COVID-19 has put the cleaning, restoration, and insurance businesses on a wild ride. As you’ve heard me say time and time again, the vast majority of restorers are not adequately insured today for biohazards in general; coronavirus just made things worse. Special insurance is needed to address the risks associated with the coronavirus. Below I will lay out a strategy to get your firm insured for the coronavirus risk.
The past few months have been like living the Wild West for contractors; awaiting the arrival of some authority to ride into town and provide direction. As many restorers were laying off entire staffs due to the government driven shut-downs, other restorers were advertising that they could “vaporize viruses”, while insurance companies accelerated the pace in issuing biohazard exclusions anywhere they could.
As these market trends were unfolding, the potential to have unprecedented demand for professional cleaning services loomed on the horizon for the idle cleaners and restorers.
Insurance agents have been on a wild ride as well. Most insurance agencies were already paperless, so working from home was not a big issue for them. But insurance agents had another problem arising from COVID-19 that we had to deal with: none of the insurance policies we had in place on our customers were designed to cover coronavirus risks or losses arising from a pandemic. That turned out to be a big problem for cleaning and restoration firms who were needed to decontaminate buildings. New insurance coverage needed to be invented; but to create that needed coverage was like trying to buy flood insurance during a flood.
At this point, I knew the policies we had in place were not adequate to deal with the risk of a pandemic, so I started the product R&D work to create specialized environmental insurance to cover virus decontamination work as soon as flights from China were stopped. That turned out not be enough lead time. Although we had affordable affirmative grants of coverage for virus decontamination work in place for our current customers within days of the virus-driven shut-downs, no one had good options to offer for first-time buyers of functional biohazard insurance.
Creating Effective Policies
The core problem was there had never been any need for affirmative coverage for virus decontamination work in more than 100 years. Ebola was a flash-in-the-pan event that did not result in specialized insurance products for virus decontamination projects being developed. Affirmative coverage for virus decontamination work had to be invented almost from scratch.
To create that specialized insurance coverage, there needed to be an objective, legally defensible guideline for performing virus cleaning and disinfection services. That document did not exist in early March. Working in close cooperation, the Restoration Industry Association (RIA) and the Institute for Inspection Cleaning and Restoration Certification (IICRC) harnessed the creative brain power of 25 subject matter experts to produce The COVID-19 Pandemic A Report for Professional Cleaning and Restoration Contractors, Third Edition. This is a excellent risk mangement resource for anyone offering cleaning services.
Here are the most frequently asked questions brought to me in the past 11 weeks, and my responses:
Do I need specialized insurance if I offer virus cleaning and disinfecting services?
Absolutely, no doubt about it. No insurance policy you have in place today was designed with a global pandemic risk in mind. Because the coronavirus risk on job sites occupied by humans cannot be avoided, you need specialized insurance for biohazards including specific coverage for virus-caused damages, even if you never offer virus cleaning and disinfecting services.
I have Contractors Pollution Liability coverage, is that good enough?
Probably not, but it is the best place to start. Insurance companies think there is a big difference between working around mold and bacteria and working around a virus that has killed more than 120,000 people in the U.S. alone in just a few months. In the insurance business, moving from commercial cleaning services to COVID-19 virus decontamination services may be considered by the insurance company to be a material change in the insured risk. When the risks associated with an insured firm materially change, the insurance company might deny a loss arising from the new risk or cancel your insurance when you do tell them about your intentions to provide professional cleaning services for virus contamination. Neither situation is good. But it is better to tell the insurance company that you are going to perform virus decon services and see what happens than it is to find out you do not have insurance coverage for a wrongful death claim.
What about the insurance I have now?
If you are in the middle of a coverage term on your insurance policies, you should inform your liability insurance companies that you are performing virus cleaning and disinfecting services. That will avoid a surprise on a denied claim over an undisclosed material change in the risk. If the insurance company says, “we would really like you to buy your insurance someplace else”, that is a good thing to know before there is a claim associated with a virus to deal with.
If you are in the middle of a current policy term, a handful of insurance companies have coverage extensions for virus cleaning services. These coverage extensions generally add premium through an endorsement to the policy to reflect the acknowledged increased risk of virus-related cleaning services.
A coverage extension specifically for virus decontamination work is an Affirmative Grant of Coverage and that is a very good thing to have in your insurance policy. If you have an affirmative grant of coverage, the insurance company will find it very difficult to deny a virus-related claim on the basis that your firm materially changed the risk to be insured.
I have been told that because I have been doing mold and Category 3 water work, my insurance is fine.
I would not believe anything that says virus decon services are simply an extension of the biohazard work restorers have been doing all along and therefore your insurance is just fine, unless that message comes in writing straight from the insurance company product line manager. All the insurance company senior managers I have spoken with think the risks of COVID-19 are nothing they anticipated when they sold the policies and that the risks of restorers have materially changed because of COVID-19.
I have an exclusion on my insurance policies for claims arising from a communicable disease. Am I covered for a COVID-19 based claim against my company?
No, you are not covered. COVID-19 is a communicable disease. Insurance companies have been adding “communicable disease” exclusions to policies since the Ebola virus scare five years ago. Insurance companies are slipping these exclusions into renewal policies with increased vigor today to shut down losses from the coronavirus. These exclusions appear under different names in insurance policies, but the concept is the same: losses arising from a biohazard that is transmitted human to human will not be covered. This is obviously a problem for the biohazard cleaning and restoration firms concerned about being sued for exposing someone to COVID-19.
It is ok to have a communicable disease exclusion on a General Liability policy as long as the CPL insurance without the exclusion and a coverage grant for virus work is with the same insurance company, hopefully in the same insurance policy form. The communicable disease exclusion on the GL policy simply shifts all the coverage over to the CPL policy.
However, a communicable disease exclusion on the GL and the CPL policies is a death nail to any insurance coverage for a virus-related loss. In light of the coronavirus risk, as a risk management strategy, if you have the double communicable disease exclusions it would be good to avoid projects in buildings occupied by humans within the past 14 days.
What do I need to do to get insured for the coronavirus risk?
No General Liability insurance policy alone is adequate to insure the risks associated with virus decontamination services. It would take a book for me to explain why that is always true. To be insured, you need to purchase a Contractors Pollution Liability policy that has been modified with an affirmative grant of coverage for virus-related cleaning services work. Those policies have recently become available to qualified firms. Which firms are “qualified” varies by insurance company, but predictable patterns are emerging in regards to which firms insurance companies think are insurable.
If you are getting ready to renew your insurance coverage, be sure to describe the virus cleaning and disinfecting services you offer in your insurance application. Your new policy should contain a specific reference to the biohazard clean-up activities, and virus must be a covered “pollutant” in the Contractors Pollution Liability coverage.
If you’re in the middle of your policy, refer back to my thoughts a few questions back on getting a coverage extensions for virus cleaning services.
My firm has never done biohazard work before. It looks like there is good money to be made in offering virus decontamination services, so how do I get into the business?
Generally, start-up bio hazard cleaning firms face a very tight (non-existent today) insurance market. As of this writing, firms with a past track record of working with biohazards are the only firms that can purchase CPL insurance with an affirmative grant of coverage for virus related losses.
How do I qualify for affirmative coverage for virus-related losses?
Every insurance company is different on that answer. In an application for insurance, underwriters want to see:
- Past certifications from RIA and the IICRC for biohazard work including mold and bacteria at the supervisory and field staff level.
- Past successful job site work experience in biohazard cleanup.
- Documented associated training of the field employees both in the use of PPE and in how to effectively clean biohazards.
- Your contracts need special hold harmless agreements for losses associated with the coronavirus. This is not business as usual work.
- My personal preference is for all field employees to be certified in the The COVID-19 Pandemic A Report for Professional Cleaning and Restoration Contractors, Third Edition publication.
COVID-19 Resources for Contractors: Training, Certification, Contracts & More
Many of the contributors to the The COVID-19 Pandemic A Report for Professional Cleaning and Restoration Contractors, Third Edition (Third Edition) offer training classes on biohazards at various levels of detail. One person on the faculty producing the third edition offers 180 hours of classes in various forms of environmental hazard remediation. The contributors are all capable of training the supervisory and field personnel on the contents of the report. These individuals are listed in the back of the report. The IICRC and RIA instructors teaching the mold, Category 3 water and crime scene clean up classes are also great sources of training.
Assuming your firm is already trained up on biohazards from previous profession certifications offered through the IICRC or RIA, the easiest way to orient all the field personnel on this vital document is a webcast produced by the lead author of the report. Michael Pinto, a longtime voluntary contributor to the restoration industry, offers through his company Wonder Makers a 90-minute web-based orientation to the third edition of the document. In a very charitable gesture, that webcast summary is available to everyone free of charge. To be certified by Wonder Makers that a staff person has attended and passed a quiz on the contents, there is a charge $35 per attendee.
From a general risk management standpoint, to protect your workers and your firm, it is a good idea to go through the latest document regardless of any insurance benefits to be obtained from doing so. Informed insurance underwriters will be asking for evidence that your employees are familiar with the materials included in your insurance application for virus decontamination services.
The third edition also offers excellent advice on how to manage risks through your contracts for services. For help with your service contracts, Ed Cross, “The Restoration Lawyer,” has assembled “A Guide to Managing the COVID-19 Risks in Contracts”. It outlines a five-step approach to achieve a strong COVID-19 service contract. This document identifies common pitfalls, explains why coronavirus contracts are different from ordinary cleaning and restoration contracts, outlines a sensible plan to reach a meeting of the minds with the customer, and addresses the recommended contract provisions mentioned in the IICRC/RIA COVID-19 Report. The information in the document has been assembled over the years and is an excellent resource to be used by your lawyer to help draft your services contracts for virus related work. Good contracts that are structured for virus-related projects can increase the insurability of your firm and lower your premiums.
The New Normal
Because no insurance policy in force today was originally designed to address COVID-19 pandemic risks, new coverage extensions needed to be created. Those insurance coverage solutions for cleaning and restoration firms are coming online quickly and are available to firms that meet the qualification criteria of the insurance companies. The choices for insurance offering the essential Affirmative Grant of Coverage for virus related services are very limited, and availability will vary depending on the services mix and qualifications of different companies.
Managing the risks of coronavirus is the new normal. A well-designed General Liability + Contractors Pollution Liability + Professional Liability insurance policy that has been endorsed to cover full spectrum biohazards including virus is the most reliable coverage design. Other insurance coverage designs can work, but the coverage is not easy to verify.