Risky Business - Overlooked Environmental Exposures

It is estimated that only 15% of real estate owners buy pollution coverage. Pollution incidents often stem from chemicals on premises, mold and asbestos, resulting in property damage and bodily injury ranging from rashes to loss of life. There is nominal to no coverage on standard property policies and general liability carriers favor “absolute” pollution exclusions. Environmental policies exist to dovetail and fill this coverage gap.

Real estate companies normally go years before electing pollution or environmental insurance unless required to do so by their lenders, but this comes at a cost just the same. Due to the claims-made feature of environmental policies, the later coverage is effective, the fewer incidents are covered. Coverage moves forward in other words, excluding anything before the initial effective date. To complicate further, every environmental policy is negotiated to fit a particular company’s risks, so it becomes easy to purchase a policy that unintentionally only covers 10% of the exposure – leaving 90% still exposed. Companies need a knowledgeable broker, especially when it comes to environmental policies.

Unfortunately for property owners, Legionnaires Disease is on the rise in the United States. Recently, two confirmed cases were linked to a hot tub at Water Oak Country Club in Lady Lake, FL. Legionnaires’ Disease is caused by Legionella bacteria that exists naturally in the environment. It can also be found in man-made water systems such as tubs, spas, cooling towers, hot water tanks, plumbing and air-conditioning systems. Researchers from the Centers for Disease Control (CDC) have found Legionella bacteria in most regions of the country.

Pollution needs to be formally addressed in every risk management program. For more information or a review of the environmental risks you face and policies that exist to safeguard those exposures, contact the AP Real Estate Team today.

Additional Information from IRMI: Environmental Insurance - Just the Facts