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Beacon Hill Associates, Inc. is a wholesale insurance broker and program administrator, specializing in the placement of environmental insurance and other specialty insurance coverages for agents nationwide.
Beacon Hill Blog
Archive for the ‘Articles’ Category
Thursday, August 12th, 2010
Article written by Beacon Hill’s Assistant Vice President, Michael Tighe. Featured in the August 2010 issue of Insurance Journal.
No matter which television channel or website you turn to, the Gulf oil spill has dominated the news. This is an environmental crisis that will affect the region’s economic capabilities and natural resources for years, if not decades, to come. Between 2 to 4 million barrels of oil have spilled into the gulf, compared to 257 thousand barrels during the Exxon Valdez event . The fishing and tourism industry, which was depressed before the tragedy, is now virtually non-existent. Gulf coast economies from Texas, Louisiana, Mississippi, Alabama, and Florida have all been affected, and scientists are predicting that the Gulf current may carry contaminants along the Florida Keys and up the east coast.
This disaster creates a tremendous opportunity for remediation contractors and consultants. Environmental contractors from across the country have flocked to the Gulf in search of clean-up contracts. Over twenty-four thousand people are working as part of the response to the April 20th accident and its aftermath. The spill has created a wide array of jobs from remediation/spill response contractors to ship boat captains to day laborers. Many unemployed fishermen, construction workers, and general laborers are receiving OSHA HAZOPER training and aiding in the clean up. “We have received numerous phone calls about potential start-up businesses or companies opening up new divisions in this area,” said Michael Tighe, Assistant Vice President at Beacon Hill Associates, a wholesale insurance broker and program administrator, specializing in the placement of environmental insurance.
Remediation Methods Used
More than 46,000 people – and nearly 7,000 boats – are now employed in the response1. While fishing business was struggling before the disaster, fishermen are now making $1,200 – $3,000 a day laying floating booms that contain oil once it rises to the surface . Where the oil collection is greatest they often create a “burning box”, which is a controlled burn over the water. In the marshes and other wetlands, contractors are mopping the oily sheen with absorbent oil pads, wiping each blade of grass, which can be time-consuming labor. In open water, boats are equipped with oil/water separators that skim surface water and can extract two thousand barrels of oil per day . Thousands of workers comb the beach using shovels or shifting machines collecting tarballs on the sand. Unfortunately, oil can be buried underneath the sand, between tides, which will require sand incineration or other deeper cleaning methods.
Potential Coverage Issues
Below are some coverage issues agents should consider when obtaining Pollution insurance for their clients.
Action over – not all liability policies provide action over coverage. An employee of the contractor may potentially sue the project owner directly for liabilities suffered during the work. This type of claim occurs more frequently with remediation contractors.
Time element triggers – some policies limit pollution to a sudden/accidental trigger only whereby the pollution occurrence and claim filing must occur within a limited period of time (usually 72 hours). A policy that includes gradual pollution is more effective for emergency response contractors.
Coverage territory – The coverage territory within the policy may not include international waters.
Designated operations – Many Contractor Pollution policies provide coverage only for operations listed on the policy. If the contractor’s work expands beyond what is listed, no coverage may be afforded.
Watercraft exclusions – there are specific limitations under a package General Liability and Pollution policy pertaining to the use and length of boats allowed.
Subcontracted work and construction management exclusions – if the remediation contractor is using subcontractors, liability may extend only if the sub meets specific qualifications and insurance requirements. Also, the supervision of subcontractors may not be covered unless a Professional Liability policy is in force.
Transportation and disposal issues – if the contractor is responsible for the transportation and disposal of waste, there may be no coverage afforded under a basic Contractors Pollution policy, should an incident occur beyond the boundaries of a job site. Limited coverage is attainable in the marketplace with proper information.
Product exposures – specific Product Pollution policies are available for manufacturers and distributors of chemical dispersants, separators, containment booms, etc. used in the spill response. Coverage can be written stand alone or in conjunction with a commercial General Liability policy.
Pollution definitions – vary greatly. Some do not include “waste” in their definition of a pollutant. If waste/refuse is not included in the definition, it may lead to gaps in completed operation and disposal coverage.
Property – hurricane and wind concerns – In addition to contracting pollution exposures there has also been interest in environmental coverages from property owners. In the midst of hurricane season, commercial property owners are becoming increasingly concerned that high winds may carry petro contaminants onto their premises. Interested parties are not only coastal, but miles away from shore. If the specified cause of loss is not the windstorm but rupture of the underwater well, many agents have found little or no pollution clean up coverage for real or personal property. The next wave of environmental contractors to the Gulf may be restoration contractors equipped to extract water and oil in and on buildings.
Due to the influx of submissions that environmental markets are receiving, they are starting to quantify the number insureds involved in the clean up effort. Additional supplemental applications may be needed to gauge the amount of on and off shore activities, as well as the amount of work subcontracted. Some carriers are limiting their exposure to coastal premises/site pollution policies, possibly offering coverage with higher retentions or without first party clean up triggers.
While agencies scramble to secure pollution coverage for their clients being affected by the oil spill in the Gulf, they should also get a clear picture of the prospective insured’s scope of operations, contractual responsibilities, and qualifications. This is crucial in order to offer effective insurance solutions, as no two policies are the same in the environmental insurance marketplace.
  
Tags: Contractors, Contractors Pollution Liability, CPL, Current Events, Environmental Exposures, Environmental Insurance, Exposures, Pollution Insurance, Site Pollution
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Tuesday, August 3rd, 2010
Article by Bill Pritchard, President of Beacon Hill Associates, Inc.
The dramatic economic events of the last several years have had a profound impact on the insurance industry. As a naturally cyclical business, insurance has suffered the double whammy of a softening market cycle coming during an economic meltdown never before seen in our lifetimes. Such a historic set of circumstances will leave an indelible mark on our industry. But while there are many challenges yet to be overcome, there is certainly reason for cautious optimism; much like the American spirit, the insurance industry is infinitely resilient and creative. A key beneficiary of the bounce-back we expect to see can be found in environmental insurance. How it can help an agent become more successful, and why agent must know about it, are topics worth considering.
It can be argued that contractors are the backbone of our economy. Without them, things wouldn’t be built or serviced, torn down or reconfigured. Clearly, the contracting industry has been hard hit by the economic downturn. The construction trades in particular, along with infrastructure and service industries, have all seen record decreases. Since the majority of insurance is based on either payroll or revenues, while these industries have contracted, so have many insurance agencies’ revenues.
We are begging to see a slow reversal of the steady decline of the last several years. Over the first four months of 2010, we have witnessed a noticeable stabilization in our contractor clients. Where we had seen annual double digit narrowing over the last two years, most renewals are now coming in slightly off, or flat, and in some cases, projecting some growth for 2010 into 2011. We are still seeing some contractors going out of business, but it seems that the ones who were going to fall already have.
In addition to the slow recovery from the abyss of 2009, we are seeing growth in our business fueled by a growing national awareness of environmental exposures. Even discounting the terrible situation in the Gulf, awareness of environmental issues has grown dramatically in the last few years. Starting with sophisticated commercial customers and lenders, and spreading to most facets of the construction industry, contractors are being required to prove their ability to address environmental problems that occur on job sites.
This growing awareness has come from several different directions. The first can be found in the media. Chinese drywall, toxic mold, silicosis, fires at treatment sites, and lawsuits against land developers have all brought environmental issues to the forefront. The tragedy in the Gulf will only continue to heighten that concern to levels never seen before. The potential for a significant environmental event impacting a business or property is no longer perceived of as a long shot. Now many people recognize the ramifications can be significant, and it is important for everyone who could potentially impact a property is properly covered in the event they do.
Taking that heightened consciousness to a new level will be an increase in awareness of what might be a “pollution” problem that was not expected to be one. A perfect example of this comes from the many recent losses stemming from erosion and sediment runoff at job sites. There have been a number of well publicized six and even seven figure losses stemming from this problem that were treated as pollution claims and declined by standard GL insurers. Recognizing how broad the standard definition of a pollutant is, and also the very limited coverage provided by the ISO CGL form has lead to requirements for separate, identifiable pollution coverage.
Another impetus for coverage has come from the well-publicized understanding that coverage is available and affordable, now more than ever. In the late eighties and early nineties pollution coverage was something of a mystery. Now it is a well known, although not terribly well understood, product. Knowing that clients can afford to buy coverage, and that there are many venues for it, has lead to an increase in requirements for it.
The final driver for contractors to seek coverage comes from new regulations. An example is the new EPA regulation regarding lead paint. Effective April 22, 2010, the EPA began requiring all contractors performing renovation, repair and painting projects that disturb lead-based paint in homes, child care facilities, and schools built before 1978 be certified and must follow specific work practices to prevent lead contamination. Contractors have to be trained and be certified to evidence it. The regulation goes further, requiring any removal of possible lead containing material be done by properly trained lead abatement professionals. All of this brings environmental concerns to a huge number of contractors, and their clients, across the country.
A gradually increasing demand for these products is expected to continue. Complicating matters somewhat is the dramatic increase in the number of carriers and programs offering environmental coverage. Where there were ten to fifteen companies willing to write pollution-related coverages ten years ago, there are now close to forty today. While more may seem like a good thing, this comes with real risks for the agent. Environmental insurance is a unique class of business, with every carrier offering coverage in its own way. While there are a plethora of products labeled “Contractors Pollution Liability, or “CPL”, they are each unique to the carrier providing them. Companies may offer forms that appear on the surface to be the same as others an agent might have seen, but it is rarely the case that they are truly the same. In twenty years of working in this class, I have never seen two policies that offer the exact same coverage.
The recent entry of a number of admitted carriers does not help this problem. While their forms have been approved by the State, that does not mean they are the same as each other, or for that matter, that they offer better coverage than that offered in the Excess and Surplus market. Unlike standardized commercial property and auto forms, States do approve different environmental coverage forms. Admitted does give the agent the security of the State guarantee fund, but should not be inferred to mean the product is actually better in any other way.
It is crucial that agent review and understand the coverage they offer their clients to be sure it is adequate for what the clients do. There are many examples of forms in the market that have very restrictive language in them which can lead to inadequate coverage. Agents should request specimens of all policies and read them carefully before presenting terms to clients.
Once coverage is understood, the next hurdle is the carrier itself. The wide range of companies, new and old, requires the agent to make choices for the client. There are several key elements that should be considered. First is the overall rating of the carrier offering coverage. In today’s volatile world, the better the A.M. Best rating, the better off an agent will be in the long run. In addition to the Best rating, it is also very important to choose carriers that have made a commitment to work with environmental risks. This means those companies that have in-house environmental claims staffs as well as significant environmental underwriting departments.
It also helps to work with carriers that offer supporting lines of coverage. You may be looking for Contractors Pollution Liability for your street and road contractor, but the ability to add premises pollution coverage for their yard could dramatically enhance your proposal, and their coverage. Many of the top carriers offer a full suite of coverages, and this gives you the ability to round out the offering to your client, while also being a testament to their commitment to the line of business.
An additional benefit of the growing environmental marketplace is the range of products available, as well as the appetite for offering coverage. The top-tier carriers are all open to providing pollution coverage to a wide range of contractor types. A few years ago residential contractors had trouble getting pollution coverage that would include Mold. That has changed, so that now most companies are willing to cover those risks. This increased appetite has made it possible to cover this environmental exposure of most all contractors.
In addition to a wider appetite, the current market is trending toward providing broader coverage than what was available only a few years ago. Many carriers are offering defense outside the limits with a cap, blanket additional insured where contractually required, and limited site coverage. In addition, many of these carriers are willing to work with their agents to broaden coverage further. It is important to recognize that much of this coverage is negotiated, and “off-the-shelf” products are seldom the best deal you can get for your client. Educating yourself as to what may be available is an important part of working with environmental products.
One such enhanced coverage for contractors is Contractors Pollution Liability with Professional coverage including Mold. Very few carriers offer this coverage with Mold in both coverage parts. The Professional coverage is significant for a number of reasons. Most CPL policies exclude Professional, which therefore eliminates coverage for supervision of subcontractors. If a sub causes a pollution problem, and the suit alleges that the insured failed in their obligation to properly supervise that sub, professional coverage would come into play. Contractors also often make modifications on the job to plan items. A duct might get moved, and the resulting re-routing might lead to a mold problem. Again if that claim comes in as Professional, this coverage enhancement would suddenly be very important.
The final area that we believe bodes well for the environmental insurance industry is green technology firms. This market segment has boomed in the last year, and with current events such as they are, the expectation is that significant growth will continue for the foreseeable future. Many green tech firms are seen as excellent prospects by environmental insurance carriers, who are willing to provide a full range of coverages for them. While many of these firms are true contractors with a green tech focus, they are perceived as good risks due to the sophistication of the work they often do. The enhanced training leads to a better paid, generally better trained workforce, which historically has led to a better risk for the insurance carrier.
While the market is still very soft, and the overall economic fragility continues to keep companies in a very conservative posture, there is reason to believe that times are getting better. Finding additional coverage that enhances a contractor’s ability to compete and function effectively in the marketplace is a perfect way for agencies to not only serve their clients better, but to increase their revenue as well. In the changing marketplace, opportunities abound for the agent who wants to develop an understanding of this complex but valuable coverage.
Tags: Current Events, Environmental Insurance, Environmental Insurance Advice, Tools for Agents
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Thursday, July 29th, 2010
Article by Bill Pritchard, President of Beacon Hill Associates, Inc.
In today’s competitive insurance industry and struggling economy, agents are hard pressed to sell anything more than the bare coverage necessities. But while this challenge may seem daunting, it is not without significant rewards. Increased revenue, stronger client relationships, and peace of mind are just a few. Given the pressures many agencies are currently feeling, certain additional coverages are an opportunity to grow in this soft market.
Many insureds have exposures that are broader than the coverage they carry. While this is not the easiest thing for agents to talk with their clients about, it is a crucial discussion nonetheless. With all of the other difficulties a business faces, inadequate coverage is not acceptable in the face of a significant claim. No agent wants to be on the wrong side of that conversation should it happen to their client.
One such exposure is posed by the pollution exclusion in the CGL policy. Virtually every business has some degree of environmental exposure, given the very broad definition of a pollutant that is addressed by that exclusion. Most airborne irritants fit the definition, leading to a wide range of possible coverage gaps.
Clearly, this is a coverage every insured should know about. It is important for an agent to recognize the value of this product—in many respects, what makes this a good product for the agent also makes it a good choice for the insured.
Agents are presented with many ancillary exposures and coverages to consider with their clients. Typically they cannot all be addressed. Given this, an agent needs to choose which coverages to provide terms on, and which to briefly discuss and let go. For an agent, there are two key considerations when deciding this. The first is that there is an exposure that is not addressed by the insured’s current insurance program. The next is that coverage is available from quality carriers, is effective, and is affordable. A positive response to these questions means an agent should offer the coverage, as failing to do so would put an agency in an untenable position in the event of a loss.
Once the choice to focus on environmental coverage has been made, the attention can then turn to the advantages to offering it. Luckily there are many.
First and foremost, offering broader coverage to a client helps demonstrate an agency’s professionalism. A firm that understands the complex needs of their clients in relation to the structure of the policies they offer is clearly seen as a more professional, experienced, and valuable agency partner. Knowing the coverage and having the tough conversations about it is what distinguishes agencies from each other. Environmental insurance is an excellent opportunity to do just that.
Similarly, insureds who carry environmental coverage are in a position to use that to differentiate themselves from their competitors. Advising potential clients of the scope of this coverage, and the added security it provides, gives them a competitive edge. Contracts calling for pollution coverage are easily met, allowing insureds to present themselves as prepared and professional.
In addition to the advantages gained through enhanced stature, pollution coverage gives both parties peace of mind. For the agent this comes from knowing that a client’s significant coverage gap has been addressed. Regardless of how thorough an agent has been in having the client disclaim coverage offered, it is always better to have the coverage in force than to have to worry about a potential problem down the road. In a world where coverage that is missing from an insured’s policy is found in the agency’s errors and omissions policy, having a client purchase the proper insurance is more than just a good idea.
For an insured, a similar peace of mind exists. As every business owner knows, walking the tightrope of coverage versus exposure can be stressful. Insurance is a powerful risk management tool and is a key component of every insured’s management plan. Deciding which risks to retain, and which to transfer, has to be based on a complete knowledge and understanding of the actual risk. Once the environmental exposures are explained to the insured, the decision to purchase coverage becomes a clear choice between retention and transfer. Deciding to purchase broader coverage and transfer the risk puts yet another business threat in the category of transferred, and allows the insured to focus their concerns elsewhere.
There are financial incentives for both the agent and insured in the purchase of environmental coverage as well. As with the exposures, having a clear picture of the benefits to both parties is crucial to the decision-making process. For an agent, there is of course an actual cost to generate this class of business. Marketing to carriers, brokers, MGAs and other market sources can be time consuming and difficult. Many carriers require separate appointments for environmental coverage, and require their own unique application as well.
Luckily, there are several ways to access the market in an efficient way that also increases the likelihood of receiving a high quality program designed specifically for the insured. There are a few highly skilled, experienced specialty brokers that can give a retail agent access to the top carriers in the business, offering very broad coverages. Many of these brokers are well known for their product knowledge, and give the agent the tools needed to explain both the exposures and the coverages to the client. The right specialty broker can add significant value to the agent’s process, increasing the odds of writing the account at the lowest possible cost in a reasonable timeframe for the agency.
Once effective coverage from a quality carrier has been found, the revenue it provides to the agency is a welcome addition in a difficult year. Commissions range from modest to excellent, depending on the source accessed. Regardless, the agent needs to keep in mind the value of linking another policy to the chain for that client. The more coverage they have in force for an insured, the harder it will be for a competitor to replicate the program or threaten the relationship at renewal.
As with the coverage considerations, the cost benefit analysis for the insured is a positive one as well. While the additional premium may not be something they initially plan on, given the softening market, it is unlikely that adding the coverage this year would push them above their expiring costs. Balanced against this is the additional business they can attract with the coverage, as well as the protection against unplanned environmental loss. Many insureds highlight this specific coverage in their marketing and SOQ materials. By recognizing the reasons why coverage is beneficial to the insured, agents are able to take this higher standard of security—for themselves and their clients—and turn it into revenue-generating opportunities.
Given the challenges of the economic climate in which businesses are currently functioning, there are many reasons why agents and their insureds should carefully consider environmental coverages. The downside of cost and effort is certainly offset by the opportunity to bring in more business. These benefits are shared equally between the agent and client, which create a unique and valuable synergy.
Tags: Advice for Agents, Environmental Insurance, Pollution Insurance
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Monday, March 1st, 2010
Insurance agents may be more inclined to sell Pollution insurance in 2010 now that the 2008 EPA Lead Rule will become effective on April 22, 2010. Contractors performing work on buildings constructed before 1978 will be required to abide by the EPA Lead-Based Paint Renovation, Repair and Painting (RRP) Rule. The regulation creates more responsibility/awareness from the contractor in dealing with potentially hazardous areas. As a result, the contractor may incur more exposure to lead-based paint claims, which is excluded under most General Liability policies.
The RRP Rule is a federal EPA program that affects contractors, property managers, and others who disturb qualifying interior and exterior painted surfaces. Remodeling, maintenance, painting/surface preparation, window replacement, electrical, plumbing, and carpentry activities are subject to the program rules. Exceptions include emergency repair work, minor repair work that disturbs less than 6 square feet of paint per room, and housing declared lead free by a certified lead inspector. Types of properties affected by the program include pre-1978 schools, daycare centers, residential homes, and apartment buildings.*
Currently painters, electricians, GCs, carpenters, property managers, and maintenance contractors are being required to provide pre-renovation educational lead pamphlets to tenants, receive delivery confirmation, and post signs about the workplace.
Effective April 22, 2010, renovators must attend an eight-hour training course by an EPA approved training provider and the firms they work for must also be accredited. Training classes address dust and debris containment, restricting open flame burning, exhaust control for power tools and clean up procedures, record keeping, and other precautionary measures. The accreditation must be renewed every five years. Other state and local requirements may also apply and be more stringent.
Insurance Issues
The EPA is broadening renovators’ responsibilities beyond the scope of a general contractor and General Liability policy. While contractors always have a Pollution exposure, the new EPA requirements increase the risk for Pollution liability claims. The new rule requires renovators to perform lead testing, encapsulation, and cleaning activities. It also requires the contractor to educate property owners/residents about the dangers of lead and the work to be performed. (more…)
Tags: Contractors, Contractors Pollution Liability, CPL, Environmental Insurance, EPA Regulations
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Thursday, February 18th, 2010
In today’s market, a few million dollars of coverage is often not enough to adequately insure a business. For many larger firms involved in complex projects, limits of ten to fifty million are becoming increasingly common. While many agents routinely build these types of programs for their clients’ regular casualty lines, they seldom have the experience to do so for environmental exposures. Although in principal these are similar exercises, there are real issues to be aware of when doing so for an environmental program.
No tower is stronger than its base, and this is true of environmental coverage as well. Far too frequently agents are struggling to fill out limits where the primary layer was constructed incorrectly. An example is when a carrier uses a Contractors Pollution Liability form to provide coverage for an insured’s product. While the policy can be modified to provide some degree of coverage, it is significantly better to simply go to a carrier with a Products Pollution Liability form and have them write the primary properly. This gives cleaner coverage on the primary and makes it easy for excess carriers to step up on a true follow form basis.
Another common issue is using a Site Specific form to cover an insured’s job site. Again, this can work, but only with significant modification of the primary policy. As in the first example, this approach puts excess carriers on notice that something strange is going on, and makes them far less interested in writing the higher limits.
In addition to the structure of coverage, the quality of the carrier offering it is also important. The willingness of an excess carrier to sign on to a program is directly related to their comfort that the primary company will be there to honor their commitments. In today’s insurance market, an “A” Rated primary is crucial. “A” Rated with a size category of ten or better often leads to the best terms from excess carriers.
When the base is built properly, there are many carriers interested in writing higher limits. Again, experience has shown that agents often go with a slightly off primary from a smaller company because the price is much better. Many wholesale brokers would argue that if the base is built correctly, the excess actually becomes less expensive and easier to obtain. In the end, the program is better for the insured, and more cost effective as well—clearly the goal everyone is striving for.
Tags: Environmental Insurance, Environmental Insurance Advice, Multi-line
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Thursday, October 1st, 2009
The EPA recently released a list of over 40 “high hazard potential” sites around the country that contain coal combustion residuals, commonly referred to as coal ash. This substance is a product of burning coal and is often stored in containment ponds or dams near electrical utilities. As coal ash leaches into the soil and spills into areas surrounding these facilities, there can be serious ramifications on human health and the environment. These storage ponds hold fly ash, bottom ash, coal slag, and flue gas residues that contain toxic metals such as mercury, arsenic, selenium, cadmium, and lead—all potentially toxic to people and wildlife.
Due to several recent coal ash spills, the EPA and other federal regulatory agencies are cracking down on the assessment, maintenance, and clean up of coal ash storage ponds in the U.S. These agencies will review the information provided by the facilities to identify issues that need priority attention, and will also visit many of these facilities to see if the management units are structurally sound. The top five states that are home to these “high hazard potential” sites include: North Carolina, Arizona, Kentucky, Ohio, and West Virginia.
Although the risks associated with hazardous coal ash sites can be devastating to the communities surrounding them, this is an opportunity for our government to take a more active role in making sure electrical (and other energy) utility sites are operating responsibly. This is also an opportunity for you to assist your clients—those who operate energy utilities as well as contractors who may be hired to clean them up—and make sure they have adequate environmental insurance. Take this opportunity to help your clients protect themselves from a potentially disastrous financial loss and secure the future of their businesses and workforces.
Contact Beacon Hill Associates, Inc. today for more information and applications.
Tags: Environmental Insurance, Pollutant, Site Pollution
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