Even now, weeks after Hurricane Sandy battered much of the East Coast of the United States, the storm is causing damage to some of the hardest hit areas in New York and New Jersey. As John Beauchamp of Beazley Group points out, Sandy's devastation not only leveled homes and businesses, it also paved the way for environmental risks that could be felt long after the region returns to a semblance of its former self.
Beauchamp, who leads Beazley's environmental underwriting business, said the hurricane's environmental risks are varied and likely to affect areas that businesses often don't consider.
Beazley said damaged fuel and chemical facilities across the Northeast have reported major spills that could leave them open to litigation. Widespread flooding caused by Sandy, which overwhelmed sewer systems, is likely to spread bacterial infections across the Northeast. And where there is flooding, there's also the risk of mold that can shutter businesses for weeks or even months.
"We're not downplaying the loss of life and property caused by Sandy," Beauchamp said. "But Sandy has also brought attention to environmental risks that can remain a problem for a long time after the initial cleanup is finished. Once things dry out, people are going to see that there are a lot of liability areas that are going to have to be addressed going forward."
Beauchamp said the U.S. Environmental Protection Agency has received reports of more than 400 environmental incidents and that more are likely to come to light.
One reported incident involved an oil spill in Woodbridge, N.J. that occurred after Sandy ruptured a large storage tank holding diesel fuel. The ruptured tank poured some 336,000 gallons of fuel into the Arthur Kill, the waterway separating New Jersey from New York's Staten Island.
"The environmental risks are substantial on this," Beauchamp said. "As businesses look at these kinds of spills they need to be asking themselves whether they have sufficient coverage to address their exposure to risk."
Beauchamp said he and his team have been working to educate businesses about some of the protections offered by environmental insurance. Many environmental products cover things like mold and pollution legal liability, he said.
At this stage, Beauchamp said his role is to work with clients to ensure they have enough coverage and that there aren't any unaccounted for gaps. "We saw this after Hurricane Katrina. The demand for environmental insurance goes up exponentially," Beauchamp said. "People often don't realize an entire market has been developed to handle these risks. We want to show our clients that you can prepare for these types of events in a lot of different ways."
Even outside of Hurricane Sandy, environmental insurance has been in the spotlight recently as the public increasingly focuses its attention on risks associated with the rise of the hydrocarbon-extraction technology known as hydrofracturing.
As Best's News Service reported earlier this year, the process of hydrofracturing, or fracking as it's commonly known, often involves creating site-specific corporations for the drilling operations that are dissolved after operations are completed. As those corporations pull out of an area homeowners with indemnity agreements may be left holding the bag for environmental harm because they own the property (and subsurface rights) and leased access to the firms that caused the harm at issue.
While environmental insurance products have been developed the last 20 years to address commercial risks, there is no widely marketed product , if one exists at all, to address a homeowner's risks that may arise as a consequence of fracking operations on or beneath residential properties.