In the 1800's, manufacturers and builders started using a natural resource that vastly improved the quality of their products. It added strength to materials, resisted heat, electrical and chemical damage, and absorbed sound. When mixed with cement and used in building construction, it enhanced fire safety. By the middle of the 1900's, manufacturers were using it in insulation, automobile brake pads, drywall, lawn furniture, fireplace cement, gaskets, and a host of other products. Unfortunately, this material, asbestos, can cause serious lung disease and even death in those who inhale its fibers. Builders and manufacturers who used it have endured hundreds of thousands of lawsuits from the victims or their survivors.
Claims resulting from exposure to asbestos fall into the category of what is known as "toxic torts" -- injury and damage lawsuits stemming from exposure to substances proven to cause illness or injury in people. Other substances that lead to toxic torts include lead paint, toxigenic mold, industrial chemicals, pesticides, and toxic landfill waste. These lawsuits can ravage a company's balance sheet, ruin a good reputation that took years to build, and divert resources and attention away from normal operations and toward legal defense.
Asbestos has been associated with instances of cancer affecting the protective lining that covers most of the body's internal organs. This form of cancer was killing 3,000 Americans a year by the late 1990s. Most of the victims had long-term occupational exposure to asbestos; a Rand Corporation study estimated that 27.5 million people in the U.S. were exposed to asbestos in their workplaces between 1940 and 1979. Consequently, by 2002 more than 730,000 people had sued more than 8,400 firms for illnesses caused by the fiber. The cost of asbestos-related litigation in the U.S. has exceeded $250 billion.
Toxigenic molds produce a chemical that can be dangerous to people exposed to large amounts of it over a long period of time. Normally, the mold is not present in large enough quantities to be harmful. However, concern has grown over the last several years about the possible effects of long-term exposure to these molds. Newer energy efficient homes have become air tight, preventing moisture from escaping and creating an environment where mold can grow. A Texas woman who sued her insurance company over its refusal to pay for cleaning up mold that allegedly made her home unlivable won a multi-million dollar damage award; a court later reduced the amount. While health experts have not reached a consensus about the actual harm mold can cause, the increased attention to it makes future litigation likely.
The standard commercial general liability insurance policy does not cover most losses resulting from pollutants. However, alternatives exist -- pollution legal liability insurance policies. These policies cover damage to the organization's own property; injuries or damages that others suffer as a result of a toxic incident for which the organization is liable; and associated cleanup costs. Depending on its terms, such a policy might also cover new injury claims, cleanup, and the discovery of new toxic substances after the organization implements a pollution remediation plan. A professional insurance agent can help locate the appropriate coverage at a reasonable cost.
Toxic torts are likely to remain a financial threat to all organizations for the foreseeable future. Controls to prevent injuries or to make existing ones less severe, coupled with the right insurance company, can help ensure that your organization will survive this threat.