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Hazardous Materials and Insurability

Blog Issue #: 

8

The Risks Are Different

Costly Cleanup

Circumstances where certain conditions, or even true deficiencies, may introduce increased risk are easily understood as having insurance implications. Of course increased risk equals increased cost or denial of coverage. But how would asbestos containing floor tiles, for example, be a risk? They do not appear to be a fire, shock, or environmental hazard. If there is no risk to people or property, where is the increased risk? The answer might just be in the cleanup.

In the example of asbestos, public perception and legislation has changed drastically. Asbestos was once the darling of the construction world because of physical properties such as a very high resistance to heat and ability to hold materials together. Accordingly it was incorporated into a wide range of products: asphalt shingles, floor tiles, duct insulation, gypsum joint compound, and sealant, just to name a fraction. Then it was discovered that asbestos can cause cancer and was listed as carcinogenic by the International Association for Research on Cancer (IARC), American Conference of Governmental Industrial Hygienists (ACGIH), US National Toxicology Program (NTP), and European Union (EU Classification and Labeling).

In Canada, asbestos is addressed by provincial and federal legislation; there have increasingly been new measures introduced to protect workers and the general public such as limiting the use of asbestos, safety controls required for worker protection, and requirements for a safe means of disposal. The costs associated with asbestos abatement (the cleanup and disposal process) are high and getting higher. In fact, in 2012, the Insurance Bureau of Canada published a brochure, Heritage Properties: Insuring the Living Past, and highlighted the following point: Heritage properties may contain materials now known to be contaminants (such as asbestos). In these cases, special disposal must be arranged, which will add to the cost of a claim.

Insurance Companies Are Preparing

Some insurance companies have responded to these costs by raising rates or by excluding coverage (with some sources citing this as "par for the course"). Lloyd's Underwriters is a particularly good example because their refusal to defend against a claim, where an asbestos exclusion applied, went to Ontario's highest court. In  1604945 Ontario Inc. v. Lloyd’s  Underwriters, 2010, where the Honourable Mr. Justice P. J. Flynn decided that no duty to defend existed, despite the fact that the "duty to defend is independent of and broader than the duty to indemnify," where an absolute asbestos exclusion applies. Without even this protection, there are many concerns for a homeowner.

If you currently hold, or are considering, a homeowners insurance policy, now would be a great time to review those exclusions.

A Quick Review

The Insurability Series

If you just catching up on this blog series, go back and start with Insurance and Insurability for an introduction to important insurance topics.

Remember!

Insurability is determined by insurance companies, not by home inspectors.

Insurance companies decide which risks they will cover and at what rate. Underwriter and risk assignments are proprietary information and their decision making process may change without notice. The Insurance Bureau of Canada (IBC) does not establish or make public risk criteria. Since home inspectors are not provided this information, and it is constantly changing, it is not possible for home inspectors to report on insurability. Home inspectors do recognize patent defects, explain their significance, and make recommendations for improvements.

Common Hazardous Materials

Caution: This is not an exhaustive list. Please see Insurance and Insurability.

Asbestos

Buildings constructed prior to the decline of widespread asbestos usage are more likely to have asbestos containing material. The decline of asbestos use began in the mid-1970’s and continued into the early 1980’s. Although the US EPA banned asbestos for construction in 1989, a complete ban has not been established in Canada.

Canada has not banned asbestos.

In Canada, asbestos is regulated by the Asbestos Products Regulations (created in 2007 and last updated in 2016). These regulations restrict crocidolite asbestos for use in building materials other than cement pipes. However, non-crocidolite asbestos products (chrysotile, amosite, anthophylite, tremolite, and actinolite) have few limitations. Each type of asbestos has differing health risks and may be present in many types of building materials.

Materials known to possibly include asbestos, include:

asphalt and vinyl floor tiles,
base flashing,
blown-in insulation,
cement pipe,
cement siding,
drywall joint compound,
duct insulation,
electrical wiring insulation,
floor tiles,
flooring backing,
high temperature gaskets,
roofing felt,
roofing shingles,
sprayed-in insulation,
textured ceilings,
vermiculite insulation,
vinyl sheet flooring,
vinyl wall coverings, and
window caulking.

Newfoundland and Labrador Asbestos Abatement Regulations under the Occupational Health and Safety Act apply to workplaces where asbestos may be present, and include the repair, alternation, or maintenance of buildings. Consult all applicable legislation to determine if workplace assessments, asbestos abatement, or other related requirements are required.

A list of registered Asbestos Abatement Contractors is maintained by Service NL.

Use caution where suspected asbestos containing materials may be disturbed, especially where the materials are friable (can be pulverized under hand pressure) and potentially release fibres into the air. While asbestos is a known carcinogen, it is important to understand that the presence of asbestos is not necessarily a serious problem. Some forms of asbestos as less hazardous, and how it is contained in the building material affects the nature of the hazard. Homeowners and buyers need to consider each property on a case-by-case basis.

Lead

The Canadian Liquid Coating Materials Regulations, enacted in 1976 and currently replaced by the Surface Coating Materials Regulations, restrict the lead content of paints and other liquid, in some applications, to 0.5% by weight. The Canadian Paint and Coatings Association (CPCA) recommended to voluntarily stop using any lead compounds in consumer paints by the end of 1990. Lead paint is common in buildings built prior to 1960, and exterior lead paint between 1960 and 1990. Lead in smaller amounts may still be used and is potentially harmful. There are no known safe levels of lead exposure.

Lead is common in pre-1960 buildings.

Newfoundland and Labrador Occupational Health and Safety Regulations, 2012, apply to workplaces where lead may be present. Consult all applicable legislation to determine if safe work procedures, or similar requirements, are required. Paint chip samples may be sent to a lab for analysis.

In some circumstances, it may be acceptable, or safer, to leave lead paint alone, or to cover it.

Urea Formaldehyde Foam Insulation (UFFI)

Urea Formaldehyde Foam Insulation (UFFI) is a type of insulation that was widely used in the 1970's for. It is a low density foam with the appearance of shaving cream but is stiff and self-supporting once cured. This product is made on-site where a urea formaldehyde-based resin is mixed with a catalyst and foamed in place. Formaldehyde gas may be released both during the curing process, and afterwards.

UFFI has been prohibited from advertising, sale or importation into Canada under the Hazardous Products Act since 1980.

Gas emissions decrease over time and therefore formaldehyde concentrations are highest when first installed. “As a result, UFFI installed before 1980 would have little effect on indoor formaldehyde levels today.” – Health Canada. To learn more about UFFI and the health effects of formaldehyde in indoor air, exposure limits, sources of formaldehyde, and recommended actions from Health Canada.

Emissions are highest immediately after installation.

Mould

Health Canada advises that there is a relationship between indoor mould and increased eye, nose and throat irritation; coughing and phlegm build-up; wheezing and shortness of breath; symptoms of asthma; and allergic reactions. People respond to mould differently and some are more vulnerable than others. Children, the elderly, and those with compromised immune systems are at increased risk.

Mould requires more testing by an experienced industrial hygienist; not necessarily abatement.

Refer to Health Canada guidelines for recommended remedial action for indoor mould, summarized as follows:

  • clean up small areas (less than 1 square meter) using personal protective equipment, household cleaning supplies, and dispose of mouldy, damaged, porous, or absorbent materials; and
  • contact your local Environment Health Officer to obtain advice on cleaning larger areas of mould (greater than 1 square meter, more than three patches, or reoccurring mould).

Home Inspections Are Necessary

As discussed previously in the first blog in this series, Insurance and Insurability, insurance underwriter and broker risk assignments are trade secrets, policies may change without notice, and home inspectors are not advised of these changes. Home inspectors are, however, experts with respect to identifying system components and reporting deficient conditions. As such, an inspector can identify the installed systems and insurance companies may require an inspection be performed for this purpose. More importantly, inspectors can recognize patent defects, explain their significance, and make recommendations for improvements.

What Options Are Available for Hazardous Materials Insurability Issues

Check Your Coverage

Previously, in Electrical Systems and Insurability and Fuel Burning Appliances and Insurability, the perspective of the articles was more geared towards what information an insurance company may request, and what options may be possible. In most cases, insurance companies would identify a condition they believe to be high risk and refuse coverage or demand an alteration. For example, an insurance company may request that a home equipped with a 60A panel be upgraded to 100A, or higher. Home owners or purchasers could consider the requirement to upgrade; weight the benefits and risks associated with upgrades, such as enforcement of new code standards when upgrading; or simply to move on and deal with other insurance companies. In short, issues would be raised and decisions made. Hazardous materials may be different: sometimes there are no questions.

Consult With Your Lawyer, Real Estate Agent, and Home Inspector

Each province may have different practices with respect to Purchase and Sale Agreements. It may not be required for a vendor to disclose the fact that asbestos is in a home, for example. There may be some options—which are outside the scope of this blog—to request warranties from the seller or provide some other assurance. These matters should be discussed with your lawyer and real estate agent. Buyers may also use a home inspector which may reveal several types of potentially asbestos containing materials, including asbestos. Inspectors are not able, however, to find all forms of asbestos, or validate their findings using testing, because destructive inspections and extensive sampling is outside the scope of any normal home inspection.

Do Your Own Research

Toronto real estate lawyer, Bob Aaron, wrote a great article on one homeowner's experiences with asbestos, Asbestos little-understood issue in real estate industry. In this case, potentially asbestos containing tiles were discovered while making repairs due to back flow from a sewage drain pipe. The initial clean up performed by the insurer was suspected of releasing asbestos fibres through the home. The family was told that they had to leave the property, and that the insurance company was considering cancelling their policy.

The couple made the wise decision of contacting Mr. Aaron who arranged for Don Pinchin, founder of Pinchin Environmental, to assess the situation. After what appears to be a thorough examination, Mr. Pinchin reported that no more airborne asbestos was found that in ordinary outside air. Fortunately this storey had a happy ending thanks to some good work by both Aaron and Pinchin.

The lesson learned: when facing hazardous materials issues, get a second opinion.

Have You Experienced These Issues?

Have you discovered hazardous materials on your property? Did your insurance company request information on what hazardous materials may be present? Are you considering making improvements to your property and are concern about what may be discovered? Your comments and questions are welcome. Please add them below. Thank you!

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