When the winds finally abated after the most expensive hurricane season on record, most eyes were focused on the awesome devastation and property damage. The pictures of large sailboats embedded in trees and windowless hotels and high-rises are lasting impressions of the damages caused by the hurricanes of 2005. A much greater endemic problem, however, is developing from a more subtle, yet equally costly, peril--mold.
Many in the risk management community are just now becoming aware of the potential catastrophic impact of mold in terms of both liability and construction design and engineering. Many home and business owners discovered that large portions of their properties were slowly but steadily being encased in mold after the waters of Hurricane Katrina receded from Louisiana and Mississippi. It takes just 48 hours for mold to begin to grow on any organic substance, and the moist conditions on the Gulf Coast served as an encouraging harbor for the fungus.
The key to remediation is to inspect the damage, discard affected materials and dry the property by using water-extraction vacuums, dehumidifiers and fans. After Katrina, none of this was possible in many impacted areas because of mandatory evacuations and electricity outages. As a result, the mold-riddled debris within homes, buildings and offices has created many challenges with rebuilding efforts and waste management.
In addition to property damage, recent studies have confirmed that certain types of mold, once thought to be innocuous, can lead to significant bodily injury. Many Gulf Coast residents, for example, are already experiencing respiratory problems, aptly named "Katrina cough." The "silent predator," mold is also causing risk managers to focus on a new peril not considered in the past, and mold litigation occasionally tops the risk management headlines.
The insurance industry is responding to this emerging exposure. Today, many general liability and property policies include mold exclusions or significant sublimits to protect carriers from mold-related litigation and abatement expenses. Environmental insurance carriers continue to define mold as a pollution condition and are amenable to extending coverage for mold-related damages as part of a comprehensive environmental insurance program.
Effectively managing the risks of environmental exposures, including mold, requires a better understanding of environmental law, emergency preparedness and environmental risk underwriting. In addition to new risk control strategies, environmental insurance can help to address concern over the long term by protecting people, property and communities. Planning, done in partnership with carriers and knowledgeable brokers, can make all the difference.
--David W. Bennink, CPCU ARM ARe, is a director of Aon Environmental. He develops integrated environmental risk management programs and advises corporations about the impact of environmental liabilities.
January 1, 2006
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