Fact:  Pollution liabilities are a severity, versus frequency issue, that can have a catastrophic impact on HNW insureds.

Fact:  Many of today’s HNW insureds have outgrown their personal & commercial insurance policies coverage capabilities.

Fact:  Pollution liabilities are a great example of how one’s affluence can out pace their insurance policies.

Today’s HNW insured’s need coverage that goes beyond their personal & commercial insurance policies.

Question:  Will the personal and commercial insurance policies you have in force cover your HNW insured’s cover for the following loss examples?

The ERMI HNW Pollution Program can cover for the following loss examples.

Environmental Loss Examples

1. A HNW insured purchased a piece of property to build a residence.  During excavation, oily smelling soil was encountered.  Investigation revealed the source of the contamination was an old unknown dump site on a former farm, now part of an affluent residential community.  The HNW insured paid $150,000 to clean up their property and their attorneys were investigating possible restitution options.
2. Environmental exposures created by motor craft (car, boat, Plane) restoration.  A car collector had a private garage where he restored and stored his car collection.  To fuel the vehicles there was a 1,000 gallon above ground storage tank.  While moving a vehicle the above ground tank was accidentally hit spilling it contents.  The fuel ran off the asphalt into the ground and a nearby creek.  Cost for remediation and natural resource damages was $250,000.
3. It was never determined how a yacht at a marina caught on fire. Because of the fire, neighboring boats also caught on fire.  Fire departments responded to the fires and after the fires were put out the resulting environmental damage cost the yacht owner more than $2,000,000 in fines, penalties, cleanup, business interruption….
4. A condominium was being renovated.  Tenants in the building complained about exposure to dust and other airborne toxins.  Tenants filed suit against the condominium owner and contractor for bodily injury from airborne contaminants entering the ventilation system.
5. Some residents in an upscale residential development were getting sick. After extensive investigation, it was discovered a chemical release from a nearby former dry-cleaning business were migrating via vapor intrusion into residences.
6. A condominium complex with an underground parking garage was in the path of a hurricane.  As a result of the heavy rains, the lower level of the parking garage was flooded.  The flooding caused backup of sewage as well as gasoline and other automotive fluids released from the vehicles in the garage.  Cleanup was required by property owners.
7. New construction was taking place on a previously undeveloped parcel of land. During excavation, contaminated soil was discovered.  The owner had to remediate the site before construction could continue.  It was later discovered the contamination had migrated onto the property from a former boat yard property that had been torn down and out of business for decades.  Remediation costs exceeded $500,000 for the property owner.
8. Several owners in a private residential community were experiencing health issues. During investigation it was discovered that some utilities in the houses such as electrical connections were corroding and could potentially cause a fire.  Testing revealed the dry wall contained contaminates not found in dry wall.  The manufacturer of the dry wall was a Chinese business.  Multiple lawsuits have been filed for multi-million dollar claims for bodily injury, property damage, diminution in property values and more.
9. After moving into their new home residents became ill. Testing revealed several flooring materials contained alarmingly high concentrations for formaldehyde.  Flooring had to be replaced but since the contractor did not have the proper pollution coverage the homeowner had to pay for the replacement and was suing their general and subcontractor for replacement costs along with bodily injury, property damages and extra expense for delays in construction.
10. Due to an unusually strong windstorm, waves broke through a retaining wall at several waterfront residences. Sediment blocked the canal and caused natural resource damages to a wetland.  Cost for restoration and cleanup exceeded $300,000.
11. A drilling contractor caused a release of raw sewage into both soil and ground water after failing to identify a sewer line before drilling. The clean up entailed the excavation of several tons of impacted soil and impacted other residential neighbors when their basements filled with sewage.
12. A real estate limited partnership acquired property previously used for farming on which they planned to build a mall. The firm hired an environmental consultant to conduct a Phase I Environmental Assessment. The property was determined to be “clean.” However, when excavation for the mall began, 100 drums of buried pesticides and herbicides were unearthed. The chemicals contaminated the soil and had to be removed at the firm’s expense. Remediation and drum disposal costs exceeded $750,000.

Fact:  If you have not developed an environmental financial assurance plan for your HNW insureds, your E&O coverage may be the only coverage your HNW insured has when they experience an environmental liability.

A recent study update conducted by the Environmental Working Group shows Michigan having the most “known” PFAS sites (192) and second place is not even close with 47 “known” contamination sites in California.  The key word is “known”.

Just as PFAS chemical use is everywhere, so too are PFAS contaminated sites.  As we have learned with Superfund sites, new PFAS contaminated sites are going to continue surfacing.  Early guesstimates are Michigan can have upwards of 11,000 PFAS contaminated sites.

For a little background on PFAS:  PFAS chemicals are used for their resistance to heat, water, oil and grease.  PFAS are a group of human-made chemicals that includes PFOA, PFOS, GenX, and many other chemicals. PFAS have been manufactured and used in a variety of industries around the globe, including in the United States since the 1940s and contaminate soil, ground water, surface water and the air.  PFAS can resist degradation in the environment and bio-accumulate; meaning that they are persistent in the environment and tend to concentrate in blood and organs over time in biological species.  People can be exposed to these chemicals in house dust, indoor and outdoor air, food, and drinking water. Exposure to certain PFAS chemicals has ties to cancer, ulcerative colitis in adults and thyroid disease in children, among other health problems.

Since PFAS contamination can create large plumes of contamination, this solicits 2 questions when analyzing a business’s environmental exposures.

1. “Who Are Your Neighbors”? When they do a Phase I Site Assessment, they do a minimum of a 2-mile radius search to find out who your neighbors are, and do they have known contamination that can be coming onto your property.  What we have learned from known PFAS contamination sites, is contamination can go way beyond a 2-mile radius.
2. What is your Environmental Financial Assurance Strategy (EFAS) to protect you from your neighbors PFAS contamination coming onto your property? Environmental liability insurance as part of an EFAS, can protect you from neighboring PFAS.

For more information on EFAS for PFAS contact:

Chris Bunbury:  chris@ermi.us    Brooks Bunbury:  brooks@ermi.us

https://www.clickondetroit.com/michigan-water/michigan-has-most-pfas-contaminated-sites-in-us-what-you-need-to-know

https://www.freep.com/in-depth/news/local/michigan/2019/04/25/pfas-contamination-michigan-crisis/3365301002/

This competitive environmental intelligence will offer a brief overview of State Storage Tank Funds vs. Storage Tank Insurance so you can make sure you are offering what is best for your insureds while better protecting your E&O exposure.

Over the last few years we have observed an increase in the number of underground storage tank (UST) owners going with State Storage Tank Funds to meet their financial assurance requirements, versus UST Insurance. Most of this is due to aging tanks (25 years or older) which the private insurance industry does not want to insure due to poor claims experience.

What we have also learned, most agents in states with tank funds, believe State tank funds offer the same coverage as private insurance carriers. The reality is, State tank funds are generally designed to meet the bare minimum financial assurance requirements for regulated storage tank owners.

State funds that are still solvent, generally cover clean up but do not offer features included on storage tank insurance policies such as defense cost, third party bodily injury, third party property damage, third party business income and much more.

At ERMI, our strategy is to use State tank funds for troubled insureds, i.e. regulated underground storage tanks 25+ years or older.

Besides being a depository for troubled tank accounts, another benefit for state storage tank funds, involves UST owners when they are getting ready to pull or replace their tanks. If an insurance carrier becomes aware an insured is going to pull a tank/s they will suspend coverage until the tank/s have been pulled and replaced and all testing is completed. Insured’s must notify a carrier if they intend to replace their tanks and there is a question on the UST warranty application that asks if the insured is going to pull or replace any tanks during the policy period.

The fact State tank funds are used for troubled accounts is one reason why so many are financially stressed or have gone out of business. In Michigan, we are on the second version of our State tank fund because the original program ran out of money forcing a lot of tank owners to pay out of pocket for cleanups or go out of business. What is the financial stability of your States tank fund?

A few issues to look for with State Funds are:

•State funds are generally offered on a reimbursement basis so the insured could face large out of pocket expenses vs paying a deductible / SIR.

•Very few State funds offer third party liability (third party bodily injury, third party property damage, third party business income) like UST insurance policies so check to see if your state does.
•Most State funds have a set limit of coverage offered and you can’t buy higher limits, regardless of the number of tanks you have.
•State funds generally exclude loading / unloading.
It’s important you do not sacrifice coverage for your UST insureds by going with a state tank fund because that can create E&O claims for you.

For more information or to strategize on storage tank insurance please contact Angie Marsman at 269-792-1070 or angela@ermi.us.

Note: If you have other team members you would like added to our email list to receive our competitive environmental intelligence please send me their email.

As the link below points out, experts are unsure as to why there has been such a drastic increase in Legionnaires.  Infections by other clinically significant waterborne pathogens that can cause infections include but are not limited to Pseudomonas, Acinetobacter, Burkholderia, Stenotrophomonas, nontuberculous mycobacteria (NTM), and Fusarium, have also increased dramatically.

Legionella and these other environmental-source pathogens are collectively called Opportunistic Premise Plumbing Pathogens (OPPPs).  To date, attention has focused primarily on Legionnaires’ disease, because it’s the only OPPP infection that legally must be reported, but other OPPP infections are gaining prominence.

Pollution insurance policies offer financial assurance in protecting insureds for OPPPs liability.  Pollution insurance policies, besides being more affordable than other forms of financial assurance also cover legal fees, first party clean up, third party property damage, third party bodily injury, third party business income, engineering fees, disposal costs, specialists to assist you in handling a claim and much more.

Businesses with exposure to OPPPs need to have an environmental financial assurance plan in place.  Keep in mind there are many other contaminants that are gaining notoriety, i.e. PFAS, PFOS, Glysophate, Formaldehyde, Silica, Welding Rod Fumes….

https://www.fisherphillips.com/Workplace-Safety-and-Health-Law-Blog/legionnaires-disease-and-other-workplace-infectious-diseases

environmental Strategist, between the lines:  The obvious focus of this story is the exposure crematory’s have to radiation due to their business model.  As the article points out in 2006 (most recent year for data) in the United States there were about 18 million nuclear medicine examinations performed and the number has grown exponentially since 2006 due to all the new radiologic and nuclear medicines introduced.

Bottom line for crematory’s, they face a cornucopia of environmental exposures and as part of “Best Practices” need to have an environmental financial assurance instrument in place.

My between the lines take involves the up the chain environmental exposures, from the production, shipment, storage and those implementing medical procedures.  Hundreds of thousands of businesses are involved in not only nuclear and radiological pollutants but the environmental exposure created by business trying to keep us living and healthy are huge.

As your client’s professional risk manager, what environmental financial assurance instruments have you coached your client’s and implemented to protect them from environmental liabilities?

https://www.kctv5.com/news/cancer-patient-s-treatment-leaves-radiation-contamination-in-arizona-crematory/article_23c6ee93-9fdd-54ed-a6c7-a334c0aec863.html

United States Suffered Costliest Natural Disasters in 2018

As ERMI has coached in the past, Natural Disaster Seasons (NDS, i.e. Flooding, Tornados, Forest Fires, Hurricanes, earthquakes…) are a great time to talk pollution.  Most pollution policies do not exclude Acts of God.

During NDS, national and local media are lighting up the airways / internet highway with all the pollution problems caused by natural disasters.  The wildfires of California released all kinds of toxic chemicals contained in commercial buildings and homes.  Residents will not be able to return their property until laborers in masks, Tyvek suits and booties begin cleaning up burned bottles of bleach, melted cans of paint, corroded car batteries….  They will need to scrape through soil until they hit layers that are free from oil and gas and other contaminants released during the fires.

As the fires burn up buildings and homes, they also release the components of modern daily life into the ground, water and atmosphere.  In the charred footprint of each building / home lurks an invisible and dangerous legacy of toxic chemicals released by the blaze. There may be radioactive isotopes from burned-up antique crock ware, cupboards of incinerated household cleaners, and asbestos from old siding.  Treated wood can release arsenic and chromium when burned.  An incinerated computer monitor / television can expose heavy metals such as cadmium and lead.  Heavy metals, chemicals and biological contaminants left behind demand a cleanup of extraordinary scale, before any residents return.

Note:  Pollution losses tend to be a severity versus frequency issue. 

Note:  Under Federal law, property owners are ultimately responsible for the environmental condition of their property regardless of who or what caused the contamination.

It may not be until years later when the real estate owner goes to sell their property and an environmental site assessment unveils an environmental problem from pollutants deposited during NDS.  Whose responsible?

Since every business is impacted by environmental exposures, it’s now part of “Best Practices” for businesses to have a financial assurance strategy in place to address their exposure to environmental liabilities caused by Natural Disasters.

As your team member for all things environmental, let ERMI know how we can assist you to drive your sales during NDS.

https://www.morningstar.com/news/dow-jones/TDJNDN_201901085202/us-suffered-costliest-natural-disasters-in-2018.print.html

https://www.nytimes.com/2018/11/29/us/california-fire-chemicals.html

environmental Strategist, between the lines:  The link below is an excellent example of Environmental Economics (EE) and why Mother Nature is transitioning us away from our current economic platform.

What is Environmental Economics (EE)?  Under what I term our current “Slash & Trash” economy the environment is a subset under the economy.  With EE, it’s the opposite, the economy is a subset under the environment.  In other words, the environment impacts and directs our economy.

As the link below highlights, due to an increase in severe weather patterns impacting Florida, the State’s agriculture industry in looking to make a change by raising crops that are more resistant severe weather than current crops.

After decades of environmental Strategist sharing information on EE it’s unfortunate our society continues to be slow to transition away from our current “Slash & Trash” economy.  It’s regrettable it takes economic devastation by natural disasters before society looks for alternatives.

The reality is, as environmental change continues to transition us away from our current economic platform, we will actually be building on a more solid, sustainable foundation that will create stability and profitability during environmental changes taking place on planet earth.

https://www.theguardian.com/us-news/2019/feb/17/hurricane-michael-florida-panhandle-agriculture-industry-transformation

environmental Strategist, between the lines:   The majority of insureds and for that matter, insurance professionals, think about pollution policies offering coverage to clean up a pollution liability.  While that is true, I do not believe cleanup is one of the top three benefits offered in pollution policies.

Pollution Liability Insurance Policy Benefit #1:  Defense coverage.  Environmental liabilities are relatively new and can be very litigious.  Dealing with governmental regulation / penalties along with suits from injured third parties can be very litigious and pollution insurance policies offer defense coverage.  Even if you do nothing wrong you can still get named in a lawsuit.  Example, a subcontractor on a job causes a pollution liability.  The sub gets named in the suit along with the general contractor and property owner.  Even though the general contractor and property owner did not cause the liability they still get named in the suit and the attorneys will let the courts decide who should pay and who can be released.  When reading the link below pay attention to all the various suits that are initiated due to a spill of oil from a tanker truck.

Pollution Liability Insurance Policy Benefit #2:  When a pollution liability occurs, you can have the Federal, state and local governments pounding on your door along with the press and neighbors.  A pollution liability is not a fender bender, a pollution liability requires specialists who know how to run damage control central and included in the premium paid, all pollution policies come with specialists to assist in handling an environmental claim.  When reading the link below pay attention to all the parties involved and trying to communicate and coordinate if you have never been involved in a pollution liability can be overwhelming if not impossible to manage.

Pollution Liability Insurance Policy Benefit #3:  Most of the time the cost to clean up the environmental liability is less than claims that come in from third parties for Bodily Injury, Property Damage and what I call the big “Black Hole” Third Party Business Income.  As you read the link below notice all the third parties impacted the oil spill.  They define business income and who will receive what along with other third-party damages.  When we work with a Fortune 500 company, the main environmental liability they are concerned with is third party bodily injury.  Most of the time they will self-fund for cleanup costs cause in their minds, remediation is the least of their worries in dealing with pollution liabilities.

Now we get to pollution policy benefit #4:  Cleanup

Pollution policies offer a lot more benefits than those listed above.  Bottom line, every business is impacted by environmental exposures and in the United States 95% of the business can’t afford to self-insure.  As your client’s professional risk manager, it is our job to make sure you have an environmental financial assurance plan in place.  What environmental financial assurance plan do you have in place for your commercial and High Net Worth insured?

When you read the link below pay attention to the date of the loss and when it’s is finally getting to settlement discussions.  With pollution insurance you get made whole and then the insurance companies will subrogate against the at fault parties.

http://www.register-herald.com/news/local_news/settlement-proposed-in-connection-with-diesel-spill/article_629320ac-95f9-11e8-bc1d-7f4e9343e872.html

environmental Strategist, between the lines: Introduction to PFAS. If you are not familiar with Per- and polyfluoroalkyl Substance or PFAS you need to be and after you read this competitive environmental intelligence you will understand why.

Due to PFAS pollution, environmental laws are changing.

PFA’s are used for their resistance to heat, water, oil and grease. PFAS are a group of human-made chemicals that includes PFOA, PFOS, GenX, and many other chemicals. PFAS have been manufactured and used in a variety of industries around the globe, including in the United States since the 1940s and contaminate soil, ground water, surface water and the air. PFAS can resist degradation in the environment and bio-accumulate; meaning that they are persistent in the environment and tend to concentrate in blood and organs over time in biological species. People can be exposed to these chemicals in house dust, indoor and outdoor air, food, and drinking water. Exposure to certain PFAS chemicals has ties to cancer, ulcerative colitis in adults and thyroid disease in children, among other health problems.

PFAS besides being used in Oral B Glide dental floss, can also be found in:

• Food packaged in PFAS-containing materials, processed with equipment that used PFAS, or grown in PFAS-contaminated soil or water.
• Commercial / household products, including stain- and water-repellent fabrics, carpets, upholstery, soap, shampoo, clothing, leather, nonstick products (e.g., Teflon), pizza boxes, fast food wrappers, microwave popcorn bags, polishes, waxes, cleaning supplies, paints, textiles, paper & packaging materials, cleaning products, and fire-fighting foams (a major source of groundwater contamination at airports and military bases where firefighting training occurs).
• Workplace, including production facilities or industries (e.g., chrome plating, electronics manufacturing or oil recovery) that use PFAS.
• Drinking water, typically localized and associated with a specific facility (e.g., manufacturer, landfill, wastewater treatment plant, firefighter training facility).
• Living organisms, including fish, animals and humans, where PFAS can build up and persist over time.

For more information and articles on PFAS refer to the following links:

EPA website: https://www.epa.gov/pfas
Where is PFAS Pollution Found in the U.S.? https://www.phly.com/rms/blog/PFAS.aspx
Dental floss: https://www.usatoday.com/story/news/nation/2019/01/09/oral-b-glide-floss-toxic-pfas-chemicals-study/2530661002/
Oscoda School water contaminated with PFAS: https://www.mlive.com/news/index.ssf/2018/08/oscoda_schools_pfas.html
Fire Fighting Foam: https://www.daytondailynews.com/news/local/dayton-suing-firefighting-foam-makers-after-water-safety-worries/iGcb3BiwcvgYfe0m5OjarL/
https://theintercept.com/2018/02/10/firefighting-foam-afff-pfos-pfoa-epa/
Wisconsin Takes First Steps To Shield Tax Payers From PFAS: https://madison.com/wsj/news/local/govt-and-politics/wisconsin-takes-first-step-to-shield-taxpayers-from-toxic-cleanup/article_e40ea686-11ff-5db3-af44-0d020f30a5da.html
How do professional carpet cleaners dispose of their water that contains PFAS extracted from the carpet? What about carpet cleaners the people rent? http://ecologywa.blogspot.com/2011/11/when-carpet-cleaning-where-should-wash.html