Aspects for the insurance industry

Future trends in US jurisdiction will play a key part in determining the order of magnitude of silicosis as a claims complex for the insurance industry. It is difficult at present to judge whether the number of plaintiffs will continue to increase or whether the trend in recent years was merely a temporary phenomenon triggered by fears of impending tort reform among the plaintiffs' lawyers.

The size of any future awards for pain and suffering as well as punitive damages will also decide how much is spent on the subject of silicosis.

The ruling in the case Campbell versus State Farm Mutual Automobile Insurance Co. indicates a trend towards awarding lower punitive damages. The case involved a private motor loss in Utah. The US Supreme Court reduced the punitive damages from US$ 145m to US$ 25m.

However, there have also been a number of more troubling recent court rulings:

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  In the case of Tompkins versus US Silica Company, which was upheld on appeal, the plaintiff was awarded US$ 7.6m. The court ruled that Tompkins, a sandblaster, had contracted silicosis by inhaling silicogenic dust.
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  In the case of Gomez versus Humble Sand & Gravel Inc., the plaintiff was awarded US$ 1.9m because his asymptomatic silicosis had reduced his life expectancy by 20 to 25 years. The award was upheld on appeal and is subject to review by the Texas Supreme Court.
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  In the case of Altvater versus Claycraft Company, a deceased employee's widow was awarded US$ 1.3m following her husband's death from obstructive pulmonary disease caused by occupational exposure to crystalline silica in a brick factory for 40 years.

The interplay between product and general liability vis-avis the worker's compensation system will also play a key role. If the litigation remains limited to workers' compensation, then the insurance industry's financial exposure should in all probability also remain limited.

However, if strict liability were to be introduced as the standard, as in the case of asbestos, then plaintiffs would not have to prove that their disease was caused by exposure to a particular product. Instead, they would merely have to prove that they were exposed to crystalline silica. This would in turn increase the pool of potential defendants. While the possibility of applying strict liability for crystalline silica remains, most experts believe this is unlikely.

Conclusion

Insurers, reinsurers and analysts consider the liability risk posed by diseases due to crystalline silica to be serious, but not disastrous. This belief is based on four factors:

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  Firstly, mortality rates for silicosis and asbestosis are moving in opposite directions.
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  Secondly, the tort environment is showing signs of change. This is indicated, for example, by a bill passed by the Ohio state legislature on 24 May 2004 limiting the group of people who may sue for silica exposure. "Silica exposure" as a cause of action only accrues when the "competent medical authorities" inform the plaintiff that he/she has contracted a disease related to exposure.
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  Thirdly, insurers have gained valuable knowledge in the asbestos arena (such as the so-called "documentation requirements") which they can use to defend silica claims.
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  Fourthly, it is presumed that the workers' compensation system will remain the focus of jurisdiction for the majority of claims.

Nevertheless, US litigation raises a number of risk management issues which must be monitored closely. According to the latest study by the Insurance Information Institute (III), silica-related diseases are normally not excluded from general liability, product liability and commercial umbrella policies.

Since the use of crystalline silica will continue in the USA and many other parts of the world, insurers and reinsurers should carefully check whether such conditions should be explicitly excluded in the policy wording.