The 2016-17 budget has revealed the extent to which the federal and state governments underwrite asbestos removal and compensation.
The budget has shown that when companies like James Hardie can’t meet their asbestos compensation responsibilities, the federal government loans states the hundreds of millions of dollars required each year to keep the Asbestos Injuries Compensation Fund (AICF) topped up. Every state and territory assumes some of the risk of these huge loans when James Hardie fails to pay the AICF.
The latest budget shows how the huge AICF compensation industry is listed as a fiscal risk and specific contingent liability.
An example of the government covering companies for the damage they caused by using asbestos is the ‘Mr Fluffy’ asbestos removal project in the Australian Capital Territory. This operation alone required a $1 billion concessional loan over the past year. That billion pays for buying back and demolishing houses in the ACT affected by Mr Fluffy loose fill asbestos. ACT must repay the federal government until 2024.
Asbestos compensation is listed as a liability in the Budget
Last year the AICF financial report showed James Hardie missed its usual level of payments due to its own profit fall, so the government had to step in. James Hardie has an agreement whereby it promises to contribute 35 per cent of each annual free cash flow profit to the AICF. The 2014-15 AICF payment was $81.1 million compared to $119.9 million a year earlier. The year before, James Hardie paid nothing into the fund. Hardie had generally been meeting its obligations to keep the AICF full of money, by paying the AICF $132m in 2012, $49m in 2011 and $73m in 2010 although it has missed payments to the AICF in other years.
James Hardie paid a total of $799.2 million to the fund since it was first set up in 2007.
The number of claims James Hardie receives declined 12.2 per cent over the past year. The average claim settlement the company pays out through the AICF over the past year was $223,000, which was down 8.6 per cent. 2014-15 was a record year for AICF claims, with 665 claims received that year.
The Commonwealth lends to NSW to lend to companies to pay asbestosis sufferers
This year the Commonwealth again agreed to assume one-third of the default risk of a $320 million NSW government loan to the AICF, contingent on all states and territories assuming the remaining default risk.
Government compensation does not preclude your personal injury compensation
Gerard Malouf and Partners are experienced in handling a variety of dust disease claims. We can inform you whether your lung injury should be compensated for by the AICF or by personal litigation.