Source: http://www.propertycasualty360.com, November 27, 2013
By: Amanda Duncan
Vacancy isn’t the only headache property owners can face: Empty buildings and land can cause pollution-related liability. Learn about possible options to mitigate environmental liabilities through insurance and risk management.
As America’s real estate crisis recovers along with our economy, more than 14 million properties remain vacant or abandoned across the country. Real estate is considered a vacant property when it is not currently occupied or in use. This includes empty lots as well as structures.
Cities like Detroit, Cleveland and Las Vegas are dealing with thousands of undeveloped lots, empty houses and even entire neighborhoods, as well as commercial, retail and industrial properties. This has resulted in an increase in crime and lower property values for surrounding areas. Local communities left to care for these properties by default do not have the time or resources to keep the properties in good condition, thus causing an increase in exposure to risks like vandalism, fire, theft and water damage. In turn, these risks hinder the possibility of resale and revitalization in the future as economic conditions continue to improve, leading to possible setbacks throughout our communities.
Several environmental risks are associated with all types of vacant properties. Older buildings may have existing asbestos insulation and tiles, as well as lead paint and lead piping. All buildings constructed before 1980 have the potential to contain both asbestos-containing materials and lead-based paint. Leaking heating oil tanks, pipes and appliances are prevalent, as well as any chemicals or lubricants stored on premises in garages or sheds.…
Multiple prime design delivery system for the renovation of a physician’s private office space to accommodate MRI equipment and a “clean room” for lab analysis. Structural plans failed to account for the load presented by the MRI equipment, resulting in overstress of floor joints and deflection of walls on lower floors. “Clean Room” was not functional, as the HVAC system was undersized and generated negative air pressure. Owner claim against design team for remediation costs and lost profits due to inability to perform MRI/lab tests exceeded available design professional insurance.
Design-Build delivery system for new state-of-the-art medical diagnostic and treatment center project. Project experienced significant cost overruns and delay due to design errors in the HVAC, MEP and structural steel plans and failure to coordinate design with original owner-specified equipment. Claim amount exceeded the available design professional insurance.
Multiple prime design delivery system for a private hospital expansion project. Plans called for separate HVAC units for each hospital room, rather than a centralized HVAC system. The compartmentalized cooling system led to inconsistent humidity levels, and the development of mold in certain HVAC units due to condensation. Owner claim against the design team for property damage, remediation costs and indemnity for patient personal injury claims exceeded the available design professional insurance.
Multiple prime delivery system on a University chemistry lab and science bldg renovation and addition. During the pre-design phase, University communicated chemical use and exhaust requirements for 2 cutting edge research professors. The HVAC ductwork designed by the MEP engineer does not contain stainless steel coating and smooth connection joints, which lead to premature corrosion and a combustion hazard due to build-up of chemicals at duct connections. Entire lab is shut down for almost 1 year to perform retrofit. University asserts a claim against design team for increased construction costs, delay, re-design costs, cost for renting alternate lab facilities and the lost productivity value of the 2 professors. Asserted value of claim (less betterment) exceeded available design professional insurance.
Source: Beazley Pro, Summer 2013
A customer alleged that her HVAC contractor failed to reconnect the ventilation system in her doublewide trailer during servicing. As a result, she said, mold and mildew developed in the attic and wall cavities of the trailer.
The plaintiff’s initial demand exceeded $150,000 and included the contractor tearing out and replacing all of the trailer’s interior walls, ceilings, floors and fixtures. Beazley, which provided Contractor’s Pollution Liability Insurance for the defendant, engaged two experts who uncovered that the water intrusion and moisture that led to the mold and mildew was due in part to vulnerabilities in the exterior envelope of the trailer. The contractor’s general liability carrier initially attempted to deny any payment on the claim; later it offered a nominal contribution of $3,000. Beazley pursued the general liability insurer for contribution and eventually obtained payment of $25,000 from the general liability carrier and settled the matter for $65,000, a fraction of the initial demand.
Bringing best-in-class resources to bear early in the claims process can make a pivotal difference in claim outcome. In this case, Beazley hired an international engineering company to do a building envelope analysis that revealed early on that areas of water intrusion unrelated to any actions by the contractor could have led to mold. This information quickly diffused the plaintiff’s demands… and led to the general liability insurer agreeing to pick up substantially more of the settlement (benefiting the insured, as it fell outside the contractor’s deductible).
Facts: Insured served as the MEP for a 244 unit condo project, under 3 separate contracts. The insured was advised that condensation was forming on windows in several units. The HOA claimed damages in excess of $15,000,000.
Claim against the insured: It was alleged that the units did not receive enough fresh air from the outside, which resulted in increased humidity and condensation on the windows. Allegations that the insured’s design was not code compliant and that new air ducts should be put in every unit.
Defenses: Insured was one of 2 mechanical engineering firms who worked on the project. He was not responsible for, and did not design the residential units’ primary ventilation. Units’ ventilation complied with the code requirements. The alleged failures of the units’ ventilation could not have caused the alleged condensation or leaks, which instead were primarily attributable to defective windows and a failed curtain wall system.
Policy Limit: $3,000,000 per limit, $35,000 deductible.
Resolution: HOA settled around the insured (only design professional not named on the WRAP policy) for $7,750,000 with an assignment of claims. This increased the insured’s exposure and settlement was achieved for $280,000.
Source: http://www.lexology.com, December 1, 2012
By: William A. Ruskin, Epstein Becker Green
There is a significant risk that there will be a resurgence of mold claims and mold litigation in the wake of Hurricane Sandy. Sandy left behind thousands of homes and offices in New York and New Jersey with flood-soaked flooring and sheet rock and water-damaged carpeting and personal belongings, which are all potential sources of mold if not removed and replaced. In addition to potential mold exposure to property owners and lessees, there is the potential occupational risk to the thousands of workers in the construction trades who are working to repair damaged homes and offices.
The most likely source of mold-related claims, however, will arise over disagreement concerning the scope of work of remediation contractors, construction companies and others involved in returning storm-ravaged communities to some semblance of normality. The contractor who replaces ruined sheet rock walls or wooden flooring, for example, may not be thinking about the water-soaked floor joists that may be a breeding ground for mold. The contractor who rebuilds an HVAC system may not feel responsible for sources of mold that may be spreading via that system.
Although certain affected surfaces may appear to recovered after being submerged under storm water for days, those surfaces may in fact be a breeding ground for mold. As much as possible, a building contractor should clarify with the client in writing what responsibility, if any, the building contractor has for addressing mold conditions, particularly those conditions that may be adjacent to area of new construction.
On November 30, 2012, WNYC broadcast a highly informative program on the Leonard Lopate Show titled, “Mold: Please Explain“, which can be downloaded from WNYC’s website. The guests on the program were Monona Rossol, an expert in environmental health and industrial hygeine, and Chin Yang, a microbiologist with Prestige EnviroMicrobiology. Ms. Rossol and Mr. Chin discussed what mold is, where it comes from, how it grows, what it can do to your home and health, and how to get rid of it. The listener Q&A following the initial presentation made clear that there are widespread misperceptions about mold and how to address it.…
The world of sustainable construction is constantly evolving with the introduction of new green construction products and the rising interest in Leadership in Energy and Environmental Design (LEED)-certified projects. Approximately 20 different states have green buildings codes with a new array of “eco-friendly” products seemingly being introduced every day. As a result, we are now seeing a rapidly changing climate of professional liability for architects, engineers, and contractors surrounding new “green” exposures.
However, in reality, these green risks are actually quite similar to traditional construction or non-green construction exposures, with the exception of building information modeling. This is because most of the risks are merely examples of elevated design innovations that use new or experimental products to significantly raise expectations of “living” building benefits.
For example, a LEED-certified hospital was recently completed on time and within budget. But, after several weeks of occupancy, the administration reported numerous warm and humid spots throughout the building. An investigation then determined that the heating, ventilation, and air-conditioning systems were all undersized, resulting in a restricted flow of air to various parts of the building. Design and installation errors, not green building, were then to blame for these problems and resulting litigation.…
Source: Rockhill Environmental/NECC Newsletter
A mechanical contractor installed an HVAC system in an assisted living facility for seniors. The system was constructed improperly, which caused mold growth in a portion of the residences. The facility was forced to relocate several patients during the repair of the system, and the renovation of the moldy building materials. A claim for clean-up costs and property damage was filed.…