Your contractor is doing so many things wrong here. Asbestos has been banned in the U.S. since 1978. As a result, there is a whole body of law governing the testing, removal and disposal of asbestos from pre-1978 construction. Only a licensed certified asbestos company is allowed to test for, remove and dispose of asbestos. The law requires contractors to include very specific disclosures in their contract as to whether they are a certified asbestos consultant. Any competent contractor will first determine the year the structure was built to rule out any asbestos issues. When in doubt, a competent contractor will bring in a licensed certified asbestos consultant for testing and post the results onsite for all inspectors to see. Your contractor is attempting to shift the duty over to you to disclose the existence of asbestos which, under your facts, you couldn't possibly know about. I strongly suggest you immediately stop all work and contact a lawyer AND the contractors state licensing board.
This almost sounds like a set up to make claims against you. Any experieced contractor should be able to detect asbestos and protect his workers. There are companies which specialize in asbestos abatement, and take measures to protect people against it. you need to hire an attorney and investigate this matter ASAP.
I am not your lawyer, and I am giving you this information to help you find a lawyer. Do not rely on this information. Consult a lawyer.
First thing you need to do is stop all work pending an inspection for asbestos and removal of any asbestos by a certified and licensed asbestos contractor.
You are not the one who is supposed to have knowledge that asbestos might be present. Most contractors, especially general contractors, should know that asbestos could be present and should know where to look for it. It is their duty to identify it, or have it properly handled once it is discovered.
Now that you have knowledge that it might be present, it is possible that you have some duty as well. That is why you need to stop work and get it resolved. As for suing you, anyone can sue anybody for just about anything. However, his employees would probably be limited to filing claims against him for any injuries they might incur. Additionally, should they bring claims against you, your homeowner's insurance will likely provide coverage.
This will inevitably lead to some sort of dispute, especially as to who is supposed to pay for the testing and removal. If that happens, having a lawyer familiar with construction issues on your side would be a good idea. Taking everything to a local attorney for a consultation would be wise, sooner rather than later.
Hopefully your contractor holds a valid license, bond, and workers compensation insurance; if not, you may end up being their employer. You can check the status of the contractors license, bond, and workers compensation insurance at www.cslb.ca.gov Unfortunately, there is a very real black market on contractors here in LA that either do not have a license or are borrowing someone elses license. Check out your contractor and get some piece of mind.
Kevin A. Spainhour, Esq. Spainhour Law Group www.slglawyer.com.