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.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.
