Source: http://www.riskandinsurance.com, January 4, 2011
As the pressure on maintaining clean drinking water supplies mount, risk managers are advised to review their coverage.
By CYRIL TUOHY, managing editor of Risk & Insurance®
Life for risk managers of public water supplies has never been easy, and it’s expected to become more complicated still as the cost of water-related exposures soar into the hundreds of millions of dollars.
Consider the following examples of recent incurred losses, according to a report issued by Marsh Risk Consulting last month:
For risk managers, the message is clear: You can’t take clean water for granted anymore, particularly with the pollution exclusions contained in the plain-vanilla property and general liability policies, according to the Marsh report titled “A Review of Water-Related Opportunities and Threats.”
“When coverage for environmental damage is granted in these forms, it is frequently very restrictive–for instance it may only address sudden and accidental exposure,” the authors of the report state.
Risk managers, therefore, need to pay particular attention to the definition of “waste,” according to the authors, Ariela Abecassis and Aisha Tittle, both Montreal-based consultants for Marsh Risk Consulting, and Jan Molina, vice president for Marsh Canada Ltd. in Edmonton, Alberta,
Even with pollution coverage mentioned in a property or general liability policy, waste can be excluded. As a result, risk managers should cover waste on a pollution-specific policy, the authors said, and risk managers should pay close attention to the time of the reporting window under which they must alert a carrier to sudden and accidental events.
While environmental insurance is available for operators of water systems and owners of these systems, risk managers need to look closely at first-party cleanup costs and third-party claims, said Abecassis, Tittle and Molina.
As water-related risks attract more attention from regulators and investors, the exposures have implications for directors’ and officers’ liability insurance as well, the authors said.
“Water availability, quality and safety are significant emerging global risks,” the authors conclude in the nine-page report. “Organizations, if they haven’t already, must begin to account for it in their strategic and operational planning.”