When extreme weather events – like the snowstorm currently headed for the American Midwest – threaten to break, most insurance agents scramble to update traditional policies like homeowners, auto or business interruption. However, many clients also stand in danger of liabilities that aren’t so obvious.
In many cases, extreme weather can cause serious environmental liabilities and high monetary consequences for clients without proper insurance coverage. Flooding, for example, can damage above-ground storage tanks that contain contaminants, releasing them into the environment and creating a pollution event.
Floods can also result in mold growth, as was seen in the aftermath of Hurricanes Katrina and Irene.
And low temperatures can also prove troublesome. Pieces of equipment can break in the cold, resulting in the release of pollutants or other hazardous materials.
This latter threat may be coming for businesses in the East and Midwest this week, as a stream of cold air increases the chance for spring snow and strong winds. This comes on top of the rounds of snow that have already been falling in the region.
“This wild, roller coaster ride with temperatures and weather will continue in the Midwest and Northeast but will expand to include parts of the South this week,” AccuWeather Chief Meteorologist Elliot Abrams said.
And if such weather does cause pollution incidents, owners of involved facilities will be liable for any fallout. Such incidents are not covered under traditional commercial liability policies, necessitating an environmental liability insurance policy for fixed facilities or contractors pollution liability policies for contract workers.
Understanding which policy forms to sell to which clients, and with which tailored coverage, is vital, says David Dybdahl, president of environmental insurer American Risk Management Resources Network.
“One common example [of an environmental insurance coverage mistake] is selling an insurance policy designed for an industrial site to a hotel,” Dybdahl said. “Most environmental insurance policies need to be amended to address the specific coverage needs of insured parties.”
Dybdahl also stressed that agents selling environmental policies must address any preexisting pollution conditions.
Above all else, agents should be sure to at least have a conversation with commercial clients about environmental exposure – even if that exposure isn’t immediately obvious. Events like this week’s snowstorm may bring those flaws to the forefront, with some nasty consequences.
“An agent [may have an] incorrect, self-guided belief that pollution exclusions only apply to hazardous waste – an extremely dangerous assumption for not only the client, but also the agent from a professional E&O standpoint,” he said.
