The risks of reclamation

At the end of July 2009, the courts concluded that reclamation works on the site of a former steelworks in Corby could be to blame for birth defects.

Corby Borough Council, which had taken on the reclamation works, was found to be in breach of its duty to take reasonable care to prevent the dispersal of mud and dust containing a range of contaminants. The council was also in breach of its statutory duty and liable in public nuisance. It was not insured.

Given the publicity surrounding the decision, there are bound to be concerns that this judgment has placed another burden on the construction industry, its brokers and insurers at a time when the economy and increasing red tape makes it more and more difficult to undertake work. But has it?

One of the key issues in this case was that the demolition works were not undertaken by sufficiently qualified or experienced contractors, so the council was found to have been negligent in not employing appropriate organisations to undertake the demolition works and for not supervising while the works took place. Had appropriate contractors been employed, there should not have been the exposure. Any organisation involved in activity in which harmful substances could be released in to the atmosphere must ensure that they have taken all the necessary steps to identify the potential contamination and that they either employ or have themselves the necessary skills to deal with that contamination.

The principles in the judgment apply not just where there is demolition in progress but to any activity in which the potential exists for exposure of harmful contaminants to the atmosphere. Where there could be such a release then construction and demolition businesses - and the landowners on whose land the demolition work will take place - must take into account the on-site workforce and those living and working in the surrounding area. In the Corby case, the area of risk was four kilometres from the demolition site. The area for potential exposure will vary depending on the circumstances of each case.

Brokers need to ensure that they are made fully aware of exactly what activities their clients are undertaking so that they can provide insurers with the appropriate information on which to make a proper underwriting decision. Insurers may also want to consider reviewing their reserves for potential historic claims.

In essence, the message remains the same: brokers must stress to their clients the importance of proper risk assessment - including identification of the appropriate people to do the job - and not cut corners. Full disclosure of all their business activities to enable clear understanding of the risks involved must be given.

The council has yet to decide whether or not it will appeal but, in the meantime, it has been ordered to make an interim payment on account of costs of £1.6m.