Pervasive Nanotechnology: The Tiniest Risk With the Biggest Potential Impact
By DAN REYNOLDS, senior editor of Risk & Insurance®
Scenario: It's the year 2020 and the medical community has begun to identify widespread incidents of skin cancer affecting men and women who had at least one thing in common. They wore wrinkle-free slacks that used nanotechnology for their wrinkle-free properties.
It is then scientifically proven that tiny carbon nanotubes in the clothing caused the skin cancer. Litigation commences and individual awards against the clothing makers and retailers who made
and distributed the slacks reach into the millions of dollars.
Bankruptcy threatens major retailers and manufacturers. Their insurers are facing legal bills that could run into the tens of millions, perhaps even hundreds of millions of dollars.
It doesn't end there. Skin creams, medicines and other products that contained nanotechnology are also linked to physical harm in humans.
With nanotechnology in use by almost every industry sector, the number of products using nanotechnology ballooned to around
5,000 in 2020, up from 2,000 in 2011.
Robert Blaunstein, director of environmental underwriting, Markel West at Markel Corp., said the technology seems to
"bring to the table some extraordinary properties."
talking everything from medical devices, cosmetics, skin creams, toothpaste, tires, you name it," said Gerry Finley, a senior vice president, casualty treatment underwriting with Munich Re.
In the end, it is a question of balancing the risk of the technology versus its rewards.
Tests as far back as 2008 showed that carbon nanotubes produced tumors in laboratory animals. There were enough tests run on carbon nanotubes, in fact, that plaintiffs' attorneys have all the documentation they need to build cases. The plaintiffs' bar is on a relentless winning streak in state and federal courts.
It's not only the products that contain nanotechnology that prove to be problematic, though. Workers exposed to the tiny carbon
nanotubes, no thicker than strands of DNA, are coming down with health problems.
Some workers are displaying symptoms of the common cold. Others are having more advanced breathing difficulties.
Lung cancer is just one illness that has affected workers
who inhaled the microscopic particles as they fashioned steel, wind turbine blades and other metals using nanotechnology processes.
The truth is that nanotechnology, the science of manipulating microscopic particles in the effort to produce outstanding properties in materials, is widespread and becoming more so.
For the moment, the tail on the potential product liability is unknown. Experts are sobered to think of the potential environmental liability posed by the technology.
"While to date there haven't been any truly definitive studies that have found that nanotechnology causes explicit harm there have been studies that have been unable to rule it out," Finley said.
Analysis: Nanotechnology has created metals with 300 times the strength of steel. And it has medical applications, in which it will be able to be used to better pinpoint the drug treatment of cancer cells.
The very permeability of nanoparticles, DNA strands are two nanometers wide, for example, is what makes them so effective in some applications. But that permeability also carries risks.
The U.S. Environmental Protection Agency has already issued regulations limiting the amount of nanoparticles that can be released into the environment.
So what insurance lines are effectively vulnerable here as the use of nanotechnology spreads? How about all of them?
"It will touch every single product line there is," Markel's Blaunstein said. "Just to mention the obvious, it will involve environmental liability."
Add to that, say Munich Re's Finley and his colleague Mike Frantz, a senior vice president and claim department manager in the insurer's reinsurance division, the lines of workers' compensation, product liability, general liability and medical malpractice, among others. Potential product liability claims lead that list.
But keep in mind, we do not intend to panic anyone, just make them more aware.
"While we don't know what we don't know, we have seen some scenarios where things ideally were intended for the good and had favorable properties that could potentially be harmful," Frantz said.
And in the realm of risk mitigation for nanotechnology, awareness is the name of the game, said Ron Wernette, a nanotech risk mitigation expert for the Minneapolis-based law offices of Bowman and Brooke, a law firm which specializes in defending corporations in product liability and environmental litigation cases.
"In this area, there are a lot of unknown unknowns but from an insurance standpoint that makes it very difficult to apply a lot of the prevailing calculations," Wernette said.
But just because there are unknowns, doesn't mean insurers should be passive, Wernette said. He said they should actively monitor the studies that are being undertaken on a monthly basis on the potential health impacts of things such as carbon nanotubes.
They should also be monitoring their customers and finding out all they can about whether they are manufacturers of nanotechnology or whether they incorporate nanotechnology from other producers into their products or services.
"Are you making bactericide products for garments or household products using nanosilver particles or are you making structural products for the automotive industry or aerospace or defense using carbon nanotubes? We need to know specifically what type of material is at issue," Wernette said.
For buyers of insurance, Wernette cautions them to very carefully audit their insurance portfolio to see if they can maximize their coverage in the areas of product liability, general liability, workers' compensation and environmental coverage, to name a few.
"It is the type of thing that they need to pay attention to because there may be certain exclusions that arguably would be used, particularly if there is a large exposure incident by the insurance company and they don't want to get embroiled in insurance coverage litigation," Wernette said.
Wernette recalls that there was an insurer that attempted to write exclusions for nanotechnology risk but then quickly killed the idea. Nanotechnology is just too widespread for an insurer to risk losing that much business. And we also see that as some consider leaving an area of the market, another is ready to step in.
Lexington, the excess and surplus lines carrier, last year launched a nanotechnology-specific product, LexNanoShield , for liability coverage for companies that use nanotechnology in manufacturing. The product also offers first-part product recall coverage, an exposure Wernette specifically noted.
"We have seen a great deal of opportunities, primarily from relatively new companies," said Bob Nevin, a product line manager with Boston-based Lexington Insurance Co. "Companies are very interested in this coverage, and they've shown an equally strong interest in the risk management services that are provided with LexNanoShield."
The reason risk managers should be so vigilant about nanotechnology risk, Wernette said, is because of the very breadth of its applications. When and if claims come in for nanotechnology, they will come in bunches, he said.
"Given the nature of nanoparticles it would be much more akin to any broader list of chemical products where if one person is injured then chances are you will have lots of people who will be suffering from the same problem," Wernette said.
Nanotech does mirror asbestos to a degree, because it is a technology that has tremendous properties that are in wide use. And asbestos was thought to have tremendous properties in construction and fire retardation and was widely in use before the human medical costs became known. Legal costs for that liability could run to $200 billion in the U.S. before all is said and done.
Munich Re's Finley thinks that our society communicates much faster and is so much better informed about an industry's effect on health, compared to when asbestos made its debut decades ago, that you can't compare asbestos to nanotechnology.
"The problem is we don't have a lot of past data; we don't know what the foreseeable future is and we don't know what the unanticipated side effects are," Markel's Blaunstein said.
(Read about our seventh emerging risk, cyberleaks.)
May 1, 2011
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