Site Pollution Liability on Beachfront Properties: The Tale of a Hidden Exposure

By Larry Simmons, Senior Account Executive

This tale begins with an all too familiar scenario: Mom, Dad, and the kids packing up the family vehicle and heading down to their favorite vacation place, a rental house at the beach. They have made the trip a dozen times and each trip they are determined to make family memories before the kids move on to college. But this time, the memories that would be created are not the warm and fuzzy kind they were hoping for. Because by the end of this trip, one of the family members would be in the hospital and the property management company managing their beach house will be forced to file a claim with their insurance carrier.

How could a family vacation to their favorite beach house end in such disaster? One word: Legionella.  Per the Centers of Disease control, Legionella is a germ that can cause a type of pneumonia called Legionnaires’ disease. Legionella is naturally found in water, or any structure that holds water, i.e. cooling towers, decorative fountains, pools, hot tubs, etc. Legionella is more easily contracted in warm water because the warmer temperature makes it more difficult to maintain disinfection levels needed to kill the germ. Beach front rental properties often have hot tubs or spas on site. If these areas are not properly cleaned and disinfected, the result could be legionella contamination.

This story takes a turn for the worse when the property management company calls to file a claim and they are told that legionella is specifically excluded from their General Liability policy and the carrier will not pay for the bodily injury sustained by the family member who contracted Legionnaires disease. The property management company did not believe that they had any sort of pollution exposure, and therefore never thought to purchase pollution insurance coverage. Unfortunately, this is a scenario we see all too often; An insured is unaware of ALL the exposures related to their business, and therefore fails to place the proper coverages.

Site Environmental Liability (also known as Pollution Legal Liability or Fixed Site Pollution Liability) is a type of environmental coverage that addresses pollution incidents associated with a specific location. This type of coverage is designed to pick up pollution exposures that are excluded in the General Liability, legionella in this case. Had the property management company purchased a Site Pollution policy, it would have paid for this claim. Instead, the company will be forced to pay for medical expenses out of pocket, which could be tens of thousands of dollars.

The moral of the story is that there are environmental exposures everywhere and there are a wide range of coverages available to address them. Pollution coverage is no longer just for hazmat contractors who wear the white suits during a chemical spill. If your client’s business involves renting properties to the public, are they covered for this type of bacteria exposure?  For more information on the pollution coverages Beacon Hill can access for your agency, contact us.