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]

2017 RIMS

RIMS Conference Opens in Birthplace of Insurance in US

Carriers continue their vital role of helping insureds mitigate risks and promote safety.
By: | April 21, 2017 • 4 min read

As RIMS begins its annual conference in Philadelphia, it’s worth remembering that the City of Brotherly Love is not just the birthplace of liberty, but it is the birthplace of insurance in the United States as well.

In 1751, Benjamin Franklin and members of Philadelphia’s first volunteer fire brigade conceived of an insurance company, eventually named The Philadelphia Contributionship for the Insurance of Houses from Loss by Fire.

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For the first time in America — but certainly not for the last time – insurers became instrumental in protecting businesses by requiring safety inspections before agreeing to issue policies.

“That included fire brigades and the knowledge that a brick house was less susceptible to fire than a wood house,” said Martin Frappolli, director of knowledge resources at The Institutes.

It also included good hygiene habits, such as not placing oily rags next to a furnace and having a trap door to the roof to help the fire brigade fight roof and chimney blazes.

Businesses with high risk of fire, such as apothecary shops and brewers, were either denied policies or insured at significantly higher rates, according to the Independence Hall Association.

Robert Hartwig, co-director, Center of Risk and Uncertainty Management at the Darla Moore School of Business, University of South Carolina

Before that, fire was generally “not considered an insurable risk because it was so common and so destructive,” Frappolli said.

“Over the years, we have developed a lot of really good hygiene habits regarding the risk of fire and a lot of those were prompted by the insurance considerations,” he said. “There are parallels in a lot of other areas.”

Insurance companies were instrumental in the creation of Underwriters Laboratories (UL), which helps create standards for electrical devices, and the Insurance Institute for Highway Safety, which works to improve the safety of vehicles and highways, said Robert Hartwig, co-director, Center of Risk and Uncertainty Management at the Darla Moore School of Business at the University of South Carolina and former president of the Insurance Information Institute.

Insurers have also been active through the years in strengthening building codes and promoting wiser land use and zoning rules, he said.

When shipping was the predominant mode of commercial transport, insurers were active in ports, making sure vessels were seaworthy, captains were experienced and cargoes were stored safety, particularly since it was the common, but hazardous, practice to transport oil in barrels, Hartwig said.

Some underwriters refused to insure ships that carried oil, he said.

When commercial enterprises engaged in hazardous activities and were charged more for insurance, “insurers were sending a message about risk,” he said.

In the industrial area, the common risk of boiler and machinery explosions led insurers to insist on inspections. “The idea was to prevent an accident from occurring,” Hartwig said. Insurers of the day – and some like FM Global and Hartford Steam Boiler continue to exist today — “took a very active and early role in prevention and risk management.”

Whenever insurance gets involved in business, the emphasis on safety, loss control and risk mitigation takes on a higher priority, Frappolli said.

“It’s a really good example of how consideration for insurance has driven the nature of what needs to be insured and leads to better and safer habits,” he said.

Workers’ compensation insurance prompted the same response, he said. When workers’ compensation laws were passed in the early 1900s, employee injuries were frequent and costly, especially in factories and for other physical types of work.

Because insurers wanted to reduce losses and employers wanted reduced insurance premiums, safety procedures were introduced.

“Employers knew insurance would cost a lot more if they didn’t do the things necessary to reduce employee injury,” Frappolli said.

Martin J. Frappolli, senior director of knowledge resources, The Institutes

Cyber risk, he said, is another example where insurance companies are helping employers reduce their risk of loss by increasing cyber hygiene.

Cyber risk is immature now, Frappolli said, but it’s similar in some ways to boiler and machinery explosions. “That was once horribly damaging, unpredictable and expensive,” he said. “With prompting from risk management and insurance, people were educated about it and learned how to mitigate that risk.

“Insurance is just one tool in the toolbox. A true risk manager appreciates and cares about mitigating the risk and not just securing a lower insurance rate.

“Someone looking at managing risk for the long term will take a longer view, and as a byproduct, that will lead to lower insurance rates.”

Whenever technology has evolved, Hartwig said, insurance has been instrumental in increasing safety, whether it was when railroads eclipsed sailing ships for commerce, or when trucking and aviation took precedence.

The risks of terrorism and cyber attacks have led insurance companies and brokers to partner with outside companies with expertise in prevention and reduction of potential losses, he said. That knowledge is transmitted to insureds, who are provided insurance coverage that results in financial resources even when the risk management methods fail to prevent a cyber attack.

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This year’s RIMS Conference in Philadelphia shares with risk managers much of the knowledge that has been developed on so many critical exposures. Interestingly enough, the opening reception is at The Franklin Institute, which celebrates some of Ben Franklin’s innovations.

But in-depth sessions on a variety of industry sectors as well as presentations on emerging risks, cyber risk management, risk finance, technology and claims management, as well as other issues of concern help risk managers prepare their organizations to face continuing disruption, and take advantage of successful mitigation techniques.

“This is just the next iteration of the insurance world,” Hartwig said. “The insurance industry constantly reinvents itself. It is always on the cutting edge of insuring new and different risks and that will never change.” &

Anne Freedman is managing editor of Risk & Insurance. She can be reached at [email protected]