FEI helps agents recognize environmental
exposures for Main Street businesses
By Len Strazewski
Michael J. Hill, CPCU, is president of Freberg Environmental, Inc., in Denver, Colorado. Danelle R. Nielsen, CIC, is vice president.
"Most independent agents don't realize that almost any business can have some sort of environmental liability exposure."
--Michael Hill, President, Freberg Environmental, Inc.
Small business risks can be the bread and butter business of many independent agents, but don't take them for granted. Many ordinary-appearing small businesses can harbor complicated and unexpected exposures, says Michael J. Hill, CPCU, president of Freberg Environmental, Inc. (FEI), in Denver, Colorado.
"Most independent agents don't realize that almost any business can have some sort of environmental liability exposure. Dry cleaners, gas stations, mini-storage facilities--they all seem to be simple Main Street businesses that can be handled with package policies," he says. "But actually all of them have environmental exposures that could require special risk analysis, loss control and liability coverage," notes Hill, a veteran of more than 20 years of environmental insurance product underwriting with FEI and other insurers and reinsurers.
Hill co-founded FEI, an insurance program manager specializing in thedevelopment of national environmental insurance programs, in 1991. The agency underwrites programs for Gulf Insurance Group and Lloyd's of London. The firm has 25 employees and supports a 50-state network of about 600 independent agents. Products include hazardous waste transportation liability insurance for transportation companies, environmental protection liability, pollution legal liability, comprehensive general liability insurance, contractors pollution liability insurance and professional liability for environmental consultants and engineers. Limits of up to $15 million are available.
Hill says many agents make the mistake of overlooking the environmental risks faced by Main Street businesses. "Until they get a hazardous waste hauler or an environmental engineer as a client, they don't really spend time investigating the wide range of environmental risks that can impact their clients. And their clients are unlikely to call their attention to these exposures. Most of their clients don't recognize the risks, either.
"Not only is this unfortunate for their clients who may be at risk, but also for the agent who could be at risk for an errors and omission exposure if a serious claim goes uncovered," he says.
So what kind of risk does a little neighborhood dry cleaner pose? Think about the chemicals that dry cleaners with a plant on premises use to get out those grease stains. "It's probably not a huge risk, but the chemicals used by dry cleaners can be very difficult to get out of the environment if they get introduced in a disposal accident; and communities are becoming particularly sensitive to hazardous wastes in their areas," he says.
Gas stations are a little more obvious in their environmental risks. Most have underground storage tanks for gasoline and facilities for disposal of used oil and other automotive fluids. Environmental protection liability insurance and storage tank liability insurance is standard for automobile service stations, but Hill says agents should be aware of potential ancillary risks and loss control needs for their clients as well as standard forms.
Mini-storage facilities can harbor virtually any kind of materials--despite restrictions that owners try to enforce on users--and site security could be a concern for both owners and environmental liability insurance underwriters.
Even a neighborhood hair salon can be an environmental hazard if bleaching, dyeing and styling chemicals are not properly stored, used and disposed of in safe ways, Hill says.
"Agents need to add environmental risks to their standard risk and insurance application check lists to make sure they are acknowledging the potential for environmental risks," Hill says. "If they encounter something they don't understand, they need to be able to access the expertise to analyze the nature of these risks and the need for additional or specialized coverage."
Hill says agents need to be particularly careful during the current hard market. Several insurers have dropped out of the environmental liability insurance market, and rates have increased an average of 10% to 20% over last year. Some small firms are receiving premium increases of 35% to as much as 120% as insurers tighten underwriting standards and demand better loss control.
Danelle R. Nielsen, CIC, co-founder and vice president, agrees. Nielsen has more than 15 years of environmental insurance experience and holds an M.S. in environmental policy and management from the University of Denver. She specializes in some of the most complicated environmental exposures, including asbestos abatement, lead-based paint contractor exposure, treatment, storage and disposal facilities and storage tanks.
Nielsen says that while small businesses may have some unexpected environmental exposures, they rarely require the company's extensive loss control experience. However, they do demand some sensitivity from the independent agents that provide the key point of contact.
"We are not going to get a lot of calls from our agents about loss control for a small dry cleaner or a small trucking company, but we do get a lot of questions about how to identify risks and choose appropriate coverage," she says. "And considering almost everything can pose some limited environmental risk ... the process isn't as easy as it might seem."
Nielsen says that hazardous waste transports and environmental consultants and contractors pose some of the biggest and most complicated liability risks. To simplify the coverage process for these clients, FEI has
published two manuals with accompanying CD-ROMs that are designed to help agents and clients work with some of the more sophisticated environmental exposures.
Recognizing & Managing Carrier Security: A Handbook for Hazardous Waste Transports, published late last year, outlines a comprehensive security system for waste haulers, beginning with personnel security and employee screening and through route and site security. The manual also provides checklists that carriers can use to list commodity chemicals and rank their relative hazards.
Understanding & Managing Risk: A Handbook for Environmental Consultants and Contractors, published in 2000, is a comprehensive business manual for consultants and contractors that outlines marketing guidelines, proposal preparation, subcontracting and other business activities that could increase professional liability. The manual also provides tips on maintaining health and safety and includes sample forms and questionnaires.
FEI also maintains a library of policy forms, a technical glossary and other useful information for agents on its Web site (www.feiinsurance.com).
Nielsen says contractors pose some of the more complicated challenges for the firm and its loss control resources. Since contractors engage in a variety of interactions with their clients in a number of different environments, they have a broad potential for professional liability that can be reduced by effective risk management.
Nielsen also notes that the manuals not only answer many of the risk questions for clients, they also provide a marketing opportunity for agents and a chance for agents to provide some risk management value directly to the clients.
Hill agrees. Agents who can demon-strate some expertise in environmental risks can more effectively compete with larger brokers.
"Marsh, Aon and the large, national brokerage firms all have environmental consulting expertise as part of their risk management consulting operations and market their capabilities to large companies. If an agent can develop some experience in this area and take advantage of our expertise, they have a tremendous opportunity to compete at a higher level," he says.
Tom Stewart, president of Tom Stewart Insurance in Houston, Texas, has worked with FEI for more than five years to provide environmental coverages for its client companies with potential pollution risks. Though the agency has provided coverage for some small, site-specific risks, including companies with autoclave and incinerator operations, many of his clients are small transportation companies with auto liability needs and special biohazard exposures, including chemical spills, cleanup costs and pollution liability.
"It's not like dealing with a small, on-site environmental risk like a dry cleaner or a service station," he explains. "These businesses deal with hazardous cargoes that can change frequently and transportation routes that can carry them through highly populated areas. Coverage needs to be flexible and inconclusive because we are always dealing with the unexpected.
"FEI has been very responsive to our needs for this rather complicated coverage, but we particularly like that they work with admitted markets. Many of the carriers willing to write environmental coverages do so on a surplus lines basis which provides less security for our clients," he says.
Stewart is also working with FEI to develop a package of environmental coverages for golf courses, which, he says, have some unusual and possibly uncovered exposures.
"Most golf courses have a water hazard which can be the target for a wide range of pollution exposures," he explains. In addition to course maintenance chemicals, fertilizers and vehicles, course users can introduce an element of the unexpected to the risk mix.
"It's not just a question of a few golf balls hit into a water trap. I've seen all sorts of things wind up there--including a whole golf cart," he says. *
For more information
Web site: www.feiinsurance.com