Environmental problems have been in the news lately, a lot. Whether mold, contaminated drinking water or poor indoor air quality, many organizations shut down operations for an extended period with the humid and muggy weather Pittsburgh experienced this summer.
“The most important and usually costliest are mold and contaminated drinking water,” says Patrick Zedreck, area assistant vice president at Gallagher. “These types of claims can not only take days to clean everything from start to finish, but we have seen, at times, it can cost well over $100,000. All while commercial property owners lose revenue from an unexpected shutdown.”
Smart Business spoke with Zedreck about the tell-tale signs of environmental troubles and what to do about them.
What indicates you have mold or contaminated water?
If your allergies are more severe when away from home, mold could be growing in your building. Signs of moisture include water stains or discoloration on walls, floors or ceilings. If your walls are bowed, bulging or warped, moisture probably got into them.
With contaminated water, people tend to notice a visual change first — it looks cloudy. The smell of chlorine is a red flag. Drinking water shouldn’t have much of a smell. A colored tint is another warning sign — frequently a brown or orange discoloration. A number of causes are possible, but the most common is mining or excavation near water supplies.
However, the only way to know whether your tap water contains lead is to have it tested. You cannot see, taste or smell lead in drinking water.
Which companies are most at risk? Why?
Multiple buildings in close vicinity with a large number of people means environmental exposures can spread and affect many quickly. If your building is older, it could be more at risk because old pipes, storage tanks and past flooding increase the probability of mold or contaminated water. If your office shuts down its HVAC equipment for periods of time or the flow of water is intermittent, it also has a higher risk for environmental liability.
A good example of an industry that fits all these categories is education. In addition, younger children also are more susceptible to severe mold problems.
How can insurance help transfer the risk?
Environmental insurance, also known as pollution insurance or pollution coverage, is designed to respond to claims for loss or damage resulting from unexpected releases of pollutants. These losses or damages typically arise in the form of claims against insureds for bodily injury, property damage, cleanup costs and business interruption.
Insureds often think they have coverage under their general liability and property policies. However, those policies restrict coverage by having time-element clauses, exclude coverage for certain pollutants altogether, or don’t provide enough limits to investigate a pollution-related claim, let alone adequately respond to a claim or clean up a pollution condition.
An environmental insurance policy fills the gaps created by pollution exclusions in liability and property insurance policies.
How should the coverage be designed?
This is a coverage that is creating a lot of discussions with brokers and companies. With increasing claims in the region, it’s becoming more important to be educated on these different exposures.
First, it’s important to find an insurance carrier that can write a policy with a fair deductible. Some claims are costly — in excess of $100,000 — so deductibles need to be low enough for the purchase of this coverage to be relevant.
Deductibles also shouldn’t be applied on a per building basis. Some organizations have up to 10 buildings on their campus. If a claim were to occur in one building, it’s likely to pop up in one of the others.
What else do property owners need to know?
While mold can occur quickly, it’s good to periodically complete a mold survey. Check your HVAC equipment annually and try to run it all year long. And be sure to ask your broker if you’re properly covered.
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