Water Crisis

Water Crisis Damages Flint Businesses

Flint businesses are seeing a loss of revenues and continue to face reputational damage.
By: | March 11, 2016 • 3 min read

Early this year, President Obama declared a state of emergency due to the water crisis in Flint, Mich., making the city and its residents eligible for federal disaster aid.

Officials eventually took action to make Flint’s water supply safer, but businesses still face reputational damage, loss of revenue and for the most part, no insurance coverage due to pollution exclusions.

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In April 2014, Flint switched from using Detroit’s water system to draw its own drinking water from the Flint River. Since then, the river’s acidic water corroded lead pipes, leaking lead into the city’s drinking water.

While residents began complaining in 2015 about the odd smell, taste, and discoloration of the water, public officials insisted it was safe to drink. That was until a September 2015 study by the Hurley Medical Center found that the number of children with above-average levels of lead in their blood nearly doubled after the city changed its water source.

Flint officials acknowledged the problem and the city started getting water from Detroit again the following month.

But the damage had already been done, not just to the thousands of residents who were exposed to high levels of lead, but to homes and businesses with lead plumbing that began to corrode from the acidity.

While a safer source of water is now in place, the physical and economic damages could mount for years.

Businesses in the city are “significantly impacted,” said George Wilkinson, group vice president of the Flint and Genese Chamber of Commerce.

The event is not only a public health crisis but an economic crisis that is resulting in a loss of sales and a halting of business operations, he said. It has been especially problematic for restaurants, hotels and those in the hospitality industry.

“They’re seeing a significant decline in [revenue]. There’s also an increase in expenses because they’re buying bottled water and having to install filtration systems,” Wilkinson said.

Flint’s restaurants now regularly test their water and some installed filtration systems that can cost up to $2,000 each.

While business owners can act to ensure their water is lead-free, the real problem is the reputational damage that the city faces, he said.

“They can be cleared by the Health Department but the real problem is the negative perception. The media is portraying Flint as a war zone,” Wilkinson said.

Flint business owners are largely left exposed because business interruption insurance has stringent pollution exclusions, said Micha Knapp, a producer at the Graham Co. in Philadelphia.

Most general liability and property policies preclude any business interruption or property damage arguments a customer could make, he said. In addition, commercial general liability policies do not cover risks associated with polluted water as they often contain an Absolute Pollution Exclusion or a Total Pollution Exclusion specific to lead.

“From a liability and property perspective, there’s often a suite of pollution exclusions that will remove any coverage for a pollutant or containment like lead. It can leave a company susceptible,” Knapp said.

Dave Walker, president of Hartland Insurance Agency in Hartland, Mich., said few businesses in Flint have the specialized insurance necessary to cover businesses losses.

“They would have to have expected this to have that kind of coverage in place. It’s not something most businesses carry,” he said. “Most will have to [cover losses] out of pocket.”

Knapp said it’s important for Flint businesses to continue to effectively test the water for environmental hazards that could impact customers’ health. He recommended they also consider eventually removing and replacing lead pipes on their properties.

Companies can also consider a Pollution Legal Liability insurance policy, which is geared specifically to the restaurant, hospitality and real estate sectors. Such coverage will also protect companies against liability and property damage associated with Legionella.

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“Most don’t have it but there are markets out there that will pick up that coverage,” Knapp said.

Flint’s water crisis could be a glimpse into a mounting national problem, according to experts.

Fitch Ratings said in early-March that there are more than 6 million lead water service lines in existence around the country, most of which are located in the Northeast and Midwest.

Dr. Jeffrey Griffiths, a professor of public health at Tufts University and a former chairman of an advisory board for the U.S. Environmental Protection Agency’s Drinking Water Committee, said in an article for the Detroit Free Press that many of the nation’s pipes can not be located or tested.

Craig Guillot is a writer and photographer, based in New Orleans. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

After 20 years in the business, Navy Pier’s Director of Risk Management values her relationships in the industry more than ever.
By: | June 1, 2017 • 4 min read

R&I: What was your first job?

Working at Dominick’s Finer Foods bagging groceries. Shortly after I was hired, I was promoted to [cashier] and then to a management position. It taught me great responsibility and it helped me develop the leadership skills I still carry today.

R&I: How did you come to work in risk management?

While working for Hyatt Regency McCormick Place Hotel, one of my responsibilities was to oversee the administration of claims. This led to a business relationship with the director of risk management of the organization who actually owned the property. Ultimately, a position became available in her department and the rest is history.

R&I: What is the risk management community doing right?

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The risk management community is doing a phenomenal job in professional development and creating great opportunities for risk managers to network. The development of relationships in this industry is vitally important and by providing opportunities for risk managers to come together and speak about their experiences and challenges is what enables many of us to be able to do our jobs even more effectively.

R&I: What could the risk management community be doing a better job of?

Attracting, educating and retaining young talent. There is this preconceived notion that the insurance industry and risk management are boring and there could be nothing further from the truth.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

In my 20 years in the industry, the biggest change in risk management and the insurance industry are the various types of risk we look to insure against. Many risks that exist today were not even on our radar 20 years ago.

Gina Kirchner, director of risk management, Navy Pier Inc.

R&I: What insurance carrier do you have the highest opinion of?

FM Global. They have been our property carrier for a great number of years and in my opinion are the best in the business.

R&I: Are you optimistic about the US economy or pessimistic and why?

I am optimistic that policies will be put in place with the new administration that will be good for the economy and business.

R&I: What emerging commercial risk most concerns you?

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The commercial risks that are of most concern to me are cyber risks, business interruption, and any form of a health epidemic on a global scale. We are dealing with new exposures and new risks that we are truly not ready for.

R&I: Who is your mentor and why?

My mother has played a significant role in shaping my ideals and values. She truly instilled a very strong work ethic in me. However, there are many men and women in business who have mentored me and have had a significant impact on me and my career as well.

R&I: What have you accomplished that you are proudest of?

I am most proud of making the decision a couple of years ago to return to school and obtain my [MBA]. It took a lot of prayer, dedication and determination to accomplish this while still working a full time job, being involved in my church, studying abroad and maintaining a household.

R&I: What is your favorite book or movie?

“Heaven Is For Real” by Todd Burpo and Lynn Vincent. I loved the book and the movie.

R&I: What’s the best restaurant you’ve ever eaten at?

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A French restaurant in Paris, France named Les Noces de Jeannette Restaurant à Paris. It was the most amazing food and brings back such great memories.

R&I: What is the most unusual/interesting place you have ever visited?

Israel. My husband and I just returned a few days ago and spent time in Jerusalem, Nazareth, Jericho and Jordan. It was an absolutely amazing experience. We did everything from riding camels to taking boat rides on the Sea of Galilee to attending concerts sitting on the Temple steps. The trip was absolutely life changing.

R&I: What is the riskiest activity you ever engaged in?

Many, many years ago … I went parasailing in the Caribbean. I had a great experience and didn’t think about the risk at the time because I was young, single and free. Looking back, I don’t know that I would make the same decision today.

R&I: What about this work do you find the most fulfilling or rewarding?

I would have to say the relationships and partnerships I have developed with insurance carriers, brokers and other professionals in the industry. To have wonderful working relationships with such a vast array of talented individuals who are so knowledgeable and to have some of those relationships develop into true friendships is very rewarding.

R&I: What do your friends and family think you do?

My friends and family have a general idea that my position involves claims and insurance. However, I don’t think they fully understand the magnitude of my responsibilities and the direct impact it has on my organization, which experiences more than 9 million visitors a year.




Katie Siegel is a staff writer at Risk & Insurance®. She can be reached at [email protected]