Most people do not normally link environmental impairment to commercial or habitational real estate. Commercial property owners and contractors tend to believe that pollution conditions such as mold/microbial matter or lead-based paint are covered by general liability policies. They are not.
The insurance marketplace has greatly expanded over the past two to three years to accommodate the growing demands of the
construction industry for enhanced and encompassing forms of environmental and professional liability coverage. As a result, the market now consists of a variety of polices that address these risks with an assortment of new products as well as old ones that have been updated with new twists.
‘Green” has become the decade’s new catchphrase. Businesses and individuals alike are constantly searching for ways to reduce energy use, waste and the harmful greenhouse-gas emissions that their organizations emit into the environment. But, long before “carbon footprint’ became a common phrase, commercial real estate owners and developers nationwide have been concerned about the possible environmental impact and/or liabilities produced by their activities.
Anyone who operates a chemical, petrochemical or bulk petroleum terminal facility has likely encountered a natural resource damages (NRD) claim. But since NRD claims have historically only been assessed after a catastrophic environmental contamination event, such as the 1989 Exxon Valdez disaster, many risk professionals may not have had any experience with them at all. This may be about to change, however, with many now referring to natural damages as a “sleeping giant” due to the potential lor vast recoveries under a host of federal and state laws. Before moving onto a more detailed discussion of this type of claim, first, it is is important to ensure we understand the necessary language.
Even though the professional liability marketplace has expanded somewhat over the past few years, and in 2008 we will definitely see rate decreases, most of this news resides with practice or corporate programs. When it comes to insuring professional liability on a project-specific basis, construction project owners still have few alternatives.
When managing the environmental liability of a construction project, the direction tends to focus on pollution conditions resulting from project activities, errors and/or omissions of the general contractor, subcontractors or the architect and engineer. Environmental claims,
however, can also arise from other scenarios such as the discovery of unknown pre-existing conditions at a site being redeveloped, or from third parties alleging bodily injury and/or property damage. These third parties could be tenants in a building undergoing renovation or from neighboring property owners living or working adjacent to a Brownfield site.
In 2002, I wrote “Mold Is Gold: Or Is It?” for CFMA Building Profits. My work was prompted by headlines touting mold as a golden opportunity for inspectors, consultants, and remediators – not to mention civil attorneys.
During the past several years, mold has spawned an entire cottage industry. But, is mold really the tort risk that contractors and their insurance companies once feared?
Identifying exposures is the first step to managing environmental risk.
Over the past 10 years, construction firms are increasingly recognizing the environmental exposures that exist in their routine construction activities. When left unmanaged, these environmental exposures are time bombs that threaten the life of an organization. While more contractors are acknowledging this reality, few are acting to identify exposures and manage risks to ensure their continued longevity and profitability.
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