatable, with the
sufferer having a life expectancy of up to 18 months.
The problem spreads
The long-term nature of the conditions listed above
is the reason why insurers have been so hard hit by the asbestos
time bomb. Even though blue asbestos was banned from importation in
the UK in 1970 and brown asbestos was banned in 1980, the number of
people suffering from asbestos-related conditions has been climbing
for decades, with some estimates claiming that as many 5000 people
die every year due to asbestos.
The situation in the US is more murky. The
Environmental Protection Agency (EPA) announced that it was going to
seek a total ban on the use and importation of asbestos in the
1970s. However, since then the EPA has been involved in a vicious
battle with the asbestos industry that has taken it into various
courts throughout the country. Despite this, asbestos was one of the
first hazardous air pollutants regulated under Section 112 of the
Clean Air Act of 1970, and many applications have been forbidden by
the Toxic Substances Control Act of 1976.
The death toll in the US is also far worse, with an
estimated 10,000 people dying from asbestos-related conditions every
year. However, this is down from the peak that was reported in the
US in the early 1990s, as asbestos was used on a wide scale in the
US first. The death toll in the UK is not predicted to peak until
around 2020, reflecting the later arrival of the widespread use of
So far, 60 countries around the world have banned
the use of asbestos, with the European Union (EU) having banned it
almost en masse. France's ban in 1997 was challenged by the Canadian
government (see box overleaf), but was upheld by the World Trade
Organisation (WTO) in 2000.
An estimated one in three properties in Australia
possibly contain some form of asbestos, making it one of the most
affected areas. In the years after World War II, when Australia was
undergoing a surge in population, asbestos seemed to be the perfect
building material to use due to its heat-resistant properties.
Sadly, the downside is only now becoming apparent. Asbestos was
finally banned in Australia, but not until 31 December 2003.
The US situation: "The most expensive tort in
However, the biggest headlines regarding asbestos
are still coming from the US, mostly because of the size of the
potential financial problem there. Asbestos litigation has been
described as being the longest and most expensive mass tort in US
Nowadays asbestos seems to be permanently linked to
the word litigation, and there is little sign of it losing that tie
in the near future. Listing the full history of asbestos litigation
would take far more space than this technical report can provide,
and would probably depress readers enormously. However, a quick skim
According to the American Bar Association (ABA),
"Each year, 50,000 to 75,000 new asbestos-related lawsuits are
filed. A large and growing proportion of these cases involve
claimants who do not now, and may never, suffer from an
asbestos-related illness. This has created a backlog of more than
200,000 claims against more than 6000 companies that is crowding
dockets across the country.
"As a result, seriously ill people who file claims
are facing longer and longer delays in having their cases heard."
The ABA claims that the total number of claimants has now risen to
Asbestos-related cases increased significantly in
the Supreme Court after 1980, and the court has dealt with several
asbestos-related cases since 1986. Two large class-action
settlements, designed to limit liability, came before the court in
1997 and 1999. Both settlements were ultimately rejected by the
court because they would exclude future claimants, or those who
later developed asbestos-related illnesses. (See Amchem Products v
Windsor et al (http://www.law.cornell.edu/supct/html/96-270.ZO.html)
and Ortiz v Fireboard Corporation
rulings addressed the 20-50 year latency period of serious
The situation is now so bad that Congress has been
considering asbestos-related legislation for some time.
Unfortunately, it's not going to be appearing on any statute books
any time soon. When the Fairness in Asbestos Injury Resolution Act
of 2003 (FAIR), which would create a trust fund to pay for all
future asbestos claims, was shot down in the House of
Representatives, Senator Orrin Hatch re-adopted it in 2004.
Faced with complaints that the trust fund was
inadequate (latest estimates are for it to be around $140bn), and
with the asbestos industry querying how much money the US government
would put up and how much they themselves would provide, the act was
in trouble from the start. Being introduced in the same year as a
hotly contested presidential election meant that it never really
stood much of a chance to be seriously debated, let alone passed in
both houses, and it died largely unmourned.
Now sponsored by Senator Bill Frist, the bill again
resurfaced in 2005, but once more failed to get much in the way of
momentum behind it. It has reappeared as S. 3274: The FAIR Act of
2006, but has - to no-one's surprise - disappeared under a rising
tide of bad news about Iraq, followed by congressional elections
that have focused everyone's attentions on whether the Republican
party can maintain its grip on power.
As Reinsurance went to press, those elections are
still up in the air. If the Republicans manage to hang on to their
majorities in both houses, then we can expect to see FAIR return in
yet another incarnation, probably in 2007 as the 2006 bill is now
However, if the Democrats win control of one or
both houses (the latest opinion polls showed the Democrats surging
in the House of Representatives, and in a dead heat in the Senate),
it is highly unlikely that FAIR will be passed (in its present form
at least) in the near future, as the Democrats will be busy
investigating the Bush administration.
The WTC and DC 'cough'
One of the biggest recent mass asbestos exposures
in the US came on 11 September 2001, when the World Trade Centre
(WTC) fell. Construction work on the WTC was started in 1968, so
that by the time the local city council announced that it was
banning asbestos, hundreds of tonnes of the substance had been
sprayed onto the building. Although some was later removed, the vast
majority of it remained. As a result, when the towers fell, large
quantities of asbestos dust came down with them.
It's difficult to assess total exposure from this
event. Readers will remember pictures of the vast dust cloud that
swept through Manhattan and other parts of New York after the
collapse of the north and south towers. To make matters more
complicated, the dust also contained a large number of other
potentially toxic contaminants, such as cadmium, lead, mercury,
dioxin and powdered concrete, the latter being highly alkaline and
therefore dangerous to the lungs.
The EPA proclaimed that working in the rubble was
safe at the time; that assessment now seems dangerously premature,
as thousands of people - including many rescue workers - have since
filed a class action against the EPA claiming they are suffering
serious health concerns, thanks to what has become known as 'World
Trade Centre cough'.
So far, 20 deaths have been attributed to working
in the ruins of the WTC. One of these is highly relevant to this
report: a New York paramedic called Deborah Reeve died of
mesothelioma on 15 March 2006. She was just 41 years old. It is
alleged that her death was directly caused by asbestos from the
Asbestos is still being found near the former site
of the WTC. In May this year, workers were searching the roof of the
Deutsche Bank building, which was very close to the WTC, for minute
fragments of bones from the bodies of those who died in the towers
when they came down. Their search was called off when substantial
quantities of asbestos dust were discovered on the roof.
And in September 2006, contractors started to
remove an estimated 1000 bags worth of asbestos from tunnels under
the US Capitol building complex in Washington, DC where the Congress
convenes. More than a few senators screamed blue murder when the
asbestos was discovered, and the cleanup bill is now estimated to be
In the UK, the situation is rather different. The
tale of how Lloyd's of London became entangled in its own intestines
over asbestos has been often told and is still a subject of some
rancour, especially among those relying on Equitas, the run-off
company that was split off from Lloyd's to handle its pre-1992
Two recent developments have been particularly
noteworthy. Firstly, the current state of asbestos litigation has
had a lot of people updating their records, then throwing them away
again, only to have to update them yet again.
In 2002, the now-infamous Fairchild case in the UK
rewrote various lawsuits when the defendant sued three firms he
claimed had exposed him to asbestos, from which he had subsequently
contracted mesothelioma. However, as he was unable to say where the
fatal fibre had come from, his case failed. The case was sent to
appeal and finally ended up at the House of Lords, where Mr
Fairchild won the right to sue one of his employers, leaving them to
try and recover contributions from other implicated employers.
However, in May of 2006, the situation returned to
the pre-Fairchild situation with the Barker vs Corus decision from
the House of Lords, which said that an employer was now only liable
to pay such a proportion of mesothelioma damages under his 'share'
of the claim. This was the law of the land for just two months, as
the UK government then amended the Compensation Act 2006 to return
the legal situation to the post-Fairchild situation. (Our colleagues
at Post Magazine have been carrying out the herculean task of
staying sane while reporting all of these changes in the law.)
In October this year, the National Union of
Teachers got the hairs on the back of people's necks standing on end
by claiming that 90% of the UK's schools contain asbestos,
especially those with old buildings. The news is an unwelcome
reminder of the fact that the asbestos toll in the UK is yet to
There is another facet of the asbestos crisis that
might have been overlooked in recent years. The (re)insurance
industry has been making great strides in opening up new markets in
the Indian subcontinent and countries like China. These regions have
seen their economies expand aggressively, especially in China, where
the national gross domestic product has increased by 9.9% for the
past 12 years.
With the West now effectively closed to it, the
asbestos industry has shifted its focus to this area and is bringing
its exports up. China is now one of the largest producers and
consumers of asbestos; according to the US Geological Survey, it
produces an estimated 350,000 metric tons of asbestos a year.
Unfortunately, the status of health-and-safety legislation in these
areas when it comes to asbestos is at best patchy, and at worst
One example should chill anyone: several
ship-breaking firms in India simply stick the ships on the shore and
get people to break them up manually, not caring if they contain
toxic chemicals or even asbestos. Granted, most of these workers are
unlikely ever to be able to afford insurance, but it is indicative
of the potential for future asbestos exposure.
Are (re)insurers making sure that they are writing
in asbestos exclusions into all this exciting new business? And have
they considered the potential for asbestos exposures?
The elephant in the living room is still there, and
it's not going away any time soon.
ASBESTOS RULINGS: WHO'S FOOLING WHO?
In 1997 the French government banned the use of
asbestos. However, two years later, the Canadian government went
before the WTO in an attempt to challenge the embargo. Canada is the
world's second-largest producer of asbestos after Russia, and is the
world's largest exporter of the mineral. Most of this is the white
asbestos (chrysotile) that is mined in the province of Quebec, and
Canadian politicians have frequently gone on the record in an
attempt to stress that white asbestos is safe.
Canada's complaint stated that the French decision
was illegal as it hurt Canadian economic interests and was an
impediment to free trade. Canada argued that chrysotile is not
harmful if used in a controlled manner. However, the EU, which
represents France in WTO legal disputes, claimed that all types of
asbestos possess a health risk and it is not possible to ensure that
it can be used 'safely', as claimed by the Asbestos Institute. This
was a major setback for Canada as it had hoped to use a favourable
ruling to put pressure on the whole EU, which had approved an
EU-wide asbestos ban by 2005.