April Asbestos in the university and higher education sector

Transcription

1 April 2011 Asbestos in the university and higher education sector

2

3 Contents Introduction... 1 Executive summary... 1 Background to asbestos... 2 Closer look: Research report results, and their impact on the higher education sector... 3 Risk management perspective... 5 What issues may arise for the university and higher education sector... 5 How Marsh can help... 6 Key contacts... 6 Appendices... 7

4 Introduction In this paper we review the impact of asbestos exposure in the higher education sector. Marsh funded the Norwich Business School at the University of East Anglia (UEA), to undertake a research project on the current level of understanding. Executive summary It is clear the education sector is impacted by claims arising from asbestos exposure. There are some 301 establishments within the sector and many have their origins in the post war expansion of the sector, when the use of asbestos was widespread. Furthermore, many of the occupations which according to the Health and Safety Executive (HSE) report (HSE: HSG264) involved a potentially injurious exposure to asbestos are found in the education sector. The University and Higher Education sector in the UK expanded dramatically from 1945, both in terms of infrastructure and number. This expansion was juxtaposed by a national rise in post war construction and development, which made extensive use of asbestos. This scenario has left a legacy which Universities need to consider when managing their potential future liabilities. Our research shows the risks associated with the use of asbestos impact both longstanding and new universities alike. Most buildings constructed prior to 1999 contain asbestos, in varying quantities and to varying degrees of toxicity. This represents a high percentage of university infrastructure. Universities need to fully understand the potential for employers liability (EL) claims as a result of mesothelioma and to manage the financial risk of such liabilities. 1 Asbestos in the university and higher education sector

5 Background to asbestos Asbestos is a naturally occurring fibrous material which comes in several forms. The three main types that have been used commercially are: Crocidolite (blue asbestos) Amosite (brown asbestos) Chrysotile (white asbestos) Crocidolite and amosite are more hazardous than chrysotile. Inhalation of asbestos fibres can lead to serious diseases. There is usually a lengthy latency period between exposure and development of disease; therefore disease occurring now is as a result of exposure many years ago. Several diseases may occur: mesothelioma, asbestos-related lung cancer, asbestosis and diffuse pleural thickening. Mesothelioma is the most concerning in that it is a fatal asbestos-related disease and the most prevalent. The HSE s projections suggest that the annual number of such deaths will peak in Even after the peak the projections suggest that there will be significant numbers of deaths beyond It has also been forecast that over two-thirds of mesothelioma deaths in the UK have yet to occur. These projections are based on the HSE s statistical modelling RR728 Projecting mesothelioma mortality in Great Britain (HSL 2009). Not only is the number of mesothelioma deaths increasing but the number of such cases that result in an insurance claim is increasing too. Since 2004 the proportion of mesothelioma deaths that result in an insurance claim has almost doubled according to the UK Asbestos Working Party (AWP). Mesothelioma has a latency period that is typically between 30 and 40 years. However, there have been cases where the latency period has exceeded 50 years and some whether the latency period has been as short as 10 years. Asbestos in the university and higher education sector 2

6 Closer look: Research report results, and their impact on the higher education sector Identification and analysis Where present, asbestos tends to be widely distributed across campuses. The quantities were normally characterised as between nominal and moderate, with significant amounts being unusual. Scientific analysis of the material showed most of it to be white asbestos. Insulation board and asbestos cement were the most common materials to contain asbestos. Universities should endeavour to complete their surveys with sample analysis as fully as possible. All records and registers which may have a bearing on asbestos liability should be identified and retained for at least 75 years. Universities and higher education institutions with a moderate to significant profile for blue and/or brown asbestos should regard themselves at increased risk and devote additional resources to the issue of insurance. Organisations which have removed asbestos containing material should regard themselves as at additional risk and devote resources to the issue of risk management. Standards of historic record keeping for insurance policies in the higher education sector A clear recommendation that arose from the University of East Anglia research was that universities should check their historic insurance records to ascertain how complete they are. Taking a view as to whether or not a university has potential for large claims to be made against them, a university should consider insurance archaeology. Universities and the higher education sector are advised to have all historic records of employees, students and contractors as complete as possible. Records in relation to maintenance staff warrant especially thorough attention; they should be checked for completion and marked for retention for at least 75 years. Claims and their relation to expired policies The Employers Liability (Compulsory Insurance) Act 1969 ensures that employers have cover. However following the recent Appeal Court judgement in the Trigger Litigation case, EL cover has now been divided into two forms of wording: Sustained during the period of insurance which respond when an injury occurs, which in the case of mesothelioma relates to when the cancer occurs and not when the claimant is exposed Caused during the period of insurance The traditional approach and covers the insured when the employee was exposed. For example a maintenance worker exposed in the late 1960s. As a result if the policy uses the sustained wording, the employer may well have to fund claims itself. The graph below shows the percentage of universities that currently maintain a contingency fund specifically for industrial disease claims, such as asbestos. 3 Asbestos in the university and higher education sector

7 Figure 1. Proportion of the higher education sector making provision for future asbestos-related liabilities. No 95% Yes 3% Don t know 2% As shown in figure 1, a very small percentage of universities and higher education colleges have made a suitable provision. We would recommend that such institutions should make a realistic provision for this potential liability. If a full insurance history from circa 1950 can be established then the reserve can be reduced or eliminated. Figure 2. Breakdown of claimants by occupation type 70% 60% 64.9% 50% 40% 30% 20% 10% 0% 10.8% Member of the academic staff Member of the maintenance staff 8.1% An external contractor 16.2% Member of the administrative staff From the research it is clear the prevalence of mesothelioma claims were highest within the maintenance staff community. Present and past members of the maintenance staff, contractors and any others who have worked on the structure and fabric of buildings are most at risk from asbestos. Every effort must be made to ensure that fresh harmful exposures do not arise from this. The asbestos survey should be undertaken (or updated) to the highest available standard and the asbestos register formed out of it should be kept up to date and available in a convenient format to facilitate easy access. When work on asbestos containing material is unavoidable, specialist contractors should be used. Due to the lengthy latency period between exposure and development of disease, a claim made today is likely to refer to an exposure from 1970 or prior. In an extreme case the exposure may date back as far as If documents and records do exist from this time period they will have been archived many years ago and are unlikely to be easy to identify or review (especially in the tight mandatory timeframe). Asbestos in the university and higher education sector 4

8 Risk management perspective Risk management protects and adds value to an organisation and its stakeholders through supporting its objectives by: Providing a framework for an organisation that enables future activity to take place in a consistent and controlled manner. - Diligent retention of insurance policy documents, documents relating to employees, students and contractors, and all historic health and safety records (for at least 75 years). Improving decision making, planning and prioritisation by comprehensive and structured understanding of university activity. - Improving knowledge within all departments of the potential threats caused by asbestos. Contributing to more efficient use of capital and resources within the organisation. - Through the use of insurance archaeology services, Universities and the HE Sector will be able to determine their level of insurance coverage for mesothelioma claims under historic policies. Protecting and enhancing assets and image. - As mesothelioma is a fatal disease, where the sufferer is still living, a university is expected to treat the claim with particular urgency. Developing and supporting people and the organisation s knowledge base. - Use of specialists to ensure compliance with the latest regulatory requirements in respect of asbestos. What issues may arise for the university and higher education sector Many institutions have experienced unforeseen problems locating old policy documents once a claim has been filed against them; this is especially relevant to Universities founded in the 1960s which have a particularly high risk of containing asbestos within their buildings. In addition institutions have often merged, or exited a non-core sector and do not have the records or historic knowledge to defend themselves when faced with a legacy EL claim, dating back to the mid 1960s. In addition, some of the leading insurers that provided cover from the 1940s onwards are now insolvent. Furthermore institutions may find themselves uninsured due to the type of wording within their historic policies. Faced with these issues, the university and higher education sector is likely to face uncertainty over issues such as: Are we insured for these risks and if so with which insurers? Are our uninsured claims being handled competently? How many claims for asbestos-related diseases can we expect to see in the future and how much are they likely to cost? Are we adequately reserving, financing or insuring for future claims of this nature? 5 Asbestos in the university and higher education sector

9 How Marsh can help Marsh has developed an industry-award winning approach which can help the universities and higher education institutions to identify, assess and mitigate their risk to these liabilities. This provides them with the confidence in understanding their financial risk and future cashflow requirements, the reassurance that they are not funding claims unnecessarily and the protection of due diligence. Insurance Archaeology We would recommend that universities trace their structure back to the 1960s or earlier, along with their insurance and employment records to ensure that they have undertaken the necessary research to protect themselves from often unexpected legacy claims. Marsh has the largest archive of legacy broker insurance records, with well over 80 miles of filing stored. These records in some cases date back to the late 1940s. Our team through their market knowledge and experience have an extensive network of contacts with other brokers and insurance companies. Researchers will also undertake site visits and review client s archives looking for evidence of coverage, such as premium payments to an insurer in the accounting records. Review of Policies After completion of the above phase, Marsh is then able to help universities review specific policies against its history. We highlight where there have been cases of insurer insolvency and provide clarity on where there are coverage deficiencies and risk exposure. Performance review of current claims handling practices Within this phase, Marsh would help a university to analyse the performance of current claims handling arrangements. This includes thorough auditing with particular emphasis on those claims involving an insolvent insurer thereby establishing competent handling of those claims which may ultimately be funded by the institution. Quantifying future long-tail risk Through risk modelling, Marsh can help a university to understand the number and value of future expected asbestos-related claims and to determine its reserving requirements and financial provisioning. Marsh can then support the university by designing and placing an optimum risk transfer programme where required. The occupational disease team brings together experienced specialists from across the Marsh business in order to create these tailored solutions for clients needs. Key contacts Ian Pelham ian.pelham@insolutionsworld.com Bill Kirkham Bill.Kirkham@marsh.com Marsh would like to thank the UEA team of MBA students; Gaurav Patil, Chin-Chien Yang, Chalermsak Suppasubsiri, and Michael Cash for their hard work in delivering the research. Asbestos in the university and higher education sector 6

10 Appendices Methodology: The methodology used in the University of East Anglia (UEA) study was developed by Marsh with the 2010 MBA students from the University of East Anglia. The UEA team performed a detailed survey, and data review of some 280 establishments within the University and HE Sector. The principal data collected from each sector body were as follows: 1. Have the buildings and installations on your campus been surveyed for the presence of asbestos? 2. Who carried out the survey? 3. What type of survey was carried out? 4. In what form do you keep your asbestos register? 5. What is the nature of the location(s) where asbestos containing materials were identified in your survey? 6. Taking the site as a whole, estimate the percentage of rooms where at least some asbestos contaminated material is present/ 7. What percentage of the asbestos containing material recorded by the survey is only presumed to be present e.g. a sample cannot be taken due to inaccessible location/ 8. What percentage of the asbestos identified at your site was considered to be in a poor condition? 9. For each of the following asbestos containing materials, please confirm the extent to which they were identified at you site by the survey? 10. Asbestos materials fall into three main sub-types white, blue and brown asbestos. Please confirm extent to which these different types of material were found in your survey? 11. Has it been necessary to remove, enclose or encapsulate asbestos containing material for any of the following reasons? 12. Over what period (approximately) do you expect to have removed all of the asbestos from your buildings and installations? 13. Since its foundation (or 1945, if later) has your institution merged with any other educational establishment? 14. Do you have comprehensive records of all employees, students and contractors who have worked or studied in your organisation in the past? 15. Do you have comprehensive insurance records for your institution for the past 40 years? 16. Have you received any claims arising from asbestos related illness? 17. If any claims have been made or intimated, please confirm the nature of the claimant or claimants? 18. Were you to receive a claim, what is your best guess as to how long it would take for it to be dealt with through the court system? 19. If you had to defend a claim for compensation arising from asbestos related illness, would you be able to provide historic records and registers relating to health and safety practices going back at least 40 years? 20. What is the largest single claim your institution could meet in full at short notice without placing existing budgets in jeopardy? 21. Do you maintain a contingency fund specifically for industrial disease claims, such as asbestos? 22. Are you aware of the special arrangements for dealing with asbestos related claims, which have been introduced by the High Court? (This is more formally known as Practice Direction part 3D which supplements CPR 3.1) 7 Asbestos in the university and higher education sector

11

12 Leadership, Knowledge, Solutions... Worldwide. The information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance information only. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such. In the United Kingdom, Marsh Ltd. is authorised and regulated by the Financial Services Authority for insurance mediation activities only. Copyright 2011 Marsh Ltd All rights reserved