Posted on 25 Feb 2013 by Neilson
As contractors continue to rebuild properties damaged by Hurricane Sandy, insurers could see a spike in environmental claims stemming from mold, said Dan Gmelin, the head of the asbestos and environmental product line for Hiscox USA.
"It's still early to see mold claims surfacing, but the mold claims will eventually roll in," Gmelin said. "Contractors who don't have any mold coverage in their policies are going to be left out."
Still, worries of mold are helping to drive the demand for contractors to buy professional liability insurance.
In the aftermath of any major event, underwriters see an influx of new business, Gmelin said. "We've seen a lot of submissions from contractors and plumbers in the Northeast," since Sandy, he said.
Contractors rebuilding properties damaged by mold may find their schedule pushed back due to the unexpected presence of mold. This could trigger claims from unhappy customers, Gmelin said.
Contractors have traditionally purchased general liability coverage, but in the past three to four years, have also been buying professional liability insurance to cover any gaps, including for mold, he said.
"You can see a lack of coverage if only general liability is in place," Gmelin said. "Often, construction delay and cost overruns are excluded from GL, so you can see a denial of coverage issued by a GL carrier if the work is delayed due to mold," he said.
Typical limits for contractors' professional liability run from a low of $500,000 to a high of $5 million, with $1 million being the most common, Gmelin said. Policies can include both a per occurrence limit and an annual aggregate limit.
A typical premium for a $1 million limit is about $5,000.
Despite the increased demand, prices have remained steady to up slightly in some areas, Gmelin said.
In November, John Beauchamp of Beazley Group said Sandy's devastation not only leveled homes and businesses, it also paved the way for environmental risks. He said the storm highlights the need for commercial environmental risk coverage.