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How many of the risks in your property portfolio were constructed before 1982? That was the year that asbestos was banned from new construction, meaning that all those pre-1982 construction risks present potential costs in asbestos removal for both Commercial and Personal lines. Chances are that many, perhaps most, risks in your book qualify for this list.
When a large fire loss occurs, these older buildings generate a loss adjustment item that you don’t consider for new construction - and may not have considered for the pre-1982 segment of your portfolio. Moreover, these older buildings were also constructed before most sprinkler requirements were enacted, and chances are the high cost of retrofitting with sprinklers was prohibitive.
What happens when a fire breaks out in a 10-, 25- or 50-story building without sprinklers to slow the spread? First the fire does its damage. Then comes the water - thousands of gallons of water from fire hoses directed at a few high floors that seep in and downward to the otherwise unaffected floors below. Over 100,000 gallons of water per minute may hit the building and find its way into ceilings, floors and walls. The fire loss tends to spread up and across, whereas the water damage tracks downward.
In an older building, that water will also find asbestos - if the fire has not already found it. Asbestos may be present in the ceiling tiles, floor tiles, joint compound used in walls, or the floor adhesive, in addition to the standard pipe wrap. Even wet, asbestos is hazardous to remove without sending the dangerous fibers into the air. While asbestos was initially designed to resist fire, in a fire it becomes a major element of loss costs.
Here are several ways in which asbestos contributes to time and cost on a fire loss.
In a residential building, each unit and common areas must be tested for asbestos and the asbestos abated. After one recent high rise fire, we estimated that asbestos accounted for close to 30% of the total cleanup cost. Water - rather than fire - was responsible for most of the asbestos fibers released into the air.
Of course, asbestos is not the only contributor to cleanup costs. Mold grows where there is standing water and a humid climate. Any lead found in the debris could trigger more questions. It all leads to more rounds of “test, abate, retest.” The impact of a large residential fire in any urban area is usually more complex and costly than first estimated. It includes finding housing for many of the residents, coordinating with myriad government authorities, transporting workers, and numerous challenges and delays.
However, pre-1982 building risks present an additional source of complexity and cost. When underwriters evaluate potential loss costs for such a building, they should think about both fire - and water damage. Although fire may be the original peril, asbestos clean-up can be the largest contributor to cleanup costs.
Do you know if asbestos is present in the older property risks you insure? If you would like to discuss your property book and this exposure, just give us a call.
