By Larry Simmons, Assistant Vice President
One of the more overlooked coverages in the environmental space is Site Pollution coverage, also known as Environmental Impairment Liability (EIL) or Premises Pollution Liability (PPL). Site Pollution coverage is designed to provide bodily injury, property damage, cleanup costs for pollution incidents that occur at a fixed location. It can be offered on a variety of risks, including apartments, hotels, colleges and universities, manufacturing and chemical plants, office buildings, and even vacant land. In this article I will review some of the exposures related to habitational risks, as well as review some of the additional coverage extensions that can be offered on a Site Pollution policy.
Mold and Indoor Air
While every fixed location has its own unique pollution exposures, for the purposes of this discussion we will focus on habitational risks. Apartments, hotels, colleges, and universities fall into this category and every town has at least one of these. The primary concern with any sort of habitational risk is mold. Mold can be one of the most expensive claim scenarios we see for habitational risks and the causes of ir can vary. A common cause of mold could simply be a leaking pipe. Over time, a slow leak, gone unnoticed, can lead to a severe case of black mold that can result in tenants or students becoming sick. However, there are so many other potential causes of mold; and it is important to keep that in mind as some coverage forms will limit mold coverage to a specific water intrusion event like a burst or leaking pipe. Mold issues can also stem from a faulty HVAC system. If a school dormitory has the wrong size HVAC unit, it could lead to excess condensation build up which could result in mold. Other potential causes of mold could be leaking roofs or poorly installed windows, both of which could result in water intrusion behind the drywall of buildings. These situations illustrate the need to get mold coverage with as few restrictions as possible.
In terms of coverages, it is important to note that every carrier approaches mold coverage a little bit differently. Some coverage forms will only provide bodily injury coverage and exclude cleanup costs. If an insured owns a hotel and mold is discovered, it is unlikely there will be any bodily injury claims, as a person would have to have been exposed to a mold condition for an extended period of time to become sick. If that same insured had a Site Pollution policy that only offered bodily injury coverage for mold, they would still be responsible for remediation or “cleanup costs” of that mold, which can become quite expensive. This is why it is important to have the proper coverage in place so that scenario can be avoided.
While mold is obviously one of the most prevalent exposures for habitational risks, it is by no means the only exposure to be mindful of. The environmental space has seen a surge in methamphetamine claims in apartments and hotels. The chemicals used in these processes would be excluded on a typical GL policy, but would be covered on a Site Pollution policy. And because these chemicals are so volatile that some Site Pollution policies include a coverage extension called Emergency Response Costs, which is designed to respond to pollution incidents immediately. For instance, if an apartment has a mold issue, it really wouldn’t make much of a difference in terms of cleanup costs if it’s handled immediately or in the near future as mold is a slow developing pollutant. In contrast, chemicals used in the methamphetamine process are so volatile and flammable, they need to be dealt with immediately, which is where the Emergency Expense coverage comes into play.
Another environmental exposure that is often overlooked in habitational risks is Legionella, the bacteria that causes Legionnaires disease. While the legionella bacteria is naturally occurring in freshwater environments like lakes and rivers, it can become problematic once introduced to man-made water systems like cooling towers, swimming pools, hot tubs, decorative fountains, etc. Once the bacteria begins to grow and multiply, it can be ingested through a water source or even inhaled as droplets of contaminated water begin to evaporate. Symptoms of Legionnaires disease include respiratory distress, fever, coughing, muscle aches, and chills. The concern for habitational risks is that if a tenant were to contract Legionnaires and be hospitalized for respiratory issues. Since legionella is a bacterium, it would be excluded from a typical GL policy; which is why owners and managers of apartments, hotels, etc. should consider a Site Pollution policy to address this exposure.
Insurance for Habitational Properties
There are several other coverage extensions that can be added to a Site Pollution policy including business interruption costs, non-owned disposal site coverage, Transportation Pollution and crisis management expenses. In short, understanding each carrier’s specific policy form is imperative when placing insurance, especially Site Pollution. As every fixed location is different, placing the correct coverage with the correct coverage enhancements is key. At Beacon Hill Associates, we understand these exposures and the insurance products that can address them. For more information on Site Pollution Liability for habitational properties, please contact us.