There isn’t a business that does not have the potential for environmental liability. This is a statement that we (members of the environmental insurance community) have tried to impart on our clients over and over again. Some of the pushback we have received is that clients know how to manage their environmental liabilities or they don’t handle hazardous materials. The fact is that if anyone has a building that is new or old, carpeted or tiled, full of windows or walls, or is in the city or the country, among any other divergent factor―there is a compelling reason to purchase environmental insurance. That reason is the potential for Indoor Air Quality (IAQ) claims. Environmental insurers are seeing an increased demand for environmental insurance as a result of concerns related to indoor air quality such as the potential for vapor intrusion claims, mold claims, and Legionella claims, among others. The following are just a few examples of IAQ news events that we have recently tracked:

• NYC institutes new requirements for cooling towers in wake of Legionnaires’ disease deaths 
  
• Black mold found in Central Campus apartment
• Living 'green' walls may have adverse health effects on office workers living in hot, polluted climates

Environmental insurers typically offer coverage for IAQ on either a Site Pollution Liability form (SPL), also known as Environmental Impairment Liability (EIL), or a form that combines General Liability with Site Pollution coverage. Some carriers have forms that are specifically written for IAQ issues and explicitly state that they include coverage for “building related illness.”  Although most environmental forms do include this coverage without explicit language, these specific IAQ forms provide more assurance that the intent is to provide coverage for IAQ pollutants. This is in light of the fact that in the past, there have been coverage disputes over whether or not certain substances are pollutants, such as carbon dioxide, carpet glue, lead paint, bacteria, and mold, among others.

Some environmental forms include IAQ hazards such as mold or bacteria in the definition of pollution conditions. In other forms, mold or bacteria, as well as other IAQ hazards such as legionella may be excluded altogether, but available via endorsement. When determining whether there is coverage in a form for a specific indoor air quality hazard, it is important to know exactly how the hazards within the form are defined. For example, if a form provides coverage for microbial matter, it is important to know what the definition of microbial matter is since all microbial matter may not be covered. Mold is often categorized as microbial matter, but certain bacteria such as legionella may not be included in the definition.

In addition, some of these forms require that cleanup of pollutants is performed only to the extent required by law or signed off by an environmental professional. Most of these forms provide coverage for bodily injury to the extent that there is physical injury while others offer coverage for this as well as coverage for mental anguish or emotional distress.  Medical monitoring is also offered in some forms but not explicitly in others.

The advent of green building and incorporation of green building materials  may inadvertently compromise the IAQ of a building. This is something that insurers are looking at, and in some cases offering enhancements to their coverage that will allow for the restoration of a building using green building materials in the event of a claim. For example, in the case of mold claims, some carriers offer the ability for clients to restore their premises with “anti-mold” drywall in place of regular drywall in order to prevent future mold occurrences.

In the past, it was easy to obtain a multi-year policy that included coverage for IAQ issues. Carriers pulled back on offering multi-year policies within the last ten years and are now starting to offer them on a more frequent basis again. The typical multi-year policy is up to three years. IAQ issues will continue to be on the radar for insurance carriers, property owners & managers, as well as contractors. Growth in the building industry and a heightened awareness of health issues affecting the public are reasons to believe that Indoor Air Quality is a concern that will continue to affect the insurance marketplace.

Information from this document was obtained from various environmental carrier websites, including:

http://www.greatamericaninsurancegroup.com/Insurance/Environmental/Products/Documents/IAQ_Fact_Sheet.pdf