Increasing natural disasters and folk hero icons like Greta Thunberg have recently made climate change a major topic in the media. Also increasing over the last few years are environmental insurance claims, while capacity is shrinking at the same time (Willis Towers Watson). According to Risk and Insurance, there are a few reasons for the rise in claims.
1. Access to Information
Social media and the digital transformation have given the public easy access to information about the environment and businesses that may impact it. If hikers traveling on a main trail notice lots of garbage in their path or a lack of maintenance, they’re able to take pictures and share them with the public in an instant. Additionally, if people notice dead wildlife near an industrial plant, it’s now very easy for them to use online databases to research government regulatory requirements and records. The Freedom of Information Act makes government records like permitting and fines for violations public record. Many of those records are now searchable online through the governing office.
2. Aging infrastructure
Most factories and industrial plants in the U.S. aren’t new, and now … they’re aging. If clients have limited resources to maintain these structures and retrofit them with pollution prevention measures, then in many cases, they are relying on their insurance companies to protect them from losses instead of updating their equipment. Making major upgrades can be difficult and expensive when there is machinery that has been embedded in the floor, or pipes and drains are underground.
3. Social Inflation
With the prevalence of “watch groups” who want to hold violators of environmental regulations accountable and documentaries broadcasting violations and their effects to the world, people are much more aware of laws regarding pollution and that businesses can be held liable for the damage they do to their surroundings. Public awareness has led to an increase in the amount of class-action pollution suits. Those have led to large jury awards and major insurance losses once the cases reach court since juries are especially sympathetic to those who’ve suffered bodily injury from pollution.
4. Increased Regulatory-Imposed Fines, Penalties and Remediation
In the past, fines and penalties were nominal, but an increased amount of digital data makes it easier to keep track of violations and hold businesses accountable. In addition, with information being available online as a part of public record, citizens are now questioning the value of fines and penalties. If a fine doesn’t seem to be big enough to be a deterrent to a multimillion dollar corporation, people are speaking out, causing regulators to increase fine amounts. Citizens are also voicing these concerns to elected officials who then demand penalties on behalf of their constituents.
5. Increase in Mold and Legionella Claims
The industry has seen an increase in mold and microbial claims in the last two years. Most mold claims were due to contractors sued for disturbing existing structures such as sewer lines and plumbing, and property owners in the hospitality, habitational, and healthcare sectors discovering mold during renovation and construction projects. Many of the mold claims coming from high humidity, leaks, and plumbing issues in these instances can be attributed to aging buildings.
A great number of insureds mistakenly believe that they are covered for pollution releases under their general liability and property policies. Make sure they understand the exclusions and their need for specific pollution coverage. Even in a hard market, we can find the right coverage for any case.