How extreme weather could affect your clients environmental exposure – and your E&O

The last 10 days of 2015 saw a variety of extreme weather events, which can cause serious environmental liabilities and high monetary consequences



When extreme weather events threaten the country, most producers scramble to update traditional policies like homeowners, auto or business interruption. However, many clients also stand in danger of liabilities that perhaps aren’t so obvious.

In many cases, extreme weather can cause serious environmental liabilities and high monetary consequences for clients without proper insurance coverage, says Freberg Environmental Insurance President Stacy Brown.

“There are many, many cases where weather-related events can cause pollution events,” Brown told Insurance Business. “Last summer in Colorado, we had major floods and there were numerous circumstances where above-ground storage tanks that contained fuels or other contaminants were actually moved off their foundations. Some of the tanks actually floated away.”

Floods can also result in mold growth, as was seen in the aftermath of Hurricanes Katrina and Irene, Brown added.

Low temperatures and extreme cold can also result in environmental exposures. Freberg has experienced some of those instances firsthand in the country’s recent cold snap.

“We’ve had circumstances were we insurance facilities and they’ve had pieces of equipment break in the cold, resulting in the release of a pollutant or other hazardous materials,” Brown said.

Owners of these facilities are liable for any environmental contamination or pollution caused by the spill or release, and—surprising to many business owners—such incidents aren’t covered under traditional commercial liability policies.

Instead, producers wanting to safeguard a client’s environmental exposures need to recommend an environmental impairment liability policy. These policies cover a fixed facility and, because premiums are generally proportionate with a client’s liability, are more affordable than many businesses think.

There is also an argument to be made for selling contractors pollution liability policies in order to insure against weather-related damages, Brown said.

“Perhaps a contractor was involved in remediating a mold situation and they didn’t do a good enough job, or they didn’t follow proper protocols and mold returned to that particular facility,” he said. “In those circumstances, a contractors pollution liability policy would come in handy.”

Offering these policies isn’t just a matter of protecting clients and earning a larger commission, either. Brown pointed out that an agent’s own error and omissions exposure could come into play if proper coverage wasn’t offered.

“If [agents] are not offering that coverage, they have a potential for an E&O claim should their insured have a pollution release some time in the future,” he noted.

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