Understanding the Spike in Mold Claims

The use of EIL policies is no longer limited to hazardous material manufacturers or facilities. The need for EIL policies should be applied to commercial buildings and managers more than ever. The frequency of mold-related losses in commercial buildings occur more than we might think.

Environmental policies are more important than ever

From mold to Legionella bacteria outbreaks, environmental- and pollution-related losses on commercial properties are on the rise, and these types of claims will only increase in the wake of Hurricanes Harvey and Irma. As a result, closer attention is being paid to pollution exclusions on property and liability policies.

This reality is changing the game as far as which coverage forms respond to losses and how claims are approached. For example, water grossly contaminated with bacteria is now handled as an environmental claim instead of being covered as a water loss under property policies. Mold losses that once fell under property policies as water losses are now either excluded or subject to significant sub-limits. More publicly known, Legionella claims are triggering pollution exclusions found in general liability and property policies.

As risk managers witness the change in how claims professionals read and apply pollution exclusions, insurance professionals have a great opportunity to offer environmental liability products to their commercial-property clients—and to protect themselves from errors and omissions claims.

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Three Emerging Contaminants

“Each year we learn more about the harmful effects of substances we once thought were safe to use.”



  • Perfluorooctanesulfonic acid (PFOS)
  • Perfluorooctanoic acid (PFOA)
  • Trihalomethanes (TTHMs)

Emerging Contaminants in the Headlines

There are hundreds of chemicals that we use each day.  Gasoline itself consists of over 150 compounds.  Each year we learn more about the harmful effects of substances we once thought were safe to use, such as asbestos. The Agency for Toxic Substances and Disease Registry (ATSDR) is our nation’s lead in investigating the potentially toxic effects of the substances that we use.  If a substance is deemed toxic, the government may decide to ban it or regulate its use.  Many substances that are banned or highly regulated will be phased out and replaced with safer ones.   Here we discuss three substances that aren’t new, but have become more widely evident in the last decade because of continually improving chemical analysis methodologies that have lowered the limits of detection to the level of parts per trillion.  These three substances are deemed “emerging contaminants” because of their widespread distribution and persistence in the environment – particularly our drinking supplies.  Two are products we have used for over 50 years and the last is a by-product of our attempts to purify our drinking water.

  Read The Full Article HERE

“Post-Hurricane Harvey, what claims and litigation issues do you foresee occurring?”

“Floods create an abundance of contamination- related losses. Not even just homes and commercial buildings with mold/bacteria exposures, but also chemicals in storage being released. There will be coverage disputes between the various fungi, bacteria, and pollution exclusions on property and liability policies.”-Kari Dybdahl, EVP and Director of Operations, American Risk Management Resources Network LLC. CLM Fellow since 2017.

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Improved Risk Management Tips for UST’s

Proactive v. Reactive

Many agents look for help for their clients on underground storage tanks (USTs) over 30 years old when it is already too late. The client wants you as the agent to shop around because the premium or deductible doubled
or tripled. This scenario does not need to happen to you as an agent. Using a knowledgeable, specialized wholesaler will help you avoid this worst- case scenario altogether. You will be able to proactively educate your client securing the relationship and renewal for years to come. Below, you will find five tips on how to be proactive v. reactive when it comes to UST risk management.

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Why do Businesses Self-Insure Their Pollution Liability? It’s Irresponsible.

By: Brad Maurer October 2017

Businesses purchase insurance so that they can afford to compensate others for the harm they accidentally cause while in the pursuit of their enterprise.  Insuring against injury is good business and is also good corporate citizenship.  Commercial enterprises have a social responsibility to fund the correction of their mishaps.  They certainly have legal responsibility to do so, but in today’s social media environment, goodwill and reputation are threatened almost instantaneously by publicized acts of social irresponsibility.  It’s good business to do right.  It’s also good business to be able to afford to do right. 

Business relationships predominantly dictate what liability is insured and for how much – so much so that businesses focus on the insurance they are required to have and lose sight of the remaining exposures they may not have insured.   If a customer didn’t ask for a certificate of insurance for it, it is often uninsured.  Unless a business is a waste facility or environmental services firm, their customers rarely ask for evidence of pollution insurance.  That doesn’t mean that a company doesn’t have the exposure.  We know the obvious examples (e.g. the refinery oil spill, the chemical manufacturer air release and the waste treatment facility sewerage release, etc.), but decades of cases argued over “what is a pollutant” has documented hundreds of scenarios of uninsured pollution losses for more innocuous events.   Although some courts rule that the pollution exclusion applies only to “traditional pollutants” to which environmental laws apply, many allow a broader interpretation of what is a “pollutant”.  The following releases have been deemed “pollutants” and therefore excluded from coverage:

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The Common Pollutant Family: 5 Common Pollutants That Could Be Excluded On A Liability Policy

They can be odorless or stinky, Often invisible and spread swiftly, They’re altogether icky, The common pollutant family.

The perfect conditions are around ‘em, When people start to see ‘em, They don’t realize their GL insurance could exclude ‘em, The common pollutant family.

So learn more why they’re excluded on, What agents need to know on, We’re gonna play a call on, The common pollutant family.

#1: Mold

Mold tops as the number one source of claims on currently placed environmental site pollution policies for commercial properties. People are affected by mold exposure in different ways, from none at all to more severe reactions such as severe infections in their lungs and chronic asthma. Mold is naturally occurring in our environment because of its spores, but it needs a food source, water, and heat to colonize and grow.

Depending on the amount of organic matter found in the structure, mold can start colonizing within 72 hours and spread rapidly after water exposure. Drywall is an excellent food source for mold as it is easy for the spores to digest. With the right amount of food, water, and heat, a commercial property can become a petri dish very fast if relative humidity is not under 40%.

Many of today’s liability and property policies exclude coverage for fungi and mold or impose a significant sublimit for claims involving fungi or mold.  A common endorsement on Commercial General Liability policies is the Fungi or Bacteria exclusion, which precludes coverage bodily injury and property damage and even removes the carrier’s responsibility to provide defense.

To learn more about mold exposure, visit http://armr.net/hurricane-hurricane-fires-oh/

Read More HERE

Environmental Risk Transfer Solutions for Mergers and Acquisitions

By: Brad Maurer JD, CPCU

In every business transaction, buyers want to be assured of what they are buying.  In the context of mergers and acquisitions, environmental liability is an elusive issue to evaluate and quantify.  The strict, joint, several and retroactive nature of environmental liability for releases of hazardous substances creates uncertainty because it attaches not only to current, but also past operations of a business. Environmental due diligence, although pervasively performed is notoriously inaccurate.  Most environmental due diligence studies performed by technical experts are too focused on known issues and pay just cursory attention to potential issues.  These studies often fail to evaluate current operational and product-based environmental risks.  Undefined and unmanaged environmental risk makes it difficult to successfully purchase or sell an enterprise.  Defining what potential financial loss environmental liability poses is essential to properly value and structure a transaction.  American Risk Management Resources, LLC (ARMR) is an expert at environmental risk identification, evaluation, and treatment.  We assist in defining environmental risk to aid in the successful transfer of equity and assets.

Benefits of Effective Environmental Risk Management

  • Defines the known risks and their cost of treatment so that true deal valuation can occur
  • Protects directors and officers from liability
  • Protects shareholder value from unexpected costs
  • Simplifies the transaction by transferring risk to a well-capitalized insurer
  • Reduces post-transaction representations and warranties litigation
  • Increases the success rate of transactions with significant environmental issues

Read the Full Article HERE

Hurricane, Hurricane, Fires, Oh My!

Examining increased environmental exposures due to weather events. By: Kari Dybdahl

We’ve all seen the news or have spoken to others about the current weather events. For some of us, we dodged the bullet. But millions of people and businesses were and are right in harm’s way. Hurricanes cause an extensive amount of damage to economies, cultures and infrastructures. They pose an enormous amount of environmental loss exposures to both homes and commercial properties. Distribution warehouses, for example, that hold various chemicals that were in a safe place prior to the weather events, may have now been compromised, with chemicals released into flood waters or burned by the wildfires. Depending on the reaction a certain chemical has with water or fire, it could be immediately harmful to the nearby natural resources and people.
Hurricanes pose even more of an environmental loss exposure with the sheer amount of water intruding into commercial properties and homes. Mold can colonize rapidly within 72 hours of water damage, if the conditions are perfect. Since mold is naturally occurring, it needs a food source, water and heat to colonize and grow. Drywall is a great food source for mold as it is easy for the spores to digest. With the right amount of food, water and heat a commercial property can become a petri dish very fast if relative humidity is not under 40%. Bacteria is even more of a threat to humans and
reproduces faster than mold. Bacteria colonies can grow 100% every 20 minutes with the right conditions. It is said that there are over one million different species of bacteria, and legionella is just one of those. Hurricanes and rain storms are the ideal situation for mold and bacteria growth, resulting in almost every fungi and bacteria sublimit and exclusion to trigger GL and property policies for commercial properties.


Avoiding Insurance Coverage Litigation for Pollution Losses

By David Dybdahl – September 2017

Pollution exclusions have resulted in more litigated insurance claims than any policy language in the history of the insurance business. Insurance coverage litigation involving pollution claims is complex and expensive, and is also completely avoidable.


Coverage litigation arising from contamination claims can be avoided by simply doing the following.

  • Explaining to insurance buyers what contamination risks are
  • Making sure that buyers of commercial insurance understand what types of losses pollution exclusions exclude
  • Giving the insurance buyer the option to purchase real environmental insurance to fill the coverage gaps created by pollution exclusions

Based on the amount of coverage litigation over pollution exclusions, this three-step process is not happening very often in practice. The result is complex and expensive insurance coverage litigation for contamination losses.

In this article, I will elaborate on why there is so much coverage litigation over pollution exclusions and suggest a simple solution to the problem of unintentionally uninsured contamination losses.

Purchase True Environmental Insurance

The main reason for coverage litigation is insurance policies that pose as “environmental insurance” but are not true environmental insurance policies. The “environmental coverage” in the insurance policy that is at the heart of the coverage litigation is just a pollution exclusion in disguise. If there is not an insuring agreement for losses caused by pollutants, it is not a real environmental insurance policy.

In my experience with litigated environmental damage cases, there is a lot of back and forth on which part of the pollution exclusion does not apply to the pollution event at issue. The point being—why is anybody reading an exclusion looking for coverage? Fundamentally, that is the wrong part of an insurance policy to be looking for the coverage. Another observation in many litigated claims cases is that the disputed loss could have been insured on a primary basis with environmental insurance products that were readily available for purchase through thousands of insurance brokers at affordable prices prior to the loss event.


Variation in Application of Pollution Exclusions

5 useful pieces of  knowledge about the application of pollution exclusions

The creation and enforcement of environmental laws in the 1970s and 1980s imposed liability to businesses for the remediation and cleanup of environmental contamination.  In response, to shield themselves from this ever-growing exposure, insurance companies introduced the first pollution exclusions on standard liability and property policies.  On a very basic level, pollution exclusions eliminate coverage for bodily injury or property damage arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants.

Probably the most widely-recognized pollution exclusion is the “Absolute” Pollution Exclusion that was brought into use in 1986.  The reason “absolute” is in quotation marks is because this exclusion was never formally referred to as such; it was an industry-given nickname of sorts.  The exclusion earned its name due to its removal of the “sudden and accidental” exception found in the original 1973 Commercial General Liability standard pollution exclusion.  Perhaps a better name for the infamous exclusion is the “broad form pollution exclusion”.

The effects of this pollution exclusion on insurance coverage litigation are curious, to say the least, and continue to this day.  As we know, insurance is regulated at the state level.  Because of this, states and jurisdictions widely vary in their application of this exclusion.  When it comes to litigation involving the “Absolute” Pollution Exclusion, courts generally apply one of two approaches for interpreting its application:

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Application of Pollution Exclusions