| The dramatic events of the last several years have | | | | rarely the case that they are truly the same. In twenty |
| had a profound impact on the insurance industry. As a | | | | years of working in this class, I have never seen two |
| naturally cyclical business, insurance has suffered the | | | | policies that offer the exact same coverage. |
| double whammy of a softening market cycle coming | | | | The recent entry of a number of admitted carriers |
| during an economic meltdown never before seen in | | | | does not help this problem. While their forms have |
| our lifetimes. Such a historic set of circumstances will | | | | been approved by the State, that does not mean they |
| leave an indelible mark on our industry. But while there | | | | are the same as each other, or for that matter, that |
| are many challenges yet to be overcome, there is | | | | they offer better coverage than that offered in the |
| certainly reason for cautious optimism; much like the | | | | Excess and Surplus market. Unlike standardized |
| American spirit, the insurance industry is infinitely | | | | commercial property and auto forms, States do |
| resilient and creative. A key beneficiary of the | | | | approve different environmental coverage forms. |
| bounce-back we expect to see can be found in | | | | Admitted does give the agent the security of the |
| environmental insurance. How it can help an agent | | | | State guarantee fund, but should not be inferred to |
| become more successful, and why agent must know | | | | mean the product is actually better in any other way. |
| about it, are topics worth considering. | | | | It is crucial that agent review and understand the |
| It can be argued that contractors are the backbone of | | | | coverage they offer their clients to be sure it is |
| our economy. Without them, things wouldn't be built or | | | | adequate for what the clients do. There are many |
| serviced, torn down or reconfigured. Clearly, the | | | | examples of forms in the market that have very |
| contracting industry has been hard hit by the economic | | | | restrictive language in them which can lead to |
| downturn. The construction trades in particular, along | | | | inadequate coverage. Agents should request |
| with infrastructure and service industries, have all seen | | | | specimens of all policies and read them carefully |
| record decreases. Since the majority of insurance is | | | | before presenting terms to clients. |
| based on either payroll or revenues, while these | | | | Once coverage is understood, the next hurdle is the |
| industries have contracted, so have many insurance | | | | carrier itself. The wide range of companies, new and |
| agencies' revenues. | | | | old, requires the agent to make choices for the client. |
| We are begging to see a slow reversal of the steady | | | | There are several key elements that should be |
| decline of the last several years. Over the first four | | | | considered. First is the overall rating of the carrier |
| months of 2010, we have witnessed a noticeable | | | | offering coverage. In today's volatile world, the better |
| stabilization in our contractor clients. Where we had | | | | the A.M. Best rating, the better off an agent will be in |
| seen annual double digit narrowing over the last two | | | | the long run. In addition to the Best rating, it is also very |
| years, most renewals are now coming in slightly off, or | | | | important to choose carriers that have made a |
| flat, and in some cases, projecting some growth for | | | | commitment to work with environmental risks. This |
| 2010 into 2011. We are still seeing some contractors | | | | means those companies that have in-house |
| going out of business, but it seems that the ones who | | | | environmental claims staffs as well as significant |
| were going to fall already have. | | | | environmental underwriting departments. |
| In addition to the slow recovery from the abyss of | | | | It also helps to work with carriers that offer supporting |
| 2009, we are seeing growth in our business fueled by | | | | lines of coverage. You may be looking for Contractors |
| a growing national awareness of environmental | | | | Pollution Liability for your street and road contractor, |
| exposures. Even discounting the terrible situation in the | | | | but the ability to add premises pollution coverage for |
| Gulf, awareness of environmental issues has grown | | | | their yard could dramatically enhance your proposal, |
| dramatically in the last few years. Starting with | | | | and their coverage. Many of the top carriers offer a |
| sophisticated commercial customers and lenders, and | | | | full suite of coverages, and this gives you the ability to |
| spreading to most facets of the construction industry, | | | | round out the offering to your client, while also being a |
| contractors are being required to prove their ability to | | | | testament to their commitment to the line of business. |
| address environmental problems that occur on job | | | | An additional benefit of the growing environmental |
| sites. | | | | marketplace is the range of products available, as well |
| This growing awareness has come from several | | | | as the appetite for offering coverage. The top-tier |
| different directions. The first can be found in the media. | | | | carriers are all open to providing pollution coverage to |
| Chinese drywall, toxic mold, silicosis, fires at treatment | | | | a wide range of contractor types. A few years ago |
| sites, and lawsuits against land developers have all | | | | residential contractors had trouble getting pollution |
| brought environmental issues to the forefront. The | | | | coverage that would include Mold. That has changed, |
| tragedy in the Gulf will only continue to heighten that | | | | so that now most companies are willing to cover |
| concern to levels never seen before. The potential for | | | | those risks. This increased appetite has made it |
| a significant environmental event impacting a business | | | | possible to cover this environmental exposure of most |
| or property is no longer perceived of as a long shot. | | | | all contractors. |
| Now many people recognize the ramifications can be | | | | In addition to a wider appetite, the current market is |
| significant, and it is important for everyone who could | | | | trending toward providing broader coverage than what |
| potentially impact a property is properly covered in the | | | | was available only a few years ago. Many carriers are |
| event they do. | | | | offering defense outside the limits with a cap, blanket |
| Taking that heightened consciousness to a new level | | | | additional insured where contractually required, and |
| will be an increase in awareness of what might be a | | | | limited site coverage. In addition, many of these carriers |
| "pollution" problem that was not expected to be one. A | | | | are willing to work with their agents to broaden |
| perfect example of this comes from the many recent | | | | coverage further. It is important to recognize that much |
| losses stemming from erosion and sediment runoff at | | | | of this coverage is negotiated, and "off-the-shelf" |
| job sites. There have been a number of well publicized | | | | products are seldom the best deal you can get for |
| six and even seven figure losses stemming from this | | | | your client. Educating yourself as to what may be |
| problem that were treated as pollution claims and | | | | available is an important part of working with |
| declined by standard GL insurers. Recognizing how | | | | environmental products. |
| broad the standard definition of a pollutant is, and also | | | | One such enhanced coverage for contractors is |
| the very limited coverage provided by the ISO CGL | | | | Contractors Pollution Liability with Professional |
| form has lead to requirements for separate, identifiable | | | | coverage including Mold. Very few carriers offer this |
| pollution coverage. | | | | coverage with Mold in both coverage parts. The |
| Another impetus for coverage has come from the | | | | Professional coverage is significant for a number of |
| well-publicized understanding that coverage is available | | | | reasons. Most CPL policies exclude Professional, which |
| and affordable, now more than ever. In the late eighties | | | | therefore eliminates coverage for supervision of |
| and early nineties pollution coverage was something of | | | | subcontractors. If a sub causes a pollution problem, and |
| a mystery. Now it is a well known, although not terribly | | | | the suit alleges that the insured failed in their obligation |
| well understood, product. Knowing that clients can | | | | to properly supervise that sub, professional coverage |
| afford to buy coverage, and that there are many | | | | would come into play. Contractors also often make |
| venues for it, has lead to an increase in requirements | | | | modifications on the job to plan items. A duct might get |
| for it. | | | | moved, and the resulting re-routing might lead to a |
| The final driver for contractors to seek coverage | | | | mold problem. Again if that claim comes in as |
| comes from new regulations. An example is the new | | | | Professional, this coverage enhancement would |
| EPA regulation regarding lead paint. Effective April 22, | | | | suddenly be very important. |
| 2010, the EPA began requiring all contractors | | | | The final area that we believe bodes well for the |
| performing renovation, repair and painting projects that | | | | environmental insurance industry is green technology |
| disturb lead-based paint in homes, child care facilities, | | | | firms. This market segment has boomed in the last |
| and schools built before 1978 be certified and must | | | | year, and with current events such as they are, the |
| follow specific work practices to prevent lead | | | | expectation is that significant growth will continue for |
| contamination. Contractors have to be trained and be | | | | the foreseeable future. Many green tech firms are |
| certified to evidence it. The regulation goes further, | | | | seen as excellent prospects by environmental |
| requiring any removal of possible lead containing | | | | insurance carriers, who are willing to provide a full |
| material be done by properly trained lead abatement | | | | range of coverages for them. While many of these |
| professionals. All of this brings environmental concerns | | | | firms are true contractors with a green tech focus, |
| to a huge number of contractors, and their clients, | | | | they are perceived as good risks due to the |
| across the country. | | | | sophistication of the work they often do. The |
| A gradually increasing demand for these products is | | | | enhanced training leads to a better paid, generally |
| expected to continue. Complicating matters somewhat | | | | better trained workforce, which historically has led to a |
| is the dramatic increase in the number of carriers and | | | | better risk for the insurance carrier. |
| programs offering environmental coverage. Where | | | | While the market is still very soft, and the overall |
| there were ten to fifteen companies willing to write | | | | economic fragility continues to keep companies in a |
| pollution-related coverages ten years ago, there are | | | | very conservative posture, there is reason to believe |
| now close to forty today. While more may seem like a | | | | that times are getting better. Finding additional |
| good thing, this comes with real risks for the agent. | | | | coverage that enhances a contractor's ability to |
| Environmental insurance is a unique class of business, | | | | compete and function effectively in the marketplace is |
| with every carrier offering coverage in its own way. | | | | a perfect way for agencies to not only serve their |
| While there are a plethora of products labeled | | | | clients better, but to increase their revenue as well. In |
| "Contractors Pollution Liability, or "CPL", they are each | | | | the changing marketplace, opportunities abound for the |
| unique to the carrier providing them. Companies may | | | | agent who wants to develop an understanding of this |
| offer forms that appear on the surface to be the | | | | complex but valuable coverage. |
| same as others an agent might have seen, but it is | | | | |