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]

2018 Risk All Stars

Stop Mitigating Risk. Start Conquering It Like These 2018 Risk All Stars

The concept of risk mastery and ownership, as displayed by the 2018 Risk All Stars, includes not simply seeking to control outcomes but taking full responsibility for them.
By: | September 14, 2018 • 3 min read

People talk a lot about how risk managers can get a seat at the table. The discussion implies that the risk manager is an outsider, striving to get the ear or the attention of an insider, the CEO or CFO.

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But there are risk managers who go about things in a different way. And the 2018 Risk All Stars are prime examples of that.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Goodyear’s Craig Melnick had only been with the global tire maker a few months when Hurricane Harvey dumped a record amount of rainfall on Houston.

Brilliant communication between Melnick and his new teammates gave him timely and valuable updates on the condition of manufacturing locations. Melnick remained in Akron, mastering the situation by moving inventory out of the storm’s path and making sure remediation crews were lined up ahead of time to give Goodyear its best leg up once the storm passed and the flood waters receded.

Goodyear’s resiliency in the face of the storm gave it credibility when it went to the insurance markets later that year for renewals. And here is where we hear a key phrase, produced by Kevin Garvey, one of Goodyear’s brokers at Aon.

“The markets always appreciate a risk manager who demonstrates ownership,” Garvey said, in what may be something of an understatement.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Dianne Howard, a 2018 Risk All Star and the director of benefits and risk management for the Palm Beach County School District, achieved ownership of $50 million in property storm exposures for the district.

With FEMA saying it wouldn’t pay again for district storm losses it had already paid for, Howard went to the London markets and was successful in getting coverage. She also hammered out a deal in London that would partially reimburse the district if it suffered a mass shooting and needed to demolish a building, like what happened at Sandy Hook in Connecticut.

2018 Risk All Star Jim Cunningham was well-versed enough to know what traditional risk management theories would say when hospitality workers were suffering too many kitchen cuts. “Put a cut-prevention plan in place,” is the traditional wisdom.

But Cunningham, the vice president of risk management for the gaming company Pinnacle Entertainment, wasn’t satisfied with what looked to him like a Band-Aid approach.

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Instead, he used predictive analytics, depending on his own team to assemble company-specific data, to determine which safety measures should be used company wide. The result? Claims frequency at the company dropped 60 percent in the first year of his program.

Alumine Bellone, a 2018 Risk All Star and the vice president of risk management for Ardent Health Services, faced an overwhelming task: Create a uniform risk management program when her hospital group grew from 14 hospitals in three states to 31 hospitals in seven.

Bellone owned the situation by visiting each facility right before the acquisition and again right after, to make sure each caregiving population was ready to integrate into a standardized risk management system.

After consolidating insurance policies, Bellone achieved $893,000 in synergies.

In each of these cases, and in more on the following pages, we see examples of risk managers who weren’t just knocking on the door; they were owning the room. &

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Risk All Stars stand out from their peers by overcoming challenges through exceptional problem solving, creativity, clarity of vision and passion.

See the complete list of 2018 Risk All Stars.

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