Large Loss Property Damage Consulting
During many of the 35 CE classes I taught in 2009 I was asked to address a growing concern among the Insurance Industry; adequate Insurance coverage. Whether it is used as a method of control over rising costs or simply a shortcut designed to save money in a tight economy, more and more Restoration firms are chosing not to pay for the necessary and growing list of risks that are associated with the nature of Restoration work today. Because of that, I was asked to address the issue in writing about the risks associated with this type of work and the need for such coverage to protect the general public and the Insurance Carriers themselves who may be involved in referring companies who do this work.
Why CPL coverage? Anybody ever heard of Chinese Drywall? Anybody ever seen a pre-existing Mold Problem spread with improper drying on a job that led to cross contamination in the entire Property? Even companies who do Water Mitigation only should have Commercial Pollution Liability Insurance (CPL). Why? Typically CGL (Commercial General Liability) coverage excludes Mold or Pollution claims.
When Mold results from ineffective or improper drying it is often denied by the Restoration Insurer as specifically excluded under a standard CGL policy. If they have coverage, this is the coverage they typically limit themselves too due to the added costs attached with CPL coverage. CPL Insurance has come down substantially but it remains a cost barrier to overcome for small shops and start-ups who opt out of coverage altogether but may leave your Insureds and customers hanging in the event of an occurrence. Therefore, EVERY company who does water restoration work and says they don’t do Mold work, still needs CPL to cover them for their potential liability exposures to their customer and Insureds. These days, many Carriers expect CPL coverage if they recommend a particular firm and have begun mandating CPL Insurance to protect the interests of their policyholders (and them) from exposure.
Why Excess Liability Coverage? Well, let’s talk about handling a water loss at a Nursing Home. Through my consulting company I was brought in to review a drying project in Fond du Lac. The firm they hired had older equipment and not enough of it. The loss involved more than twenty rooms and each was an elderly residents room. Anybody starting to see a problem here? If it is improperly dried it also exposed elderly (typically immunocompromised) residents to mold growth and subsequent liability exposure from EVERY resident. Is $1mil going to be enough to potentially deal with Mold issues from 20 occupants? No. They did get another company in to add equipment and triple their drying capabilities.
Finally, ever see people work outside of their ratings for their coverage? In other words, many smaller firms Insure as Carpet Cleaners or as Cleaning Companies to enjoy lower premiums but work in the full spectrum of Restoration Contracting including Construction rebuilds which, in the event of a loss, can be denied for coverage leaving both them and their customer without proper remedies for repair or correction of faulty workmanship. Restoration Companies expect to be asked for verification of coverage. Feel free to review it and expect it from every reputable company. They should have no problem providing it to you. Your interests and those of the Insureds, deserve protection.