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Insurers’ response to the prospect of insuring asbestos products is likely to be lukewarm at best, assuming a proposed framework by the U.S. Environmental Protection Agency that would create new opportunities for “new uses” of asbestos comes to fruition.
But given the right price and conditions, there may be available coverage, say some observers.
In June, the EPA’s Office of Pollution Prevention and Toxics proposed a “significant new use rule” that, with the agency’s approval, would allow new uses for asbestos.
Asbestos is a mineral fiber that occurs naturally and was widely used decades ago as a fire retardant. Exposure to it, which can occur through inhalation of its airborne fibers in the workplace or home, can cause lung cancer, mesothelioma, cancer of the larynx and ovary, and asbestosis, or fibrosis of the lungs, according to the World Health Organization.
Asbestos causes an estimated 255,000 deaths globally annually, according to a study published earlier this year by the International Journal of Environmental Research and Public Health. It is banned in about 60 countries, but not the United States.
It has long been a problem for the insurance industry. A.M. Best Co. Inc. estimated in November 2017 that the current estimated total losses for asbestos for the U.S. property/casualty industry is $100 billion. It is generally excluded in liability policies today, with limited exceptions.
Nancy Bewlay, Stamford, Connecticut-based chief underwriting officer for global casualty for XL Group Ltd., which does business as XL Catlin, said it is “almost unfathomable that we would knowingly allow” for the introduction of asbestos products and materials. It is “hard to get your head around” because the link between asbestos and cancer has been long established, she said.
More than 15,000 Americans die each year from asbestos-related exposure, “and that exposure could have been 40 or 50 years ago,” and its eventual total impact is still unknown, said Ms. Bewlay.
“When you think about the long-term exposure to asbestos, it’s almost impossible to be able to underwrite it and insure it with knowledge,” said Ms. Bewlay.
“That’s the hardest thing when it comes to insurance companies responding to the need to insure a product such as this, that we don’t have the ability or capability to really look over the long term to try to estimate the magnitude and impact of this,” she said.
“I would be shocked” to see insurers revise their policies’ terms and conditions to restore coverage for asbestos, “knowing the history of this product and what they’ve gone through,” said Brian O’Larte, director of property/casualty ratings at Oldwick, New Jersey-based Best.
He added with asbestos having a latency period of about 30 years, “I’m sure some companies” will write the coverage with the idea “they will deal with it then.” But “the guys who wrote this business in the ’70s and ’80s will not do this again,” Mr. O’Larte said.
“There’s certainly a stigma associated with asbestos,” said Matt Pateidl, vice president at Lockton Cos. LLC’s environmental practice in Kansas City, Missouri. “The insurance industry is going to take a very cautious step forward with regards to the potential for these products being introduced into the marketplace,” he said.
Mr. Pateidl said over the past several years, the industry has introduced some limited asbestos coverage, such as for soil and groundwater cleanup, third-party bodily injury and property damage and inadvertent disturbance, where asbestos is disturbed during a project and becomes airborne.
If asbestos, which has caused significant liability claims in the past, is being reintroduced, “it’s just going to make (insurers) re-evaluate what they’re willing to do with regards to the coverage givebacks that have become standard over the past several years,” he said.
A high percentage of insurers are “going to be very negative” about insuring asbestos products, said Tony Reynolds, Bradenton, Florida-based managing director with Marsh LLC’s National Excess Casualty team.
“It will probably be doable, however, if the customer can demonstrate to the insurance company they’ve taken a great deal of care in making sure the asbestos fibers won’t affect workers or customers. If they can show very redundant safety procedures, they may be able to buy it,” but it will be very expensive, Mr. Reynolds said.
This coverage is likely to be sold through the excess and surplus lines market, he said. “You won’t find the standard lines companies guys lining up to do this.”
Rhonda D. Orin, a partner with Anderson Kill P.C. in Washington, who represents policyholders, said, “I can envision (insurers) selling policies and collecting premiums that would cover asbestos in some new usage. I’m not sure about whether they would then provide the coverage they sold, but that’s always a healthy question for a policyholder attorney to ask.”
“The insurance industry can sell coverage for anything,” said Scott N. Godes, a partner with Barnes & Thornburg LLP in Washington, who is a policyholder attorney.
“It ultimately will come down to the question of whether they believe they can make it profitable,” he said. “There will be many underwriters that will shy away from providing coverage, I predict, but hopefully, on behalf of corporate policyholders, there will be somebody that will step up and recognize this is a need in the marketplace.”
Travelers Cos. Inc. and Crum & Forster Holdings Corp. Inc. units have prevailed in litigation over a now-defunct asbestos distributor, with an appeals court upholding a lower court’s ruling that their coverage limits are exhausted.