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Environmental Liability

The Zika Battle’s Unintended Consequences

Worry about Zika’s devastating effects is leading to redoubled remediation efforts, but also potential liability claims.
By: | September 28, 2016 • 7 min read

More than 3,100 cases of Zika infection have been recorded in the U.S., most of those contracted due to international travel. South Carolina has 31 recorded cases and infection in every case appears to have happened overseas.

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But after four local residents were diagnosed with Zika, officials in one South Carolina county sought to contain its spread and arranged for an aerial spraying of the pesticide Naled, which kills the Aedes mosquito known to carry the Zika virus.

In their haste to halt the advance of the virus, Dorchester County officials gave inadequate public notice for an early Sunday morning spraying on August 28.

A local farmer didn’t get the alert and therefore didn’t shield her 43 beehives. Only when she discovered that nearly all her bees — as many as 3 million — were dead, did she figure out what happened.

Joe Peiser, EVP, head of casualty broking, Willis Towers Watson

Joe Peiser, EVP, head of casualty broking, Willis Towers Watson

The county immediately apologized for the lack of proper notice and said it will try to reimburse beekeepers after insurance adjusters determine the value of the loss.

The bee farmer suggested the figure will be vast as there is no easy replacement for lost bee colonies, honey and hives.

“There wouldn’t need to be, nor does a separate product exist to cover the municipality’s liability in this situation,” Joseph C. Peiser, executive vice president, head of casualty broking at Willis Towers Watson.

The county’s coverage should come under either a general liability program, or a pollution or environmental liability program, as the spraying and the unintended consequence of killing the bees is a form of negligence and property damage, he said.

“That is exactly what a general liability policy is designed to cover,” Peiser said.

Unintended Consequences

Ever since Zika enter the U.S. earlier this year, government officials tasked with protecting public health are in uncharted territory. Worry about Zika’s devastating effects on a developing baby in utero and the virus’s unique ability to transmit from human to human is leading to remediation efforts that have not been tried in years, if at all.

The above case was Dorchester County’s first such aerial spraying in 14 years, administrator Jason Ward told CNN a few days later. The hard-hit Florida district of Wynwood also initiated new aerial sprays late this summer. It looks like the approach worked.

“After mosquitoes persisted and infections continued despite ground-based spraying, aerial spraying knocked down mosquitoes rapidly and was associated with interrupting transmission of Zika in Wynwood,” CDC Director Tom Frieden said in a statement.

“When faced with the potentially devastating outcomes of microcephaly or other serious brain defects that Zika can cause during pregnancy, we must use the best available tools to prevent infection.

According to EPA assessments, when used properly, aerial spraying with Naled for mosquito control doesn’t pose a risk to people or the environment,” he added.

The honeybee case highlights the need for insurance brokers to work with clients to weigh all options and anticipate the unintended consequences. Start with the environmental liability program, sometimes called a pollution legal liability program, Peiser said.

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“Because they are spraying from the air, and that’s not from a specific site, it would be better if they have an environmental program that it is amended to include this type of operation,” he said.

Communities could add a carve-back on the pollution exclusion called ‘named perils and time element coverage.’ It can be in an umbrella policy, or the primary general liability policy, or both, Peiser said.

The ‘named perils’ portion offers coverage if the pollution is caused by one of the itemized events in the carve back, such as hostile fire, lightning or an overturned vehicle. It’s unlikely to provide coverage for this event, Peiser said.

“Because they are spraying from the air, and that’s not from a specific site, it would be better if they have an environmental program that it is amended to include this type of operation.” — Joseph Peiser, EVP and head of casualty broking, Willis Towers Watson

But the ‘time element’ portion should. This allows the general liability policy to cover an event when it’s known within a set time period (say 20 days) and reported to the insurer within a certain time (say 30 to 40 days), he said.

“I think the most important amendment is to the pollution exclusion to provide ‘time element’ pollution exclusion,” Peiser said. “If they do that, all scenarios should be covered.”

But as an added measure and in order to lessen the chance of argument with the insurer, one can also amend the ‘intentional acts exclusion’ so it does not apply to property damage as the result of reasonable force or activity, Peiser said.

To date, Peiser has yet to field questions or concerns about Zika but expects that he will.

Other Unexpected Zika Claims

Other brokers agree that the Zika virus is just gaining traction as a risk management concern. When the Aedes mosquito population begins to surge again next spring, more claims and questions may pop up. Brazil’s infection rate this winter is a likely litmus test of what the U.S. will experience next summer.

As cases of Zika increase, so too will related insurance claims.

“You’ve got to anticipate the negative and then prepare for it,” said Rick Vohden, SVP and education and public entity practice leader at Marsh Risk Consulting.

Industries that could potentially be impacted by the Zika virus include health care providers and first responders, who could be exposed to blood and bodily fluids, and outdoor workers, who could be exposed to mosquito bites.

International business travelers and university staff and students studying abroad are also presenting new areas of concern, since Zika thrives in regions along the Equator.

Ample communications with employees and students may be the most important approach any business or government organization can take. Let people know what the dangers are in the area where they work and offer solutions to avoid contracting the virus, said David Marcus, managing director, public sector at Arthur J. Gallagher & Co.

“You’ve got to anticipate the negative and then prepare for it.” — Rick Vohden, SVP and education and public entity practice leader, Marsh Risk Consulting

Employees may sue if the employer does not provide adequate controls and they catch the disease, Peiser said.

“Whenever there is a pandemic you start to hear about infectious disease exclusions,” he said.

“Hotels, hospitals or universities want to make sure they don’t have an Infectious disease exclusion that is sometimes in a general liability policy,” he said.

“Sometimes it’s also in the excess workers’ comp policy if a business is self-insured.”

“We continually provide alerts to our clients that they need to be cognizant of the issue early because there is a realm of risk that you are probably going to be impacted by, if not this year, more significantly next year and I think 2018 will be worse than next year,” Vohden said

It is not too early for organizations and brokers to think through each solution and anticipate where it may cause another problem. For example, asking summertime workers to wear pants and long sleeved shirts for protection may expose them to heat exposure and heat exhaustion, Vohden said.

“So we are saying ‘here’s what you can do but if you do this, here’s your next group of consequences that we need to be wary of,” he said.

It is possible that workers’ compensation could come into play at some point.  A worker could make third party over claim and sue the municipality, as well as collect workers’ comp, Peiser said.

VIDEO: South Carolina’s aerial spray for mosquito control accidentally killed millions of honeybees. WCBD’s Sofia Arazoza reports.

Since there’s potential for employees to have occupational exposure to Zika and then transmit it to their spouse, that’s another liability to consider.

“That’s stringing the potential liability out pretty far, but the potential exists if you look at similar cases that occurred with asbestos litigation in the past,” Vohden said.

Marcus, at Gallagher, is a broker for public schools districts in Florida’s Miami-Dade and Broward counties, which are the frontlines for U.S. Zika transmissions this summer.

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There, students and staff were required to wear long sleeves and pants under uniforms and health officials passed out DEET products to students’ families and gave lessons on the best ways to apply it.

“It’s going to get larger before it gets smaller, just like any other disease,” Marcus said.

“There’s a full-out effort to communicate in south Florida right now to everybody on a daily basis and they are doing a phenomenal job.”

The Zika virus was first identified in monkeys in the Zika forests of Uganda in 1947 and later found in humans in 1952, according to the World Health Organization. The first large outbreak of disease caused by Zika infection was in 2007.

Zika virus is related to the dengue, yellow fever and West Nile viruses, but it is the only virus in this group so far to be capable of human-to-human transmission through sexual contact and to cause significant birth defects to babies in utero.

Visit the CDC’s website for the agency’s latest count on Zika cases in the U.S.

Juliann Walsh is a staff writer at Risk & Insurance. She can be reached at [email protected]

Cyber Resilience

No, Seriously. You Need a Comprehensive Cyber Incident Response Plan Before It’s Too Late.

Awareness of cyber risk is increasing, but some companies may be neglecting to prepare adequate response plans that could save them millions. 
By: | June 1, 2018 • 7 min read

To minimize the financial and reputational damage from a cyber attack, it is absolutely critical that businesses have a cyber incident response plan.

“Sadly, not all yet do,” said David Legassick, head of life sciences, tech and cyber, CNA Hardy.

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In the event of a breach, a company must be able to quickly identify and contain the problem, assess the level of impact, communicate internally and externally, recover where possible any lost data or functionality needed to resume business operations and act quickly to manage potential reputational risk.

This can only be achieved with help from the right external experts and the design and practice of a well-honed internal response.

The first step a company must take, said Legassick, is to understand its cyber exposures through asset identification, classification, risk assessment and protection measures, both technological and human.

According to Raf Sanchez, international breach response manager, Beazley, cyber-response plans should be flexible and applicable to a wide range of incidents, “not just a list of consecutive steps.”

They also should bring together key stakeholders and specify end goals.

Jason J. Hogg, CEO, Aon Cyber Solutions

With bad actors becoming increasingly sophisticated and often acting in groups, attack vectors can hit companies from multiple angles simultaneously, meaning a holistic approach is essential, agreed Jason J. Hogg, CEO, Aon Cyber Solutions.

“Collaboration is key — you have to take silos down and work in a cross-functional manner.”

This means assembling a response team including individuals from IT, legal, operations, risk management, HR, finance and the board — each of whom must be well drilled in their responsibilities in the event of a breach.

“You can’t pick your players on the day of the game,” said Hogg. “Response times are critical, so speed and timing are of the essence. You should also have a very clear communication plan to keep the CEO and board of directors informed of recommended courses of action and timing expectations.”

People on the incident response team must have sufficient technical skills and access to critical third parties to be able to make decisions and move to contain incidents fast. Knowledge of the company’s data and network topology is also key, said Legassick.

“Perhaps most important of all,” he added, “is to capture in detail how, when, where and why an incident occurred so there is a feedback loop that ensures each threat makes the cyber defense stronger.”

Cyber insurance can play a key role by providing a range of experts such as forensic analysts to help manage a cyber breach quickly and effectively (as well as PR and legal help). However, the learning process should begin before a breach occurs.

Practice Makes Perfect

“Any incident response plan is only as strong as the practice that goes into it,” explained Mike Peters, vice president, IT, RIMS — who also conducts stress testing through his firm Sentinel Cyber Defense Advisors.

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Unless companies have an ethical hacker or certified information security officer on board who can conduct sophisticated simulated attacks, Peters recommended they hire third-party experts to test their networks for weaknesses, remediate these issues and retest again for vulnerabilities that haven’t been patched or have newly appeared.

“You need to plan for every type of threat that’s out there,” he added.

Hogg agreed that bringing third parties in to conduct tests brings “fresh thinking, best practice and cross-pollination of learnings from testing plans across a multitude of industries and enterprises.”

“Collaboration is key — you have to take silos down and work in a cross-functional manner.” — Jason J. Hogg, CEO, Aon Cyber Solutions

Legassick added that companies should test their plans at least annually, updating procedures whenever there is a significant change in business activity, technology or location.

“As companies expand, cyber security is not always front of mind, but new operations and territories all expose a company to new risks.”

For smaller companies that might not have the resources or the expertise to develop an internal cyber response plan from whole cloth, some carriers offer their own cyber risk resources online.

Evan Fenaroli, an underwriting product manager with the Philadelphia Insurance Companies (PHLY), said his company hosts an eRiskHub, which gives PHLY clients a place to start looking for cyber event response answers.

That includes access to a pool of attorneys who can guide company executives in creating a plan.

“It’s something at the highest level that needs to be a priority,” Fenaroli said. For those just getting started, Fenaroli provided a checklist for consideration:

  • Purchase cyber insurance, read the policy and understand its notice requirements.
  • Work with an attorney to develop a cyber event response plan that you can customize to your business.
  • Identify stakeholders within the company who will own the plan and its execution.
  • Find outside forensics experts that the company can call in an emergency.
  • Identify a public relations expert who can be called in the case of an event that could be leaked to the press or otherwise become newsworthy.

“When all of these things fall into place, the outcome is far better in that there isn’t a panic,” said Fenaroli, who, like others, recommends the plan be tested at least annually.

Cyber’s Physical Threat

With the digital and physical worlds converging due to the rise of the Internet of Things, Hogg reminded companies: “You can’t just test in the virtual world — testing physical end-point security is critical too.”

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How that testing is communicated to underwriters should also be a key focus, said Rich DePiero, head of cyber, North America, Swiss Re Corporate Solutions.

Don’t just report on what went well; it’s far more believable for an underwriter to hear what didn’t go well, he said.

“If I hear a client say it is perfect and then I look at some of the results of the responses to breaches last year, there is a disconnect. Help us understand what you learned and what you worked out. You want things to fail during these incident response tests, because that is how we learn,” he explained.

“Bringing in these outside firms, detailing what they learned and defining roles and responsibilities in the event of an incident is really the best practice, and we are seeing more and more companies do that.”

Support from the Board

Good cyber protection is built around a combination of process, technology, learning and people. While not every cyber incident needs to be reported to the boardroom, senior management has a key role in creating a culture of planning and risk awareness.

David Legassick, head of life sciences, tech and cyber, CNA Hardy

“Cyber is a boardroom risk. If it is not taken seriously at boardroom level, you are more than likely to suffer a network breach,” Legassick said.

However, getting board buy-in or buy-in from the C-suite is not always easy.

“C-suite executives often put off testing crisis plans as they get in the way of the day job. The irony here is obvious given how disruptive an incident can be,” said Sanchez.

“The C-suite must demonstrate its support for incident response planning and that it expects staff at all levels of the organization to play their part in recovering from serious incidents.”

“What these people need from the board is support,” said Jill Salmon, New York-based vice president, head of cyber/tech/MPL, Berkshire Hathaway Specialty Insurance.

“I don’t know that the information security folks are looking for direction from the board as much as they are looking for support from a resources standpoint and a visibility standpoint.

“They’ve got to be aware of what they need and they need to have the money to be able to build it up to that level,” she said.

Without that support, according to Legassick, failure to empower and encourage the IT team to manage cyber threats holistically through integration with the rest of the organization, particularly risk managers, becomes a common mistake.

He also warned that “blame culture” can prevent staff from escalating problems to management in a timely manner.

Collaboration and Communication

Given that cyber incident response truly is a team effort, it is therefore essential that a culture of collaboration, preparation and practice is embedded from the top down.

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One of the biggest tripping points for companies — and an area that has done the most damage from a reputational perspective — is in how quickly and effectively the company communicates to the public in the aftermath of a cyber event.

Salmon said of all the cyber incident response plans she has seen, the companies that have impressed her most are those that have written mock press releases and rehearsed how they are going to respond to the media in the aftermath of an event.

“We have seen so many companies trip up in that regard,” she said. “There have been examples of companies taking too long and then not explaining why it took them so long. It’s like any other crisis — the way that you are communicating it to the public is really important.” &

Antony Ireland is a London-based financial journalist. He can be reached at [email protected] Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]