Environmental Risk

Seven Questions for Richard Sheldon

Mold, emerging contaminants, and increasing claims complexity are all issues to watch in the area of environmental risk.
By: | May 9, 2017 • 4 min read

Willis Towers Watson’s Richard Sheldon has more than 30 years of experience in environmental consulting, insurance underwriting and brokerage. He joined WTW in 2004 and is now responsible for the management of the firm’s North American Environmental Practice Team. Here is his take on a number of environmental exposures facing insureds.

R&I: We hear a lot about mold, that it’s an ongoing — even growing — problem for commercial property owners. How are carriers responding to this issue? Are they changing coverage terms and in what way(s)? 

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RS: The market is at a crossroads for mold coverage currently and underwriting review for this coverage is certainly becoming more stringent. Insurers are looking at limitations such as “per door” mold deductibles for habitational and hospitality risks in particular; time element coverage designs are being contemplated; and increased deductibles are being applied overall for mold coverage.  Some markets will not cover wood frame construction at all. Some have considered limiting coverage to Acts of God, while others have said they will not cover Acts of God. Insureds need to be prepared for possible coverage changes at renewal, and to either seek alternatives, or to adjust their level of risk tolerance.

R&I: Are there new contaminants that are becoming an environmental problem for property owners? What are they and why are they coming to the fore now? 

RS: PFAS (Polyfluoroalkyl Substances) have been identified by the U.S. E.P.A. as an emerging contaminant. And this is leading to some “re-opener” claims for clean-up on facilities that used these chemicals in their processes or for firefighting. Lead in drinking water has certainly also been a concern for both clients and carriers since the crisis in Flint, Mich.

R&I: Given the drumbeat of talk about regulatory change in Washington, DC, how are clients reacting? What are the most pressing questions you’re getting from them about the liability landscape?

RS: At this point, companies are watching closely to see if and how this might materialize. But so far, we haven’t seen any reactions broadly from clients or the insurance marketplace — but this could certainly change. We are hearing a lot of chatter about what activities the various states (who in some cases are charged with administering environmental regulations) will take and speculation about adequate resources going forward. Regardless of where the regulation, enforcement or budget goes, underwriters are still going to want to see insureds demonstrate they are being responsible relative to their environmental exposures.

R&I: What do you hear from carriers given all this talk of regulatory change? What are they doing to prepare for this possible shift?  

RS: Carriers have not sent any significant messages to the marketplace yet on this topic. But we do know that many have been analyzing their books more rigorously, and in particular, more so since the exit by AIG from a major part of the environmental business. Any feelings by carriers that reductions in regulatory budget could lead to diminished enforcement may further increase this scrutiny, especially for higher-risk classes of business.

R&I: We hear that managing and reporting environmental claims is becoming increasingly complex. What factors are playing into this? 

RS: Both the frequency and severity of claims has increased, driven mostly by the remediation of mold and pre-existing contamination triggered during site development activities. Each environmental claim is unique and can take on a life of its own based on the circumstances surrounding it. As brokers, we spend a lot of time working with specialty underwriters to educate clients and risk managers on the various aspects of environmental coverage and how it will respond. In addition to risk transfer, many insureds are pursuing options to secure insurance capital to help finance potential environmental losses.

R&I: Given that managing and reporting environmental claims is more complex, what should insureds be doing to improve their processes? 

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RS: Timely notice is most critical. Insureds should have a robust risk management communication program to make sure that environmental claims are reported from the field to their risk manager as soon as possible. In addition, insureds should understand coverage terms relative to carrier consent for any remediation activities. Insureds should also understand what coverage they have for emergency response, and whether there are capacity and/or time restrictions for that coverage.

R&ILooking ahead a bit, what environmental risks do you see that are emerging, that might not be a problem for insureds now, but very well could be in five years? 

RS: New risks can always emerge that we can’t anticipate. However there are some issues on the horizon that could escalate — such as trace pharmaceuticals in water, e-waste, and oil and gas industry impacts from exploration and production. The biggest question for our market is how underwriters will respond to the ongoing and increasing frequency and severity of claims.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Absence Management

Establishing Balance With Volunteers

It’s good business to allow job-leave for volunteer emergency responders, whether or not state laws apply.
By: | January 10, 2018 • 7 min read

If 2017 had a moniker, it might be “the year of the natural disasters,” thanks to a phenomenal array of catastrophic or severe events— hurricanes, tornadoes, wildfires, ice storms and floods.

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Combined with smaller-scale fires and other emergencies, these incidents tax the resources of local and state emergency services, often prompting the need to call volunteer emergency responders into action.

But as lean as most organizations are already running, volunteer activities can sometimes cause friction between employees and employers. Handling conflicts the wrong way can potentially lead to legal headaches, harm employee morale and batter a company’s reputation.

State by State Variations

Most employers are aware of the various federal and state leave laws protecting their employees, including family and medical leave, pregnancy leave and military leave. But leave laws that protect the livelihoods of volunteer emergency responders are more likely to fly under the radar of some HR managers and risk managers.

Such laws don’t exist in every state, but more than 20 states do have some type of law in place to protect volunteers including emergency responders, firefighters, disaster workers, medical responders, ambulance drivers or peace officers.

Marti Cardi, vice president of Product Compliance for Matrix Absence Management

The laws vary broadly. Nearly all specify that such leave be unpaid, and that employees disclose their volunteer status to employers and provide documentation for each leave. But there is a spectrum of variations in terms of what may trigger an eligible leave. Some, for instance, apply for any emergency that prompts a call from the volunteer’s affiliated responder group. Others may require a government declaration of emergency for the law to be triggered.

While many of the laws do not explicitly require employers to let employees leave work when called to an emergency during a shift, most specify that an employee may be late or even miss work entirely without facing termination or any other adverse employment action.

Some states mandate a maximum number of unpaid leave days that a volunteer can claim. But others may place more significant burdens on employers. In California, for instance, employers with 50 or more employees are required to grant up to 14 days of unpaid leave for training activities in addition to any leave taken to respond to emergency events. For multistate employers, keeping on top of what obligations may apply in each circumstance can be a challenge.

Significant Risks

Large or mid-sized employers may rely on absence management providers to keep them in compliance. For smaller employers though, it may be as simple as looking up a state’s law via Google to find out what’s required. However, checking in with the state department of labor or the company’s attorney may be the best way to get the correct facts.

“I would caution that just because you don’t find something [on the internet], it doesn’t mean it’s not there,” said absence management and employment law attorney Marti Cardi, vice president of Product Compliance for Matrix Absence Management.

For example, Cardi said, an obscure Texas law provides job-protected leave for volunteer ham radio operators called into service during an emergency.

Cardi said employers should task HR to investigate the laws in each state the company operates in, and to ensure that supervisors are educated about the existence of these laws.

“If a supervisor is told by one of his or her employees, ‘Sorry I’m not coming in today … I’ve been called to volunteer firefighter duty for the [nearby region] fire,’” she said, you want to be sure that the supervisor knows not to take action against the employee, and to contact HR for guidance.

“Training supervisors to be aware of this kind of absence is really important.”

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An employer that does terminate a protected volunteer for responding to an emergency may be ordered to pay back wages and reinstate the employee. In some cases, the employee may also be able to sue for wrongful termination.

And of course, “you don’t want to be the company in the headlines that is getting sued because you fired the volunteer firefighter,” she added.

If an employer bars a volunteer from responding, the worst-case scenario may be a third-party claim. Failure to comply with the law could give rise to a claim along the lines of “‘If you had complied with your statutory obligation to give Jane Doe time to respond, my loved one would not have died,’” explained Philadelphia-based Jonathan Segal, partner at law firm Duane Morris and managing principal of the Duane Morris Institute.

“That’s the claim I think is the largest in terms of legal risk.”

Even if no one dies or is seriously injured, he added, “there could still be significant reputational risk if an individual were to go to the media and say, ‘Look, I got called by the fire department and I wasn’t allowed to go.’”

The Right Thing to Do

What employers should be thinking about, Segal said, is that whether or not you have a legal obligation to provide job-protected leave for volunteer responders, “there’s still the question of what are the consequences if you don’t?”

Employee morale should be factored in, he said. The last thing any company wants is for employees to perceive it as insensitive to their interests or the interests of the community at large.

“Sometimes employers need to go beyond the law, and this is one of those times,” — Jonathan Segal, partner, Duane Morris; managing principal, Duane Morris Institute

“How is this going to resonate with my employees, with my workforce, how are people going to see this? These are all relevant factors to consider,” he said.

There’s an argument to be made for employers to look at the bigger picture when it comes to any volunteer responders on their payroll, said Segal.

“Sometimes employers need to go beyond the law, and this is one of those times,” he said. “Think about the case where’s there’s not a specific state law [for emergency responders] and you say to a volunteer, ‘No, you can’t leave to deal with this fire’ and then people die. You as an employer have potentially played a role, indirectly, because you didn’t allow the first responder or responders to go,” he said.

The bottom line is that “it’s the right thing to do, even if it’s not required by law,” agreed Cardi.

“I feel that companies should have a policy that they’re not going to discipline or discharge someone for absences due to this kind of civic service, subject to verification of course.”

Clear Policy

While most employers do strive to be good corporate citizens, it goes without question that employers need to guard their own interests. It’s not especially likely that volunteer responders will try to take advantage of the unpaid leave allowed them, but of course, it could happen.

That’s why it’s important to have policies that are aligned with state laws. Those policies could include:

  • Notifying the company of any volunteer affiliations either upon hire or as soon they are activated as volunteers.
  • Requiring that employees notify a supervisor as soon as possible if called to an emergency (state requirements vary).
  • Requiring documentation after the event from the head of the entity supervising the volunteer’s activities.

If at some point it becomes excessive – someone has responded to emergencies five times in nine weeks, then it’s time to examine the specifics of the law and have a discussion with the employee about what’s reasonable, said Segal. It may also be time to ask specifics about whether the person is volunteering each time, or are they being called.

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In some cases, the discussion may need to be about finding a middle ground, especially if an employee has taken on an excessively demanding volunteer role.

“We encourage volunteers to pick the style that best fits their schedule,” said Greta Gustafson, a representative of the American Red Cross. “Disaster volunteers can elect to respond to disasters locally, nationally, or even virtually, and each assignment varies in length — from responding overnight to a home fire in your community to deploying across the country for several weeks following a hurricane.

“The Red Cross encourages all volunteers to talk with their employers to determine their availability and to communicate this with their local Red Cross chapter.”

Segal suggests approaching it as an interactive dialogue — borrowing from the ADA. “Employers may need to open a discussion along the lines of ‘I need you here this week because this week we have a deliverable on Friday and you’re critical to that client deliverable,’” he said, but also identify when the employee’s absence would be less critical.

No doubt there will be tough calls. An employer may have its hands full just trying to meet basic customer needs and need all hands on deck.

“That may be a situation where you say, ‘First let me check the law,’” said Segal. If there’s a leave law that applies, “then I’m going to need to comply with it. If there’s not, then you may need to balance competing interests and say, ‘We need you here.’” &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]