COVID-19 WORK: IS IT WORTH RISKING YOUR BUSINESS?
Offering COVID-19 services is taking on additional risk in your business. Here’s what you should know about insuring your company against those risks.
The word “risk” is a very broad term. To be in business, risk is always present. Business owners choose what risk they want to take on, avoid, or transfer. Offering a new service or taking on a new job is what us insurance nerds call taking on risk. Simply put, to avoid risk is to not take on the new service or job. To transfer risk is to purchase an insurance policy where you pay a small percentage of premium for the coverage amount purchased.
On a macro scale, offering COVID-19 services is taking on additional risk in your business. What increases the risk is that there is not enough data to predict how detrimental taking on these new operations could be. What we do know is it is not economical to determine if a virus is present or not. It is expensive and very small to detect. Since we do not know if a job site has active viral particles present, all jobs would need to be treated as contaminated due to the high risk of unknowns.
The natural response would be to transfer this associated risk to someone else, i.e., an insurance company where you pay a premium and in exchange the insurance company covers the associated risks. Without a hefty amount of actuarial data, insurance companies will run for the hills since the unknowns are too high for them to confidently insure the associated liabilities/risk, leaving business owners to self-insure or avoid the risk altogether.
An additional complexity is the quality of liability insurance purchased. There are sneaky exclusions in standardized General Liability policies that could very well deny coverage for a claim, such as a communicable disease exclusion. This is due to standard General Liability never being intended or created to cover risks from a viral pandemic, leaving business owners uninsured for CVOID-19 jobs they take on. If a consumer tries to use a product for something it was never intended to be used for, why would we think it would work?
There are a few insurance carriers who are not running for the hills; however, they are taking a very cautious approach to covering COVID-19-associated operations, and the insurance landscape changes every single day. Our environmental insurance brokerage firm has been tracking the offering of associated COVID-19 liability coverage from the start. The solution is for every business offering COVID-19 services to purchase a specialized contractor’s pollution liability with affirmative coverage for COVID-19 operations. This is easier said than done. The coverage is extremely difficult to obtain as the prequalification includes extensive jobsite experience related to biohazard work, prior training for biohazards, and multiple certifications held by key employees. Additionally, all field personnel must be trained in the knowledge of The COVID-19 Pandemic: A Report for Professional Cleaning and Restoration Contractors, Third Edition, May 28th 2020 or more recent versions, and special legal contracts must be in place for virus decontamination work.
In summary, is providing COVID-19 services worth risking your business? In my professional opinion it is a choice specific to your business and should be approached as a long-term service offering. If your business is contemplating taking on the risk without biohazard experience or training prior to the pandemic, I would caution you pause and evaluate if taking on that much risk is worth the potential reward, as it would be nearly impossible to transfer the risk to a third party if something goes wrong.
(Where the Hell is My Business Interruption Coverage?)
Author: Randy C. DeLopst, CPCU
Taurus Insurance & Risk Management Consulting, LLC
The Short Version of this Article
For a property insurance policy to provide coverage for claims arising out of a virus like COVID19, the following conditions must exist:
1. The state where the claim occurs must be one where courts would hold that the presence of a virus on insured property is “direct physical loss or damage”. Some states do and some states don’t. If the actual presence of the virus on the property is not verified, it will be very difficult to show there was a
“direct physical loss”.
2. The virus must be physically present on the Covered Property for loss of Business Income & Extra
Expense and Dependent Properties coverages to be triggered. It is very difficult to confirm the actual presence of a virus on a property. There are no simple tests. For Civil Authority coverage, the virus must be on property other than the properties at the described insured premises.
3. The state where the claim occurs must be one where courts would hold that a virus was not a “pollutant” under the policy’s pollution exclusion. Some states probably would and some probably wouldn’t. Is there is any case law on whether or not a virus is a “Pollutant” in property insurance policies? I could not find any such cases.
4. The policy does not have any separate exclusions for viruses, microbes, microorganisms, microbial matter, microscopic organisms, biological agents, contamination or similar terms. Such policy exclusions would probably exclude coverage for virus claims. You will most likely need to look to the Environmental Impairment/Pollution (EIL) insurance market for reliable property coverage for virus claims. This EIL policy will need to clearly state that coverage is
provided for virus claims and be adapted for indoor use.
or those who want to dig a little deeper into the reasons for why a property policy is not reliable for a contamination- driven cause of loss like a virus, hang on to you hats, ingest lots of caffeine and read on.
Testing Methods for Coronavirus Cleaning and Disinfection
Certified Mold-Free Corp (CMF) has extended its services into Coronavirus training as well as Coronavirus disinfection services.
What challenges are faced in developing a Coronavirus-Free Disinfection Program?
The main questions contractors asked:
- What are the methods available for Post Remediation Verification (PRV) testing for Coronavirus?
- Do they work … are they reliable?
- Can I get insurance for Coronavirus disinfection and what are the restrictions if any?
- What are the risk/reward tradeoffs? Certainly we would like to differentiate our company’s services from others that do not and cannot provide a Proof of Coronavirus Disinfection but would this pose a legal risk?
- What would the contract language look like to provide Proof of Coronavirus Disinfection? Any changes required to our current CMF contract language guaranteeing that remediation is Mold Free?
We answer these questions in a free training PowerPoint called: Testing Methods to Prove Coronavirus Disinfection Success. This is available online/anytime.
- Evaluate different methods for testing for the success of coronavirus disinfection. Also called Clearance Testing or Post Remediation Verification testing. Why?
- In order to provide a Coronavirus-Free Warranty/Guarantee/Clearance Certification
- In order to reduce your liability. Someone gets sick and perhaps dies in a facility after you disinfect, if you prove it was perfect when you disinfected, then it will be hard or perhaps impossible for the plaintiff to find an attorney to take the case on contingency.
- Because you want to know that you did a perfect job. And have left the facility 100% safe
“One of the biggest problems we have had in developing risk management strategies for the contractors in the virus decontamination business is figuring out a way to reliability verify that the contractor has done a good job, on an affordable basis. In the liability insurance game it is all about having a legally defensible insurance buyer.What Dr. Rosen has come up with is a break through. His prescribed method works, and it is very inexpensive compared to the alternative methods of verifying clearance. Certifying site clearance from virus contamination is what building owners are going to want see from the cleaning firms that they hire. For them cleaning is all about avoiding liability.
In the hands of an articulate marketing rep selling the benefits of verified clearance, contracts for cleaning services will be won or lost over the legal defensibility of the cleaning services they provide.
President ARMR Specialty Holdings
How To Insure Your Virus Cleaning and Disinfecting Services
By David J. Dybdahl
July 10th, 2020
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 layout 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.
Read More COVID Articles and RESOURCES
The amount of information on the Coronavirus is overwhelming and is constantly changing. We are adapting to those changes in real-time offering current and reputable resources to our hard-working cleaning and restoration contractors. Best of all, it’s FREE to all!
Ask the Expert: Liability Insurance Recommendations for Coronavirus Cleaning
Dave Dybdahl of ARMR Network answers three questions related to liability coverage and cleaning during the coronavirus pandemic:
- What is the #1 question you are getting from your restoration clients?
- What are some of the “must haves” for liability insurance if you’re doing coronavirus cleaning?
- What are some helpful documents out there for contractors right now? (This is obviously the place to mention the RIA/IICRC doc)
Diving deeper into the discussion, here are some risk management tips for restorers going out in the field to conduct virus decontamination work:
- Job #1: Protect the workers. If your employees have not been trained on personal protection equipment, if your firm does not have the equipment and experience working with bio-hazards, this is not place for on the job training.
- Follow the guidance and advice offered in the new RIA and IICRC Preliminary Report for Restoration Contractors Assisting Clients With COVID-19 Concerns. This document was produced s specifically to help contractors mitigate risk. DOWNLOAD HERE.
- Get your insurance coverage in order. At a minimum, contractors should review their general liability, contractor’s pollution liability, professional liability, and workers’ compensation policies with an insurance agent or broker with specialized knowledge or access to specialized knowledge in restoration contracting and bio hazards. There is no training available for insurance agents on the specialized needs of restoration contractors. Which explains why more than 90% of restores are inadequately insured today, not just on biohazard work. If you do not have a Contractors Environmental or Contractors Pollution Policy with its own insuring agreement section, stop all biohazard jobs. Job site coverage extensions on the General Liability policy do not fulfill this requirement.
Opening My Business Again after the COVID-19 Shutdown.
Do I Have Liability
Insurance Coverage if a Customer Gets This Virus?
Who We Are
For a deeper dive into this issue, let’s analyze how a Liability insurance policy may respond to a bodily
injury claim arising out of COVID-19. Many Liability insurance policies use Insurance Services Office (ISO)
policy forms to provide Liability insurance coverage. As such, this is a reasonable place to begin a
discussion of how Liability insurance policies respond to COVID-19 claims
Randy C. DeLopst, CPCU
Taurus Insurance & Risk Management Consulting, LLC,
8519 Reid Drive, Madison, Wisconsin 53717.
There is no such thing as “virus” insurance!
David Dybdahl, CPCU, CIC, MBA, ARM
With this much economic disruption on the horizon,
insurance buyers are asking their insurance advisors
this question; “Am I covered by insurance”?
As specialists in environmental risk management, we are getting
the same question on an hourly basis from the insurance agents
and brokers that we serve.
In this writing, I will detail how to go about insuring losses arising
from a virus.
As it turns out there is potentially a lot insurance coverage
already in place for losses incurred from the Coronavirus. The
closer an insurance placement is to the standard ISO property
and liability insurance policy, the better off the insurance buyer
is going to be. In my research so far on this topic, if an insurance
company has deviated from ISO on a policy form in reference to a
virus caused loss, it has only been to eliminate coverage.
Similar to spinning the coverage wheel of fortune with the
totally unreliable coverage givebacks in common pollution
exclusions, trying to figure out a covered cause of loss arising
from a virus will lead to a lot of gray coverage areas. Avoiding gray
coverage areas is a very good idea because of insurance coverage
litigation on contamination caused losses can take a decade or
more to resolve in court, assuming the insurance buyer has the
funds and will to pursue the legal case for that long.
Having an affirmative coverage grant for virus as a cause of loss
would be much more reliable for everyone involved in a loss.
Those policies exist but are they not common in the world of environmental insurance. Environmental insurance coverage is
not a panacea.
Today, less than 5% of commercial properties are properly
insured for indoor air loss exposures. For the very few properties
that have EIL coverage on them today, if a virus is a covered
“pollutant” that could emit or discharge thereby triggering
the policy coverage, there is a 90% chance that policy has a
communicable disease exclusion thereby rendering it useless for a
loss caused by the Coronavirus.
1. Do not ignore the effects of Pollution/Fungus/Mold/Bacteria/Virus exclusions and sublimits in property and
liability insurance policies.
2. Explain the environmental loss exposure, the effects of exclusions, and sublimits in the current insurance
program to the customer.
3. Always recommend the purchase of environmental insurance. Doing otherwise takes on undue errors and
4. Offer to procure environmental insurance, to fill the identified coverage gaps, in the current insurance
program for an agreed upon target premium.
5. Only go to market to obtain a quote for insurance after steps 2,3 and 4 above have been completed.
6. Find qualified help in getting you through this process.
READ HERE: What we have done at ARMR to make the coverage interface between the traditional P&C insurance program and the gap-filling environmental coverage easier for our retail producers:
Engaging customer experience so that as an end result, we be CMSable. Leverage below the fold and finally gain traction. Generating bleeding edge and creating actionable insights.
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Insuring Indoor Environment Risks in Commercial Property
by: David Dybdahl January 2018
Insuring Indoor Environment Risks in Commercial Property. Almost all commercial property owners are severely underinsured for environmental risks. Very few property owners have any appreciation of the far-reaching effects of pollution/fungi/mold/bacteria insurance coverage limitations or how often these limitations can bar insurance recoveries from very common loss events. The result of this situation is an increasing number of uncovered insurance claims arising from water intrusion in the built environment.
To fill the insurance coverage gaps, commercial properties need specially modified environmental impairment liability (EIL) insurance coverage to address the effects of pollution/fungi/mold/bacteria exclusions on standard commercial general liability (CGL) policies and the sublimits of coverage on commercial property insurance policies.
Environmental insurance policies specifically designed to manage and insure the indoor environmental risks of commercial property have been available since 2004. The premiums charged for environmental insurance policies are usually a small fraction of the cost of traditional property and liability insurance policies. In my experience, informed property owners will usually opt to insure indoor environmental hazards as soon as they understand the risk and the dearth of current insurance coverage in their property and liability insurance policies.
Today, more than 99 percent of the commercial properties that need specially modified environmental insurance coverage to fill the gaps created by common exclusions for pollution/fungi/bacteria do not have it. To make this situation even more interesting, when EIL placements are made to address indoor contamination events, more than half of the environmental insurance policies sold contain significant coverage flaws. This is because environmental insurance policies were not originally designed to insure indoor contamination loss events.
By: David Dybdahl
With focus on the Ebola virus recently, I had the same question asked of me three times in one day, “Do environmental insurance policies insure losses arising from the Ebola virus?” As long as insurance coverage for a loss caused by a virus is being discussed, let me expand the topic to: “Do environmental insurance policies cover losses arising from biological contaminants?”
Answer: A few environmental policies today do an exceptionally good job of insuring biological contaminants. However, most environmental insurance policies sold in 2014 did not adequately cover biological contamination risks.
Common Coverage Defects for Biological Contaminants in Environmental Insurance
Coverage defects for biological contaminants in environmental insurance policies arise in seven distinct areas:
- The definition of a “pollutant” in the environmental insurance policy needs to specifically include the biological contaminants that need to be covered. The most commonly used Insurance Services Office, Inc. (ISO), definition of what a “pollutant” is does not encompass biological contaminants very well. This is why insurance companies had to introduce separate far-reaching exclusions for fungi and bacteria to get out of paying “toxic mold” losses on property and liability insurance policies at the turn of the century. The relationship between viruses and pollution exclusions mirrors the precedent set with fungi/mold/bacteria as biological contaminants 15 years ago. There was a reason separate exclusions for fungi and bacteria were introduced; pollution exclusions were not sufficient to eliminate the coverage in the policy for losses arising from fungi and bacteria. Environmental insurance policies use the same core ISO definition of what a pollutant is. Therefore, for the same reason fungi and bacteria needed to be addressed separately as an exclusion in standard insurance policies, they need to be specifically covered as “pollutants” in the environmental insurance policies.
- The environmental insurance policy may contain specific exclusions for losses arising from or related to fungi/mold/bacteria. By default, Category 3 water losses become excluded because of the bacteria in Category 3 water; there are millions of Category 3 water losses annually in the United States. There needs to be coverage in the environmental insurance policy for the bacteria in Category 3 water.
- The environmental insurance policy may cover only a specific species of fungi or bacteria when the standard property and liability insurance policies exclude any type or amount of these materials.
- There may be a specific exclusion for losses caused by a communicable disease.
- A commonly used definition of “cleanup costs” limits the coverage to cleanup 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 is a problem.
- The cleanup coverage may only apply to outdoor pollution events affecting soil and water, whereas biological contamination is almost always an indoor loss exposure.
- Contractors environmental insurance policies commonly have exclusions for damage to the building the contractors are working on or in, which effectively eliminates 90 percent of the biological contamination loss content in the policy.Read More here