This is an article for the contractors working to repair the effects of the
2021 winter storms. It contains useful information for the property owners as
well.
If it seems weather events are in the news more than they used to be, that
is because there are more extreme weather events than there used to be. One of
the effects of a changing climate is more extreme weather events. We are
experiencing more and more hotter hots, wetter wets, colder colds, and drier
dries than there have been in recorded history.
With more extreme weather, there is a greater need for resiliency-related
services. Resiliency is the activity to repair or build back what was destroyed
or damaged by the weather events. A significant part of resiliency in North
America is financed by insurance recoveries, much less so in less developed
countries. Resiliency activity creates immediate demand for restoration and
reconstruction services in the affected geographic areas. This demand for
services arising from catastrophic weather events always far outstrip the local
capabilities to restore and reconstruct.
The restoration contracting business has the capabilities to respond to
localized weather events. Sophisticated networks of services firms and
equipment suppliers will be mobilized and heading toward the areas that will be
affected by an extreme weather event, days before the storm. These emergency
responders will be working far from home, often in unfamiliar conditions. That
fact situation exposes these firms to risks that they may not have when working
closer to home.
In response to the polar vortex of 2021, tens of thousands of properties
with frozen pipes will need repairs. Water releases in the built environment
add biological contamination in the form of mold and bacteria to the worksites.
Water indoors will lead to mold growth within 72 hours. Water in drainpipes is
laced with bacteria. Both mold and bacteria have severe insurance coverage
limitations on property and liability insurance policies.
In addition to those biohazards, in 2021, employers and workers are also
dealing with COVID-19 loss exposures. The combination of these risks to the
responders generated a need for a guidance document that would help the firms
that are aiding in the repair efforts. To meet that need, the three leading
trade organizations serving the restoration business produced a guidance
document titled 2021 Winter Storm CAT Events. In the restoration
business, CAT is short for catastrophe. The full 24-page advisory report can be
reviewed on the American Risk Management Resources Network website.
The following material on liability and risk management considerations for
the responders to the 2021 winter storms is taken directly from the 2021
Winter Storm CAT Events guidance and is used with the permission of the
Restoration Industry Association; the Institute of Inspection, Cleaning, and
Restoration Certification; and the American Industrial Hygiene Association.
Although written for the responder, the good advice and perspectives offered
apply to other stakeholders in affected properties as well.
Appendix 2: Liability and Risk
Management
The following information is provided as a tool to evaluate and address
business risk and liability and may be useful in considering the structure
and coverage of insurance products secured by the contractor. This appendix
is not intended to provide an exhaustive list of the considerations a
contractor may need to address; it can be a useful part of the risk and
liability management process.
Risk Management Considerations
- Do not work outside of your skillset. A CAT response far from home is
no place for on- the-job training.
- Avoid hiring temporary labor if possible. Trained, trusted and, proven
employees are the key to getting jobs done right.
- Work under contracts with specific scopes of work; and utilize signed
change orders that authorize the payments for changes in scope. Stop work
if you do not have the signed change order.
- Warn the stakeholders if a delay in your work increases the risks
associated with it. Example, being ordered to remove 5 air movers or leave
a job before you know it meets clearance standards.
- Clearly identify who you are working for and their ability to pay you.
Insurance recoveries for clearly covered water losses from frozen pipes can
be significantly reduced if mold starts growing or bacteria from Category 3
water is part of the loss.
- If you hire subcontractors, obtain an insurance certificate directly
from the insurance agent, not from the sub-contractor. Utilize a tight set
of insurance specifications in your sub-contacts.
- Make sure that your insurance is fit for the purpose for which it is
intended, many of the liability insurance policies sold to restoration
contractors are not adequate to address the loss exposures commonly
associated with restoration contracting.
- Inform your insurance providers that you are performing CAT response
work, especially if that work is outside of your normal operating
territory. Adjustments to your insurance coverage are likely
necessary.
- Seek advice from a qualified insurance professional on the different
risk profiles of different states. The risks associated with operating in a
different state can be very different than your home operating
territory.
- Before you start work make sure you have all the needed licenses to do
that work and that the work you are performing is not illegal in some way.
Pay particular attention to the application of biocides. At least 16 states
require the applicators of biocides to be licensed as Pesticide
Applicators.
- Follow the manufacturers label on cleaning products and biocides. It
can be a violation of Federal Law to deviate from the label instructions on
biocides and disinfectants. Insurance companies do not pay for illegal
work.
- Protect workers for COVID-19 with COVID safe working conditions. See
https://armr.net/wp-content/uploads/2020/11/COVID-19-Professional-Cleaning-and-Restoration-Industry-Fifth-Edition-1026-2020.pdf
Workers Compensation Insurance
This insurance coverage is state specific. Employees injured out of state
can claim benefits in the state where the injury occurred that may be
different than the home state. The workers compensation coverage will need to
be adjusted to cover this contingency when working out of state. There is no
exclusion for COVID-19 claims in this policy.
General Liability Insurance
This coverage applies anywhere in the United States and Canada. However,
be aware of state specific exclusions that do appear in some policies. Do not
work in a state that is excluded on your General Liability insurance
policy.
The more common problem on the General Liability insurance policies
commonly sold to restoration firms are a series of exclusions related to
various contaminates and biohazards. Insurance companies responded to
COVID-19 with universal exclusions for Communicable Disease as a cause of
loss. COVID-19 is a communicable disease. The General Liability insurance
policy will also usually exclude losses arising from specific contaminants
including silica, lead, asbestos, mold, bacteria, or virus. In addition to
excluding losses from these contaminants General Liability insurance policies
when purchased separately and not part of a combined policy form with CPL
insurance will exclude all coverage from a job site where you are working to
clean up mold or Cat 3 water. The liability insurance coverage gaps created
by a job site exclusion on a General Liability cannot be completely filled
through the purchase of Contractors Pollution Liability insurance.
Virtually all General Liability insurance policies in 2021 will have a
COVID-19, virus, or a Communicable Disease exclusion in them. If the
restoration firm itself is insurable with the training, prior experience in
biohazard remediation and has PPE equipment, the resulting insurance coverage
gaps can be filled with a specially modified Contractors Pollution Liability
insurance policy that provide an affirmative coverage grant for these
contaminates.
Contractors Pollution Liability Insurance
This insurance applies anywhere in the United States and Canada. CPL
insurance was originally designed to fill the insurance coverage gaps created
by the pollution exclusion in the General Liability insurance policies
purchased by contractors working to remediate Superfund hazardous waste
sites, outdoors. Due to the original design of the insurance policy, most CPL
policies are not fit for indoor work involving biohazards. Some but not all
CPL policies are specifically designed for the restoration trade.
Professional Liability Insurance
General Liability and Contractors Pollution Liability insurance policies
routinely exclude losses from "Professional Services". The IICRC
Standards are "Professional" standards. Professional Liability
insurance is available for no additional premium on the higher quality
CPL+Professional liability and combined GL+CPL+Professional Liability
policies designed specifically for restorers.
© February 2021, Restoration Industry
Association; Institute of Inspection, Cleaning, and Restoration
Certification; and the American Industrial Hygiene Association. Reprinted
with permission.
Conclusion
High-quality insurance with specialized coverage for biohazards is needed
and readily available for the firms working to restore properties from the
damages caused by the 2021 winter storms. It is especially important to address
the biohazards on all losses involving water intrusion in the built
environment.