Long-Tail Liability in Australia: 2025 Guide for Businesses

Long-tail liability isn’t just insurance jargon—it’s a critical concept that can make or break an Australian business. As legal environments evolve and claim windows extend, understanding your potential exposure to historic claims is essential. In 2025, Australian regulators and insurers are sharpening their focus on long-tail liability, with real impacts for businesses across construction, healthcare, manufacturing, and more.

What Is Long-Tail Liability?

Long-tail liability refers to risks or insurance claims that may not emerge until years—or even decades—after the event that caused them. Unlike short-tail liabilities (like car accidents, where claims are made and resolved quickly), long-tail liabilities can arise from issues such as:

• Asbestos exposure, where health effects appear decades later

• Product defects that only surface after prolonged use

• Professional advice or design errors with delayed consequences

• Environmental contamination discovered years after the fact

These claims are notoriously difficult to predict and price, making them a major concern for both insurers and business owners.

Why Is Long-Tail Liability a Hot Topic in 2025?

This year, several factors are bringing long-tail liability to the forefront for Australian businesses:

• Regulatory changes: The Australian Securities and Investments Commission (ASIC) has introduced tighter reporting requirements for legacy risks, with new standards for documenting historic exposures. This particularly impacts sectors like construction, engineering, and resources.

• Legal precedent shifts: Recent high-profile court cases have broadened the window for claimants to file lawsuits, especially in areas like workplace health and environmental harm. The 2024 decision in Smith v. BlueRock expanded employer liability for historic workplace injuries, sending ripples through insurance markets.

• Insurance market hardening: Insurers are raising premiums and tightening policy wordings for long-tail liability covers, citing increased claims unpredictability and the lingering effects of past mispricing. In 2025, some insurers are even exiting high-risk segments altogether, leaving businesses scrambling for cover.

Long-tail liability isn’t just a legacy issue. It’s a live risk, with real-world consequences for how businesses operate and manage their balance sheets today.

Case Study: The Asbestos Legacy and Construction Sector

Consider the ongoing fallout from asbestos exposure—a textbook example of long-tail liability. Decades after widespread use was banned, claims from former workers and building occupants continue to emerge. In 2025, the National Asbestos Exposure Register logged a record number of new entries, and insurers paid out over $300 million in related claims.

For builders and property owners, this means:

• Ongoing legal and financial exposure even for past projects

• The need for meticulous record-keeping of materials used and safety protocols followed

• Difficulty obtaining affordable insurance for older properties or renovations

It’s a sobering reminder: what you do today can echo for decades, and your business could be on the hook long after a project ends.

How to Manage Long-Tail Liability Risks in Your Business

While you can’t eliminate long-tail risks, you can take steps to protect your business and your future:

• Audit your historic exposures: Review past projects, products, and services for potential legacy risks. Document what you find and store records securely.

• Review your insurance program: Work with a broker who understands long-tail liability. Ensure you have adequate run-off cover, retroactive cover, and clarity on policy exclusions.

• Stay across regulatory changes: Keep up with 2025 updates from ASIC, Safe Work Australia, and your industry body. New standards could affect your obligations and insurance requirements.

• Invest in risk management: Implement robust quality assurance, safety, and compliance processes. The more you can show your diligence, the stronger your defence if a claim surfaces years later.

The Bottom Line

Long-tail liability is a slow-moving, high-impact risk that every Australian business leader should take seriously in 2025. As legal landscapes shift and insurers tighten their terms, now is the time to get proactive—review your exposures, shore up your cover, and embed risk management into your culture. Your future self (and your balance sheet) will thank you.