The Ebola virus is the latest threat that bio-remediation professionals will have to combat and it’s been no surprise that I’ve received this question numerous times from restoration and remediation clients of mine: “Am I covered if I do Ebola decontamination work?”
Keep in mind that this is a question that’s coming from professionals that don’t currently have Ebola decontamination jobs, but are planning ahead in case they ever do receive one. I love clients that plan ahead on insurance issues.
As it turns out, my clients would be fully insured if they went to work an Ebola decon job, due to the fact that their insurance coverage is structured between the General Liability policy and their Contractors Pollution Liability insurance policy to address biological contaminants work, starting with their Category 3 water work. By default, we hit the Ebola decon work nail on the head. It turns out that it is actually easier to get seamless insurance coverage for Ebola decon work than it is to get bacteria decontamination jobs covered seamlessly.
However, it’s worth noting that most of the liability insurance packages sold to restorers in 2014 would likely not adequately cover biological contamination risks of any kind.
In fact, there is a 90% chance that if you are a restorer reading this that you are not insured the right way to be working on bio-remediation’s of fungi/mold/bacteria/viruses or, by default, Category 3 water because of the bacteria it contains. There are number of reasons that this is the case.
For instance, your insurance company may not know you perform bio-hazard remediation work, including Category 3 water. They would not insure you if told them that your Category 3 water work had a bio-hazard component to it. Bio-hazard remediation contractors are taboo in the majority of insurance companies. In fact, most of the insurance vendors who sell insurance policies to restoration firms have never heard of Category 3 water, which explains why so many restorers are insured by insurance companies that think they do not insure bio-hazard remediation contractors.
Your insurance vendors not knowing that Category 3 water is bio-hazard can come back to bite you at a very inopportune time. For example, if your insurance underwriter has you rated as a janitorial firm and they see your workers on the 6 p.m. evening news working with respirators at a bio-remediation project, you can count on your business insurance being cancelled in 30 days on the basis that there has been a material change in the risks insured.
I had an insurance underwriter tell me a few weeks ago that this is exactly what happened to one of his restoration clients. The underwriter’s boss, more than 1,000 miles away from the job, saw the van of a contractor working one of the Ebola decon jobsites on national television. A quick reference to the insurance companys’ client list revealed that the firm performing the work was in fact their customer. A quick call from the boss instructed the underwriter to issue a 30 day notice of cancellation of the firm’s liability insurance because of the material change in risk. To avoid these situations, it is a real good idea that your insurance vendors are fully aware of the scope of services your firm provides. To avoid the unpleasantness of an insurance cancellation, make sure everyone including the underwriter’s boss is cool with the bio-hazard component of Category 3 water if you are working those jobs.
Another reason you may not be insured correctly is because your General Liability and Contractors Pollution insurance policies likely do not adequately cover bio-hazard work on a seamless basis. The exclusions for bio-hazards in your General Liability insurance policy exclude more claims than your Contractors Pollution policy can cover. If you have a separate GL and CPL policy with different insurance companies, this insurance coverage glitch definitely applies to you. My current insurance underwriting team invented the first CPL policy with me when they were working for AIG insurance company in 1986. As the original designer of CPL insurance, to this day I cannot figure out how to tweak a CPL policy to completely fix the bio-hazard exclusions on GL policies. If you are being told that your separate GL and CPL coverage is fine for bio-hazard work, one thing is for sure, the person telling you that did not invent the CPL insurance coverage line. There is almost no way for the coverage on the separate GL to be fine for bio-hazard work no matter what kind of CPL policy you buy.
Bio-hazard work, including Category 3 water, requires special insurance that is not necessarily expensive, you just need to know where to get it and why it is important to have.
Common Coverage Defects for Biological Contaminants In Environmental Insurance
Insurance agents need to deal with some over the top complex insurance coverage issues to insure a restoration firm working on bio-hazard jobs. To make matters worse for the insurance agents, there is nowhere for them to go to learn how to do it right. There are no books on this subject. I teach a four-hour CE class on the subject for the Independent Insurance Agents of America, but I will only reach a few hundred insurance agents in 2015, literally one in a thousand agents. Yes, it is real difficult for an insurance agent to be able to figure out how to insure a bio-remediation contractor. Only about 1 in 100 insurance agents have even heard the term “Category 3 water.”
The common coverage defects for biological contaminates in environmental insurance policies arise in seven distinct areas:
1. The definition of a “pollutant” in the environmental insurance policy needs to specifically include the biological contaminates that need to be covered.
2. The environmental insurance policy may contain specific exclusions for losses arising from or related to fungus/mold/bacteria. By default, Category 3 water losses become excluded in the insurance policy because of the bacteria component in Category 3 water.
3. The environmental insurance policy may cover only a specific species of fungi bacteria when the General Liability insurance policy excludes losses from any type or amount of these materials.
4. There may be a specific exclusion for losses caused by a communicable disease, which the Ebola virus causes.
5. A commonly used definition of “cleanup costs” limits the coverage to clean up actions required under environmental laws. It helps to know there are no environmental laws pertaining to the cleanup of biological substances to understand why this provision in an insurance policy is a problem for a restoration firm. There is no educational venue for insurance agents to learn anything about environmental laws.
6. The cleanup coverage in the policy may only apply to outdoor pollution events affecting soil and water, whereas biological contamination is almost always an indoor loss exposure.
7. Contractors Environmental Insurance policies commonly have exclusions for damage to the building the contractors are working on or in, which effectively eliminates 90% of the biological contamination loss coverage in the policy.
Most of these potential coverage defects in environmental insurance for losses associated with biological contamination can be attributed to a single factor - environmental insurance policies were never designed or intended for indoor use. The core environmental insurance policy designs from the 1980’s predated the emergence of specific exclusions for fungi/mold/bacteria with their anti-concurrent causation provisions in both property and liability policies. As a result, most of the environmental liability insurance policies sold today are not suitable to insure biological contaminates as a covered pollutant or to insure indoor environmental risks.
Things are a little better for the restorers than the general insurance-buying public because of the refined insurance requirements of the restoration networks. But not a lot better - more than 90% of restoration firms are sold liability insurance policies with seriously glitchy coverage for losses associated with fungi/mold/bacteria/viruses and, by default, Category 3 water. This is not a guess on my part, we know the actual defect rate by reviewing over 1,000 insurance programs sold to restoration firms in our risk management consulting operations.
Fixing the Environmental Insurance Coverage Defects for Biological Contamination
It is interesting to note that over the past 10 years environmental insurance policies that correct for these aforementioned seven common coverage defects have been readily available at the same or even lower premiums than the environmental insurance policies which contain the defects.
In order for fungus, bacteria or viruses to be insured in the environmental insurance policy, all three need to be referenced as defined “pollutants” in the definitions section of the policy. Alternatively, including microbial matter as a defined pollutant in an environmental insurance policy would encompass all types of fungus/mold/bacteria/virus with fewer words and it works just as well to extend coverage for losses arising from exposure to these materials.
Be on the lookout for this coverage glitch, one very popular environmental insurance policy sold to restoration firms for more than a decade defines microbial matter in the policy form to only be fungus, much to the surprise of most insurance brokers, including me. The definition, as written in the insurance policy, would override more traditional uses of the broad term microbial matter thus limiting the environmental insurance policy only to losses arising from the release or escape of fungus (which does include mold) but not the other forms of microbial matter (bacteria and viruses). That particular insurance company will in recent years, upon request, add in coverage for bacteria. But the insurance broker needs to be alert enough to ask for the coverage enhancement. I was not alert enough to notice the glitch and ask for the fix for six years and I assume most insurance brokers have never caught on either.
Some environmental policies specifically insure all forms of fungus/mold within the definition of a pollutant but then only list one form of bacteria as a covered pollutant. The most common form of limited bacteria coverage is to restrict the coverage in the policy to only cover legionella bacteria, which is the cause of Legionnaires disease as a defined pollutant. Legionnaire’s disease sometimes kills people and has led to multi-million dollar wrongful death lawsuits that are totally uninsured due to the universal fungi/bacteria exclusions in property and liability insurance policies today. It is good to have environmental insurance for legionella bacteria, but it is not sufficient coverage when all species or amounts of bacteria are either severely sublimited or completely excluded causes of loss in standard property and General Liability insurance policies.
Category 3 water is not “Category 3” because of legionella bacteria specifically. You need coverage for all the different kinds of bacteria that can show up in Category 3 water. There are well over 1 million species of bacteria on Earth - insuring losses from only one species of bacteria leaves more than 1 million other kinds of bacteria uninsured.
A Specially Designed Policy Provides Coverage for Virus/Biological Contaminants
An environmental insurance policy can insure losses arising from fungi/mold/bacteria/viruses or microbial matter as defined pollutants in the policy.
However, the environmental insurance policy would need these coverage provisions to be effective for biological contaminates:
- The definition of a pollutant should reference fungi, mold, bacteria, virus and/or microbial matter.
- Ideally, coverage should be triggered by the presence of fungi, mold, bacteria, viruses and/or microbial matter and not be limited to the required release or escape of these materials.
- The definition of “cleanup” in the environmental insurance policy needs to incorporate an objective predictable standard and not be restricted to “as required under environmental laws” because there are none for biological contamination. I like to use the IICRC S500 and S520 as the cleanup standards for fungi and bacteria in our customized insurance products.
All of the concern about Ebola risks perfectly illustrate that people tend to focus on the wrong subjects in environmental risk management. There were 25 times more people killed by lightning in 2013 than died from the Ebola virus in the United States in 2014. I don’t know about you, but I don’t worry about being killed by lightning. A much bigger insurance issue than Ebola decon is uninsured claims arising from Category 3 water.
I have never had anyone call me concerned about their coverage for Category 3 water jobs. Even though a restoration firm is literally 1 million times more likely to have an insurance coverage problem with a Category 3 water job than with an Ebola remediation. Plus the coverage for a Category 3 water job in a General Liability insurance policy is simply awful and the coverage in the GL policy actually pretty good in relative terms for losses associated with Ebola.
Bio-remediation work requires not only specialized insurance, it requires that your insurance vendors know that you are performing it. Bio-hazard work begins with Category 3 water. The right insurance on your business will not necessarily cost you more money. But it may cost more than a policy that does not cover what you do for a living.
You are never going to get functional insurance in place on your business if your insurance vendors do not know what Category 3 water is at a bare minimum. To get the right insurance in place, the first thing you need to do is get the right insurance vendors in place. If you get the right insurance in place you can work on bio-hazard remediation jobs, including Ebola decons, all day long. But it is a good idea to let your insurance vendors know before you start a high-hazard bio-remediation job like Ebola - so they don’t first find out about it on the evening news.