More than 50,000 federal grants providing up to $150,000 for use to relocate or rebuild Hurricane Katrina damaged homes are expected to be made to New Orleans residents. In its October 19 issue, USA Today reported that nearly 75 percent of the homeowners applying for these grants so far (10,634 out of 14,534) say they'll rebuild their homes in flood areas, even though complying with upgraded city construction requirements (to elevate by 3 feet) is unlikely to prevent them from being flooded should the levees fail again. An official with the recovery authority was quoted as saying the new rule, which was hurriedly passed to qualify for the federal funding, isn't perfect but will help them buy insurance.

This really disturbs me. Federal and state programs nonsensically encourage or even subsidize building in flood zones and on hurricane-prone coastlines. (The NFIP program is also a subsidy since the premiums charged do not reflect the risk insured.) Then, when the insurance industry shows the wisdom to refuse to cover the risk or to charge an appropriate premium, it is criticized by politicians and the public.

What do you think? How can/should governments motivate rational decision-making in choosing where to build and incorporating adequate safeguards in buildings while maintaining humanitarian compassion? Does the insurance industry do enough to encourage responsible building codes? What should the insurance industry do to educate the public about these matters? What other steps should the industry take to avoid a bad rap from this situation? [See reader responses.]

As a reminder, Levine on California Workers Compensation Premium and Insurance will no longer be available after December 15. Add it to your library at an incredibly low price now.

Thank you for subscribing to IRMI Update.

Have a great day.

Jack

Jack P. Gibson, CPCU, CRIS, ARM
President
IRMI

Risk Tip

Avoid Naturally Occurring Substances Exclusions In Pollution Policies—For years, environmental liability associated with naturally occurring substances such as silica, mercury, arsenic, radon, and probably the most prevalent, asbestos, has been a part of the environmental liability risk profile for many industry groups. Nearly all of these substances are recognized as hazardous waste or substances by the Environmental Protection Agency and therefore present unusual exposure to many property owners, developers, contractors, and others. Thought to once exist only in the western states, naturally occurring asbestos is now being uncovered and excavated in many states. From California to Connecticut, there has been an increase in interest, news articles, and public attention directed at naturally occurring asbestos.

The issue that compounds the problem is the naturally occurring substance/pollutant exclusions in certain environmental or pollution liability policies. Some are fairly recognizable and straightforward exclusions. Others are more cryptic—being found in the definition of pollutants, pollution conditions, etc. Either way, such policy conditions and exclusions will have a significant impact on coverage, depending on the type of business being conducted. For many organizations, buying the proper pollution policy is always a prudent alternative for financing environmental loss. However, there are about 150 different pollution liability forms offered by about 20 different companies, and it is important to understand what you are selling or buying. Avoiding limitations on coverage for naturally occurring substances is one important area on which to focus.

By: Jeff Slivka, ARM, CRIS
New Day Underwriting
Bordentown, NJ
www.NewDayUnderwriting.com

Suggest a Risk Tip. Send us a practical tip (less than 300 words) for identifying and managing risks, buying insurance, managing claims, or filling gaps in insurance coverages. Submit your tips. We'll acknowledge your contribution as we did for Jeff.

McCarthy Building Companies Seek Risk Management Analyst in St. Louis

This person will be primarily responsible for timely and accurate review and analysis of contractual language for new construction projects. This position directs what insurance coverage is considered necessary for each project, the pricing of the coverage, and the implementation of the coverage. Minimum of 5-7 years of experience in a similar role for a contractor, broker, or insurance company. Apply online.

New Expert Commentary

There are now over 800 risk management and insurance articles on IRMI.com. Below you'll find summaries of some recent additions with links to the articles.

PWG Report on the Future of Terrorism Insurance—The Presidential Working Group report contains many questionable omissions and conclusions, and offers no definitive public policy position. James Macdonald explains.
Responding to an Unauthorized Breach of Electronic Personal Information—Paul Siegel provides a discussion of state breach notification laws and offers preventive strategies to ensure compliance.
Court Considers Whether Allegations of Faulty Workmanship Constitute "Occurrence"—Kevin Merriman describes a Pennsylvania case where property damage from poor workmanship to the insured's own work product was not covered by its CGL policy.
Promoting Insurance-Based Solutions to Brownfield Redevelopment Challenges—Jeff Kehne and Michael Hill discuss environmental insurance programs at the state level.
Government Bailout or Catastrophe "Insurance"?—While financial managers need to address insurance for catastrophic events, history reveals that the majority of funding will most likely come from the government.

Get CRIS Behind Your Name and Get CE Credit

More than 600 construction risk and insurance professionals have received their Construction Risk and Insurance Specialist (CRIS) designation. The CRIS continuing education program has also been approved for CE credit in all 49 eligible states. Learn more about this specialized curriculum and low price here.

Time Is Running Out To Get 2006 CE

If you're still scrambling to fulfill your continuing education (CE) requirement for 2006, IRMI has the answer with online courses that are easy to take and informative as well. We have recently added two new insurance law courses and a flood insurance course to the library. You can purchase enough courses to meet most state's annual CE requirements for less than $50! For more information or to order one of these or other CE self-study courses, see the Training and Education section of IRMI.com.

Expert Commentator Profile: Matthew Leitch

Matthew Leitch, an independent consultant and researcher in the United Kingdom, writes the risk management and internal control column for IRMI.com. Mr. Leitch is a chartered accountant with a BSc in psychology from University College London. Through his research and consulting, he aims to make control less costly, more fun, and more effective. His IRMI.com column provides insight on embedding risk management, dealing with Sarbanes-Oxley, and understanding COSO guidelines. For more information on Mr. Leitch, see his full biography and a list of his articles.

How To Get IRMI Update E-mails

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IRMI Update—Issue #149

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