ACCC product recall: Contaminated sand containing asbestos

Understanding the risk exposure, insurance implications and ways to manage associated risks

Following the Australian Competition & Consumer Commission’s (ACCC) recent product recall announcement concerning coloured sand contaminated with asbestos, many of Marsh’s clients are potentially impacted, particularly those in the education sector. Other businesses that may be impacted include shopping centres, local governments, community service centres or faith-based organisations who run playgroups or children’s events. Those in the healthcare sector who provide paediatric services may also be impacted if they supply children’s play equipment in waiting rooms or play areas. Some providers may use coloured sand as a tool/activity as part of their services (e.g. occupational therapy, speech pathology).

To help you be prepared, below is an initial reference guide on the potential risk exposure, how your insurance policies may respond and practical tips on managing the associated risk.

What is the risk exposure?

The ACCC has advised that, based on current information, the risk to human health from these contaminated sand products is low. For the latest updates and guidance, please refer to the ACCC website: www.productsafety.gov.au/about-us/product-safety-news/news/safe-disposal-and-health-information-for-consumers-with-recalled-sand-products

What should you do?

If you provide or use these sand products in your education facility or business premises, in addition to following ACCC’s guidelines on managing the recall and safe disposal of the sand products, we recommend that you also retain a small sample of the sand for testing in case a claim arises in the future. This may assist in challenging potential allegations that the product caused physical injury.

We recommend that you follow ACCC’s public announcements closely for the ongoing development of the product recall.

How is asbestos detected? ¹

It is not possible to determine if a material contains asbestos simply by visual inspection. Only scientific testing of a sample can provide confirmation.
Any asbestos sample must be tested by a laboratory accredited by the National Association of Testing Authorities (NATA).
Samples should be collected by a qualified professional, such as a licensed asbestos removalist, a professional occupational hygienist, or a representative from a NATA-accredited asbestos laboratory.

What are the insurance implications?


Insurance policy	Claims likely	Policy scope	Coverage position
Insurance policy	Claims likely	Policy scope	Coverage position
Professional indemnity	Claims related to asbestos exposure in the course of providing professional services.	Covers claims arising from the provision of professional services such as early childhood education and care, delivered by qualified personnel under supervision.	Many PI policies contain bodily injury/property damage, asbestos and pollution liability exclusions.
Liability	Claims for bodily injury, sickness, disease, shock, mental anguish arising out of exposure to asbestos.	Asbestos Exclusion: Liability policies typically exclude coverage for asbestos in any form or quantity. The exclusion does not apply if the claim for personal injury or property damage is unrelated to asbestos’s inherently hazardous nature.	Generally, claims involving asbestos contamination will not be covered under liability policies.
Directors & officers liability	Civil claims are expected to be directed at the entity rather than individual officers.	Coverage may be limited to investigation costs related to asbestos allegations if made against individuals. Bodily injury exclusions typically apply. Some policies may also contain a pollution exclusion.	Further assessment is needed regarding potential regulatory actions against senior officers such as the Chief Quality Officer or CEO. We recommend you promptly notify insurers of potential claims arising from these circumstances to ensure appropriate coverage assessment.
Statutory liability	Possible fines and penalties as a result of asbestos exposure.	Covers: Insurable fines payable to any regulatory authority consequent upon breach of an Act; legal costs and associated expenses incurred with the investigation, defence (including appeals or resisting appeals); settlement of any claim	Some statutory liability policies may respond to an allegation that there has been a breach of Australian law, however many have an asbestos exclusion. Each policy will need to be checked for such an exclusion. Also, note that work health and safety legislation in most states and territories make it an offence to procure or provide insurance that covers a monetary penalty under the relevant legislation. We recommend you promptly notify insurers of potential claims arising from these circumstances to ensure appropriate coverage assessment.
Industrial special risks	Limited to claims related to removal of debris or remediation of contamination following an insured event. E.g. Clearing of debris from resulting damage of a fire or storm.	The typical property insurance policy carries a perils exclusion for pollution and contamination, and debris, which would exclude asbestos contamination.	ISR policies are unlikely to cover losses related to asbestos contamination in isolation of an insured event causing damage.

What are the work health and safety implications and what should you do?

Employers have a legal responsibility to manage asbestos hazards properly, including disposing of waste at approved facilities. If asbestos-contaminated coloured sand is found at a workplace, employers need to act quickly to keep everyone safe and meet legal requirements:

The first step is to stop using the sand, isolate the area and restrict access to prevent further exposure.
A licensed asbestos assessor should be engaged to conduct a risk assessment, determine the safest method of removal and issue a clearance certificate before anyone re-enters the area of exposure. A qualified asbestos removalist should be used.
Workers should avoid touching or disturbing the sand, and any clean-up should be carried out using wet methods and proper PPE (e.g. gloves and P2 masks) to prevent asbestos fibres entering into the air.
The employer should keep workers informed and trained, and report any asbestos issues promptly.

Summary

Staying on top of these steps can help employers maintain a safe work environment and manage the associated risks. From an insurance perspective, coverage for claims arising from asbestos contamination is generally limited due to specific exclusions across the policies mentioned above. We recommend notifying your insurers promptly to discuss your specific circumstances and ensure appropriate risk management and claims handling is facilitated.

If you have any questions or would like to discuss how this may impact your business, insurance coverage, risk management approach and health and safety in the workplace, please contact your Marsh representative.

¹ www.asbestos.vic.gov.au/about-asbestos/finding-and-identifying/find-and-identify-asbestos-tool?place=workplace

This publication is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. The information contained herein is based on sources we believe reliable, but we make no representation or warranty as to its accuracy. Marsh shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting, or legal matters are based solely on our experience as insurance brokers and risk consultants and are not to be relied upon as actuarial, accounting, tax, or legal advice, for which you should consult your own professional advisors. Any modelling, analytics, or projections are subject to inherent uncertainty, and any analysis could be materially affected if any underlying assumptions, conditions, information, or factors are inaccurate or incomplete or should change.

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