New rules which came into full effect on 21 May this year and which require organisations to locate, review and make safe or remove any asbestos-containing materials in the workplace could either burden employers with staggering costs, or cripple them with potentially massive fines, say risk managers, business groups and solicitors. It is already clear that some organisations have failed to meet the May deadline.
The UK Health & Safety Executive introduced the Control of Asbestos at Work Regulations 2002 on 21 November 2002 to protect workers and contractors who may come into contact with asbestos-containing materials in the workplace.
The regulations allowed for an 18-month period for organisations to conduct asbestos reviews of all their premises and to undertake either remedial action or removal. But there is strong evidence that perhaps thousands of 'dutyholders' - those with the legal responsibility to ensure compliance, such as employers, landlords and tenants - have either ignored the regulations or have grossly misinterpreted them.
"There is a great deal of confusion about what was meant to happen by 21 May," says Simon Henderson, a senior solicitor with the construction unit at law firm Anderson Strathern. "There are thousands of organisations that are still going through the review process and thousands more that haven't even started, because they believe that there is a leeway period.
Some unlucky director is going to find out he is wrong the hard way."
"These regulations were introduced 18 months ago, and the HSE and other bodies, such as business federations, have constantly informed organisations that there is a strict deadline for compliance," says Tom Mellish, health and safety policy officer at the Trades Union Congress. "What worries us is that organisations have left their planning and budgeting too late and now don't have enough time or money to carry out surveys of their premises - especially if they have large property portfolios. This means that employees and contractors are put at risk by poor management planning."
The new regulations aim to rein in employee exposure to asbestos and bring the UK into line with the European Chemical Agents Directive. Crucially, the new rules force dutyholders to assume that all materials contain asbestos unless there is strong evidence to the contrary. Any breach of the regulations is likely to be treated as a breach of the Health and Safety at Work Act 1974. Maximum penalties on summary conviction are a £20,000 fine for a breach of the 1974 Act and a £5,000 fine in respect of any breach of the regulations themselves.
Problems continue
According to the Royal Institution of Chartered Surveyors (RICS), there are six million tonnes of asbestos remaining in buildings in the UK, with as many as 500,000 non-domestic premises containing asbestos materials.
As a result of the post-war housing boom, asbestos-containing materials have been used for numerous purposes, including insulation, lagging, fire protection, tiling and roofing. Where it is still in place, this material will pose no danger to health, provided it is in good condition and is not disturbed. However, should it become damaged, asbestos fibres may be released into the air, posing a risk to those who inhale them. While the last form of asbestos was only banned in the UK in 1999, the RICS and the HSE generally agree that premises built since 1990 would be 'unlikely' to contain any asbestos and so would not need such a detailed review.
But there is a chronic shortage of qualified surveyors capable of carrying out thorough reviews and asbestos sampling. At present, there are only around 500 professionally qualified asbestos surveyors in the UK struggling to meet demand for their services, according to the British Institute of Occupational Hygiene. As a result, says Elizabeth Shepherd, partner in the environment, health and safety team at law firm Eversheds, "an asbestos review can now cost up to three times as much as previously quoted and can be between £3,000 and £5,000 for just one building".
Local authorities, who may have around 1,000 buildings in their property portfolios, could be the hardest hit by the new regulations, says Kevin Goodwin, chairman of the contractor's special interest group at AIRMIC.
"Many public sector buildings - hospitals, schools, libraries, council offices, and so on - pre-date the 1990s when the substance was barred from use, so they are very likely to contain asbestos-related materials," says Goodwin. Mellish adds that due to spiralling surveyor costs, the TUC is worried that smaller firms will not be able to afford to carry out detailed surveys of their premises, and that larger organisations will either flout the rules or delay complying with them due to cost concerns.
Risks of delay
Employers who have failed to make safe or remove any disturbed materials by mid-May could be putting themselves at risk. Not only could they face prosecution from the HSE, but they could also be held liable if an employee or contractor can successfully claim that he may have contracted an asbestos-related disease such as mesothelioma or asbestosis while carrying out work in a building that had not complied with the 2002 asbestos regulations by the deadline date.
Furthermore, a claimant no longer necessarily has to prove where he may have been exposed to the substance that directly caused his illness. A recent House of Lords ruling (Fairchild v Glenhaven Funeral Services & Ors; Matthews v Associated Portland Cement and Fox v Spousal & Ors on 20 June 2002) means that there could be a precedent for an employee to sue any of his previous employers for causing his asbestos-related illness if he can show that he worked in close proximity to asbestos materials at any place of work. Now that organisations need to inform employees and outside contractors about the extent and state of the asbestos in their premises, future liability claims for asbestos-related illnesses could potentially soar if reviews are not carried out thoroughly or regularly.
According to research by insurance broker Alexander Forbes Corporate Risk Solutions, asbestos-related incidents are already specifically excluded from 90% of public liability insurance policies. Unless businesses comply with the new legislation they may find that insurance companies will seek to recover payments for claims relating to asbestos under employers liability insurance cover, says Peter Gordon, head of consulting at the firm.
Gordon says that the lack of awareness of the regulations became truly evident as companies began to renew their employers' liability insurance.
"We have asked clients that are renewing policies through us what measures they have taken to comply with the HSE regulations, and we have found that many have not done anything," says Gordon.
Gordon believes that a failure to carry out sufficient reviews for asbestos is likely to result in increased insurance premiums - particularly in employers liability cover - and a refusal by many insurers to provide any kind of asbestos liability cover in many other insurance policies because of a potential hike in insurers' exposures to future claims.
But other insurance experts do not believe that premium rates will be hiked because of compulsory asbestos reviews. "There will be a fair number of organisations that have been complying with the spirit of the asbestos regulations for some time and I doubt that they have seen any real adverse change in their premium rates due to their asbestos reviews," says Andy Welch, a management consultant in broker Marsh's risk consulting practice.
"There is no real reason to see insurers increase employers liability rates while the substance is no longer used and organisations take steps to control it," he adds.
Malcolm Tarling, a spokesman at the Association of British Insurers, says that rates have actually dropped slightly over the past couple of years and are now the same as they were a couple of years ago. "Organisations should rest assured that their employers liability policies will still indemnify them for any instances of workplace exposure, as that is part of the mandatory cover anyway," he says. "What employers might find, however, is that there could be exemptions in their professional liability policies because insurers do not want to be unduly exposed to employee health claims arising from employers failing to carry out adequate asbestos assessments in their premises," he adds.
Sainsbury acts early
Some organisations have been proactive and have ensured that they follow the spirit of the new regulations. Paul Howard, head of insurance and risk management at supermarket chain J Sainsbury, says that his organisation has been complying with the HSE's latest asbestos regulations and recommended guidance since they were issued in 2001. Sainsbury carries out annual asbestos reviews throughout the company's entire property portfolio of around 520 stores and 20 depots and administrative office buildings, he says.
Howard adds that there are three essential components for making sure that an organisation handles its asbestos reviews properly. "The most important item on the list is to make sure that you have the procedures in place to deal with the issues outlined in the regulations - of carrying out suitable and sufficient reviews regularly. Once that is done, it is vital to maintain an up-to-date register of what kind of asbestos is present, where it is located, and what condition it is in, and if any remedial action has had to be taken," he says. "The final step is to properly communicate the company's asbestos review policy to both employees and contractors."
Howard explains that his organisation has its asbestos register online so that it can be updated easily and immediately if necessary. He also says that each building or store has its asbestos register available on the company's intranet, so that everyone is kept informed of possible health and safety risks.
But it seems that the supermarket chain's response is not shared by the majority. Jamie Fitzroy, a risk management consultant at broker Jardine Lloyd Thompson, says that "too many organisations have taken the view that immediate compliance is not an issue for them". He adds that organisations also tend to think that compiling an asbestos survey is enough to manage the risk of asbestos exposure. It isn't.
TOP TIPS
1. If you missed the compliance deadline, act now. Further delay puts your organisation at serious risk.
2. Get expert advice. Contact a qualified asbestos management surveyor (preferably with P402 accreditation from the British Occupational Hygiene Society) and make sure that they have a licence from the HSE which allows them to make safe or remove asbestos-containing materials. The Asbestos Removers Contractors Association will have a list of members that are qualified to survey asbestos and carry out its removal.
3. Operate a blanket ban on contractors or employees from coming into contact with asbestos-containing materials. Do not allow anyone to carry out repairs on the property until you have carried out a thorough survey and have taken remedial action on any dangerous materials.
4. Centralise all information relating to the organisation's property portfolio. Dutyholders can then prioritise which premises will need to have surveys conducted first and remedial action taken.
5. Establish a survey programme. Employ a qualified person to visit all the buildings and identify areas that are likely to contain asbestos-containing materials.
6. If the asbestos survey recommends remedial action or removal to make the premises safe, get the work carried out as soon as possible.
7. Develop a management action plan. Identify all the people in the organisation that will need to be involved in managing the risk of asbestos exposure within the workplace. This could involve directors, health and safety officers, risk managers, internal audit, and external contractors.
8. Put the plan into action and make sure employees are aware of it.
9. Set regular review dates to check that asbestos-containing materials have not been disturbed since the last review was carried out.
10. Keep asbestos registers up-to-date and available.
From Paul O'Connor, senior environmental consultant at PricewaterhouseCoopers
WHAT'S HAPPENING NOW?
The latest news from around the world brings little consolation to risk managers of multinationals - or their insurers.
IN EUROPE: In March, Peter Taylor, a partner at law firm Lovells, with long experience of dealing with asbestos claims, suggested that while US asbestos claims have probably peaked the worst is still to come in Europe.He said that law changes and landmark court judgments in a number of European countries have extended employers' liability regarding their workers' exposure to to asbestos and eroded some of the legal defences insurers might otherwise have used to defend themselves against a torrent of claims.
IN AUSTRALIA: The Federal Government is reportedly facing a $1bn liability bill for lawsuits brought by workers suffering from mesothelioma, according to a recent audit report. The amount is considerably higher than previous estimates because of escalating payouts, the emergence of more cases than expected and a recent High Court case expanding the areas of government liability. Liability claims for asbestos-related disease against companies are also rising.
IN THE US: The US Insurance Information Institute's April letter says that asbestos claims are surging again. It describes asbestos liability as 'one of the largest ever faced by businesses in the United States and abroad', estimating that, for the US insurance industry, asbestos-related losses could eventually reach as much as $65bn.
The report says that one reason for the new wave of claims was the realisation that many asbestos manufacturers had already been driven into bankruptcy, and settlement funds were drying up. Up to 90% of current claimants have no signs of serious illness, but are filing claims while there is still hope for some compensation. Some asbestos-related illnesses have a latency period of up to 40 years. Also fuelling litigation is the expansion of defendants to include firms that have a less direct connection with asbestos, such as contractors, or current owners of companies that formerly produced products containing asbestos.
