Environmental claims have become more prevalent in the hospitality industry and insuring against risk has become more complicated. In the past, broadly written general liability policies covered some environmental risks. Those days are gone, but the risks remain. From removing mold damage or eradicating contaminants caused by a meth lab in an extended stay room, to defending against lawsuits filed by guests alleging exposure to Legionella bacteria, cleaning solvents or fumes, hospitality organizations need sufficient environmental coverage and a strategy to mitigate these exposures.
General liability policies typically exclude pollutants defined as any “solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.” These exposures are included in environmental insurance policies, which often cover claims for bodily injury, property damage and/or cleanup costs. But reduced carrier appetite for writing these exposures has raised premiums and retentions and increased exclusions, particularly for coastal properties where environmental risks like mold are prevalent.
Environmental policies can vary substantially, with carriers restricting claims on pre-existing conditions, excluding certain exposures or requiring per-room deductibles for remediating exposures such as mold. Insurers are also increasingly capping legal defense costs or excluding coverage for third-party bodily injury.
How to mitigate the risks
With the increasing cost of and restrictions on environmental coverage, hospitality companies need to make themselves a best-in-class risk by prioritizing risk management and exposure mitigation. Here’s how:
- Develop and maintain policies for managing the biggest risks. A comprehensive chemical storage plan should follow best practices for cleaning, maintenance and disposal of chemicals like cleaning solvents and pool chemicals. Make sure plans include regular inspections and training protocols for staff. Similarly, water intrusion plans can head off mold problems — a common and costly claim. Document everything and share plans with carriers.
- Make maintenance a priority. It’s best to catch issues before they become a problem — and then a claim. One hotel’s Legionella prevention plan called for flushing toilets and running showers and faucets in every unoccupied room. It offset the risk of the bacteria growing in the chlorine-treated water in the pipes.
- Prioritize environmental mitigation during renovations. Most hotels undergo a facelift every five or six years. Use the time as an opportunity to uncover potential problems — such as mold — and make repairs.
- Put controls in place. Make sure rooms have carbon monoxide detectors and that they are regularly inspected. Schedule frequent cleaning of air ducts to maintain high indoor air quality. Install sensors to automatically shut off air conditioning when doors are left open to reduce the risk of moisture condensing to form mold.
- Contact the carrier immediately if an incident occurs. In emergency situations, such as water damage from a hurricane, hotels may want to bring in repair professionals to begin work immediately, but doing so could impact the claim. Involve insurers immediately after an environmental exposure is found and ensure companies hired to mitigate the situation are qualified and approved by the carrier.
Contact HUB International’s hospitality insurance experts to learn more about protecting your property against environmental exposures.