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Land contamination liabilities, especially if they affect human health (as cov-
ered in Chapter 19);
Part C “ Overview of the Social Aspects of Business Risks
414



Asbestos: global legislation like the UK Control of Asbestos at Work
Regulations 2002 (SI 2002 No. 2675) requires employers, owners or occupiers
of non-domestic premises to ensure that the risks posed by asbestos are prop-
erly managed. Assessments are usually needed to be undertaken to identify
whether asbestos is present on or in the premises and, where present, or is
likely to be present, those responsible must:
Compile a written risk assessment;
Prepare a written plan identifying those parts of the premises concerned;
and
Identify in that written plan those measures to be taken to properly manage
the risk.
These documents must be periodically reviewed, and failure to manage this
risk can lead to a criminal prosecution of both the company and the com-
pany™s officers. Examples of sector liabilities are:
The aerospace and defence sectors, engineering and construction sectors
are all affected by this. In the UK, observed deaths are over 1700 per annum
and will hit a maximum of 2000 per annum in 2010, up from less than 200
in the 1960s. The US National Bureau for Economic Research (NBER) esti-
mates that at least 600 000 people have now filed asbestos exposure claims
in the US. Eighty firms have filed for bankruptcy and insurers have paid
out approximately $32 billion in compensation. The total cost of asbestos
compensation is projected to be between $200 and $275 billion; and
The exposure of the UK manufacturing industry to asbestos liability is also
increasing as new estimates of expected fatalities occur. VT plc has already
increased their provision by £15 million in March of this year. The number
of asbestos suits against Ford rose by two-thirds in 2003 as the total num-
ber of claims reached 41 500.
The scale of the potential liabilities is still vast and for just the UK this has
been researched by Actuarial Professionals who find that the number of
Britons suffering from asbestos-related diseases will peak at roughly 2000 a
year within the next 10 years, at a loss of nearly £8“20 billion pounds sterling
over the next 30 to 40 years (˜UK asbestos deaths rising™, Claims, December
2004, volume 52, number 12, p. 13);
Food producers and processors are facing obesity litigation for poor diet and
physical inactivity, which accounts for about 400 000 American deaths each
year. It is also estimated that taxpayers foot half the $75 billion a year and
that in the next few years it will become the number one killer in the US.
There are product recalls every day as companies have a legal obligation to
recall products which are deemed unfit for the purpose. Coca-Cola has had
the Dessani water recall and subsequent deletion of that product line in the
UK. They had a large-scale product recall of products made at their Belgium
plant, which is alleged to have cost $100 million. There are now regular
headlines such as:
˜Revealed: how food firms target children™ (The Guardian, 27 May 2004).
Dramatic extracts such as ˜Children will die before their parents™ can be
read in the criticism of the food industry which has been given three years
Chapter 17 “ Health and safety of stakeholders and customers 415



to redeem itself (the report can be read at www.parliament.the-stationery-
office.co.uk/pa/cm/cmhealth.htm).
Food producers and processors are being encouraged to follow the market
trends which can include increased demand for home-grown food produced
to the highest nutritional and animal welfare standards. David Miliband,
Britain™s Secretary of State for Environment, Food and Rural Affairs, said at
the Oxford Farming Conference, ˜The food sector is increasingly driven by
consumer questions about quality, health and environmental impact as well
as price ¦ Consumers want more information on where their food has come
from and how it has been produced, and higher standards of nutrition and
animal welfare.™; and
Paint liabilities are becoming like asbestos litigation, the ramifications of the
verdict could be widespread and affect not only other paint manufacturers
and pigment makers, but also landlords with poor maintenance records,
painters, distributors, and others in the supply chain that produced the lead-
based paint used in millions of buildings across the United States. Legal
experts note that the link between lead paint and individual cases of devel-
opmental impairment will be difficult to prove, which is why many other
cases filed at the state level have failed, and it is unclear whether the Rhode
Island verdict will survive the appeals process and affect the tort system in
the way that asbestos has.

Case study “ tobacco sector
We undertake an exploration of some of the risk impacts that the tobacco sector
has suffered. First, the very nature of the product has a highly noticeable impact
upon society. The estimated annual death toll from tobacco-related products is
435 000 deaths in the US and 400 000 in the EU of which 100 000 per year are in
the UK. The US Department of Justice is pursuing a $289 billion lawsuit against
the tobacco industry, on top of a previous settlement for $320 billion. This
will affect the UK tobacco giant BAT plc more than the other UK-based tobacco
companies as they have limited or no exposure to the US market.
Analysts at Charles Stanley say of the liabilities in the tobacco sector:
˜BAT™s shares have always stood at a discount to those of Imperial Tobacco and
Gallaher because of the risks posed by US litigation™, and that this effect will be
reduced by BAT™s pushing these liabilities onto Reynolds America, a new hold-
ing company forged by bringing its US operations together with those of RJ
Reynolds Tobacco (Financial Times, 29 October 2003).
There are other liabilities that become apparent over time, however, and
the same tobacco company started to suffer in other geographical areas as British
American Tobacco fell 1.1% at the start of a lawsuit, brought against it by
British Columbia seeking C$10 billion in healthcare costs at the Canadian
Supreme Court (Financial Times, 9 June 2005). The effect of litigation like this
is not always immediate and Credit Suisse First Boston changed its recommen-
dation of the tobacco sector a few days later (on 16 June 2005) from ˜overweight™
(holds more than the sector™s proportion of the index) to ˜neutral™ (holds the
Part C “ Overview of the Social Aspects of Business Risks
416



same as market proportion) as they said that current valuations did not reflect
the risks from changes in taxation, regulation, litigation or competition. BAT
fell a further 2.2%, Imperial Tobacco lost 1.6% and Gallaher 1.1% as reported
in the Financial Times on 17 June 2005.
There is the increasing likelihood of a reduction in passive smoking and air
pollution for the general public as smoking bans gather pace. Ireland outlawed
cigarettes in all its restaurants and pubs in 2004. It is now illegal to smoke in vir-
tually all workplaces, closed public spaces and on public transport, with fines of
up to ‚¬3000 (£2000) for transgressors (Risks, issue number 150, April 2004).
The Justice Department is suing the industry for allegedly conspiring to
deceive the public about the dangers of tobacco products/smoking and the
addictive properties of nicotine and how these can be boosted. The US govern-
ment is also claiming that the companies gained $280 billion through fraud.
New research suggests that a workplace smoking ban could almost halve the
number of heart attacks. The study looked at the impact of a smoking ban in the
US town of Helena, Montana (˜Reduced incidence of admissions for myocardial
infarction associated with public smoking ban: before and after study™, British
Medical Journal, Richard P. Sargent, Robert M. Shepard, Stanton A. Glantz, pub-
lished online, 5 April 2004 (Risks, issue number 151, April 2004)).
Filters in (Philip Morris) cigarettes may release potentially harmful fibres
into smokers™ lungs, new research claims. Scientists say the tobacco giant has
known of the possible defect for 40 years, but marketed the cigarettes anyway.
Researchers from the US Roswell Park Cancer Institute said that as people smoked
the filters released plastic-like cellulose acetate filter fragments and carbon
microparticles. The report is published in Tobacco Control, a subsidiary jour-
nal of the British Medical Journal. Philip Morris brands include Marlboro, Peter
Jackson and Alpine (Herald Sun, Melbourne, Australia, 13 March 2002, p. 25).
The following are some product liability cases against the tobacco sector:

Boeken case: the jury awarded the plaintiff $5.5 million in compensatory
damages and $3 billion in punitive damages, later reduced to $100 million;
Bullock case: the jury awarded the plaintiff punitive damages in the amount
of $28 billion, later reduced by the trial court to $28 million;
Engle case: the $145 billion punitive damages award in Florida™s Engle class
action, which was overturned, was the largest such award in US history;
Lukacs case: a verdict was reached for compensatory damages in favour of
the plaintiff against Philip Morris USA and two other tobacco companies.
The jury awarded Mr Lukacs $37 500 000;
Williams-Branch case: the plaintiff, the wife of a deceased smoker, sued
Philip Morris USA for fraud and negligence. The jury entered a verdict
against Philip Morris USA on the fraud claim and awarded the plaintiff
$800 000 in compensatory damages and $79 million in punitive damages,
which the trial court later reduced to $32 million. The appellate court later
reinstated the award of $79 million in punitive damages;
A French health insurance fund went to court to try to force four tobacco
companies to pay for medical treatment for ailing smokers. The branch of the
Chapter 17 “ Health and safety of stakeholders and customers 417



Primary Health Insurance Fund based in the northwest French city of Saint-
Nazaire is targeting Altadis, Philip Morris, RJ Reynolds and British American
Tobacco;
Philip Morris has been ordered to pay $150 million to the estate of a woman
who died of lung cancer after smoking their low-tar cigarettes. According to
the jury, the company bore 51% of the responsibility for the smoker™s death,
with the smoker bearing the rest of the blame for choosing to smoke (CSR, 23
March 2002); and
There are cases in the US on behalf of former asbestos manufacturers and
affiliated entities against domestic tobacco manufacturers. These cases seek
contribution or reimbursement for amounts expended in connection with the
defence and payment of asbestos claims which were allegedly caused in
whole or in part by cigarette smoking.

General examples
Bayer AG and product liability: a product liability suit against the German
drug giant Bayer AG began with an additional 1400 more plaintiffs waiting in
the wings. The company shares started to plunge, falling over 25% in the
trial™s first few days. The plaintiff™s representative was publicly predicting
that his and other Baycol litigation could cost Bayer a stunning $50 billion
before it was over. To date, it has settled 2312 cases for $872 million (Wall
Street Journal, 3 May 2004);
BOC plc, already facing thousands of legal claims from Parkinson™s disease
victims in the US, have now lost their first asbestos case there. The industrial
gases giant admitted they were also facing 1200 previously undisclosed
claims from asbestos sufferers in America. The shares closed down 2.5 at
887.5p, despite BOC announcing a better than expected rise in profits in the
six months to 31 March, ˜Asbestos ruling dampers BOC™. The Daily Telegraph,
Christopher Hope. Field: 14 May 2004. BOC also have 8525 claims relating to
an alleged link between fumes from welding rods and Parkinson™s disease;
Jarvis: the main issues raised were the quality of rail safety work and Private
Finance Initiative (PFI) contracts behind schedule. They have issued a prof-
its warning, lost their chairman in November 2003 and their CEO Andrew
Sutton in February 2004. Shares fell by 40%;
Jarvis: safety problems are thought to have started their slide in reputation
which has cost the company millions. A quote from The Observer (12
October 2003) helped pre-empt the losses that Jarvis experienced:
Jarvis has lost new work worth tens of millions of pounds because its reputation has
been battered by rail crashes and derailments, say government officials.

Jarvis had bid for a dozen PFI projects but failed to make the top two in any
of them, thus missing work valued at £1.1 billion. They issued a profit warn-
ing some four months later. Maybe as a result of these occurrences Jarvis cut
83 rail signalling and maintenance jobs in March 2004 due to a downturn in
demand. Shares fell 6.5p on the day of the announcement;
Part C “ Overview of the Social Aspects of Business Risks
418



Rio Tinto admitted responsibility for the Capper Pass contamination in June
2000. Over a five-year period in the mid-1980s, children aged 12“15 living
in West Hull villages were confirmed to be suffering from cancer, allegedly
from exposure to chemicals such as arsenic, lead, cadmium and radioactive
polonium-210 in the Rio Tinto mines. Seven of them have since died.
A report (prepared by the prosecution) documents another 400 cases of con-
tamination by the smelter; and
Royal & Sun Alliance Insurance Group plc was reported in Hazards as refus-
ing payouts to asbestos victims who had worked in the Clyde shipyards.
Allegedly, Royal & Sun issued certificates from 1972 to 1977 to Turner and
Newall illegally excluding asbestosis (January 2002).


Risk case study “ emerging food health and safety issues
by Raj Patel
(Research Fellow at the Centre for Chemical and Bioanalytical Science, Royal
Holloway, University of London, Egham, Surrey, United Kingdom)

The food sector has had a large number of difficulties with its supply chain,
human health and safety and environmental health issues: for example,
BSE/vCJD in cattle and humans; foot and mouth affecting the UK pig herd;
Salmonella, SARS and Asian flu in poultry; toxicity from the levels of pesti-
cides in fruit, vegetables and farmed fish; contamination of tuna and other fish
with high levels of mercury and other heavy metals; and general issues such as
the large-scale nitrate pollution of water, or the overapplication of antibiotics,
which is reducing human resistance to infectious diseases.
The list is wide and increasing, and in this case study we explore some of
the newly emerging risks that the sector is facing. It is argued that there are
structural problems in the agricultural and food industries that can emphasise
quantity over quality. It is to be noted that there are few brands or reputations
in the food producing sectors compared to the global players in the food pro-
cessing and sales categories. Usually if there are no brands there is weaker
responsibility for outcomes. A lot of the UK™s food health issues resulted in
thousands of farmers believing it was the UK government™s responsibility to
protect quality and the government thought it was the farmers™ duty. There was
a void, or rather avoidance of accountability that has been partially resolved by
the establishment of a Food Standards Agency to counteract this stakeholder
miscommunication.
The market mechanism for the production and processing of food has been
a heavily regulated one as since the first English food law was proclaimed by
King John of England (1202) prohibiting the adulteration of bread with such
ingredients as ground peas or beans, the complexity of risk managing food provi-
sion has increased immensely with regulation not far behind. In the contempo-
rary world the World Health Organisation says hundreds of millions of people
worldwide suffer from diseases caused by contaminated food: http://www.
who.int/archives/inf-pr-1997/en/pr97-58.html
Chapter 17 “ Health and safety of stakeholders and customers 419



We review some of the key risk issues in the food sector and see just how more
complex the health and safety issues surrounding food products have become and
how it has to contend with issues explored in the rest of this section, including:
Allergenicity;
Antibiotics in honey;
Carcinogenic acrylamide in food;
Common and emerging pathogens:
Microbial contamination of vegetable salads; and
Salmonella contamination in chocolates.
Contamination from packaging;
Food authenticity;
Food security;
Genetically modified crops;

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