Government announces prohibition on use of engineered stone. What are the insurance implications?

On 13 December 2023, Work Health and Safety ministers representing the Commonwealth, states and territories agreed to Safe Work Australia’s recommendation to prohibit the use of engineered stone to protect thousands of workers from respirable crystalline silica (silica dust). The prohibition takes effect on 1 July 2024.

What is Silica dust?

In our recent article here we set out what silica dust is and how the exposure to it has resulted in numerous cases of silicosis over recent years.

Health concerns have prompted all states and territories in Australia to review work health and safety (WHS) laws to protect workers from the hazards associated with silica dust.

Respective state and territory Jurisdictions will manage arrangements for working with engineered stone products, installed prior to the prohibition, within a national framework developed by Safe Work Australia.

How will Insurers react to the ban?

The prohibition on engineered stone could prompt insurers to reassess their Public Liability and other third party liability policies for businesses likely to have the highest exposure to silica dust. Those would include miners, farmers, engineers, and builders.

We assume that these businesses will be required to demonstrate compliance with the new WHS regulations and cease working with engineered stone. Insurers are likely to increase premiums, apply specific exclusions, or increase worker to worker excesses if we see rising trends in workers compensation claims relating to silicosis.

For suppliers, importers, architects, interior designers, and contractors working under design and construction contracts, expect to see specific exclusions applied for claims arising in connection with any recommendation, installation or use of engineered stone subsequent to the ban.

We expect that transitional legislative provisions will give businesses guidance on ongoing work in relation to engineered stone. Government will need to clarify regulations regarding repair, demolition, and removal of engineered stone in the future. For any business providing these services or advice, careful consideration of broad-based exclusion clauses in insurance policies will need to be reviewed to ensure they are covered.

We expect to see an increase in regulatory action for businesses and professionals failing to adhere to the prohibition next year with resultant prosecutions by SafeWork (or WorkSafe). Note, Work Health and Safety fines and penalties imposed on companies are uninsurable. The legal costs of defending prosecutions can be significant. This risk of these costs can be transferred by taking out a Statutory Liability insurance policy.

Regarding potential workers compensation injuries, the relevant national schemes will continue to serve as a safety net, offering compensation to affected workers and their families. Despite the prohibition, employers must still ensure stringent adherence to workplace safety standards. They must continue to take significant steps to protect their workforces from the long-term risks associated with silica exposure while ensuring that affected workers receive the necessary support through workers’ compensation programs.

To avoid adverse insurance implications, businesses can take steps to mitigate the health effects of silica dust. This includes a combination of engineering controls, safe work practices, employee training, safety equipment, and in general – demonstrate a commitment to ongoing evaluation and improvement in workplace safety measures for silica dust.

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