Second-Hand Smoke: Next Black Lung?

The best thing about underwriting is that there is always a newrisk to consider and analyze. The worst thing about underwriting isthat there are always new loss sources that cause your loss ratioto elevate when the plan for it is to decline.

One of the latest new loss sources has the potential to assaultboth your general liability and workers' compensation results. Theexposure makes every day a new offense, causing the coveragetriggers to fire endless occurrence dates.

The source? Second-hand smoke, also known as “passive smoke,”“environmental tobacco smoke” and “toxic tobacco smoke.”

There is overwhelming evidence that second-hand smoke (SHS)causes lung cancer and heart disease, as well as asthma attacks.The U.S. Environmental Protection Agency states that SHS is a“known cause” of lung cancer in humans and has classified it as aGroup A carcinogen. EPA attributes an estimated 3,000 deaths in theUnited States from lung cancer and 35,000 from heart disease to theeffects of SHS.

Why is this important to insurers, agents and risk managers?Because it could raise loss costs and premiums for the affectedcoverages.

Although working in a smoke-filled environment is voluntary,work is not when you have bills to pay. Jobs are hard to find, anda person is sometimes limited as to where they can work because oftheir education or competence. They have the right to a risk-freeworkplace and could sue if harmed on the job by exposure tosecond-hand smoke.

Could SHS ever be viewed the same way as black lung disease inthe coal mining industry? Those employees voluntarily worked forthe coal mines, too.

More and more state and local governments are moving to addressthe problem. The Connecticut Senate, for example, recently passed abill (103-43) designed to “protect workers and customers from thedangers of second-hand smoke.” This smoking ban expands to prohibitsmoking in the workplace with five or more employees.

However, many areas have no such legal protections, leaving itup to employers to set the rules. If smoking is allowed, potentialliability follows. People are being hurt by controllable conditionsand thats where lawsuits begin. The responsibility for preventionis placed on the business allowing harm to occur.

Even customers could theoretically sue. Clearly a patron has achoice whether to go to an establishment that allows smoking, butwhat if there is not sufficient ventilation? What keeps someonefrom claiming they have been harmed and their right to fresh andpure air violated because they can smell the smoke across theroom?

The insured is responsible for the operation of their business,as well as the safety of their employees and patrons, and every dayof second-hand smoke exposure is considered a new occurrence. CGLpolicies could be hard hit if such suits become a trend.

This is not a hard exposure to authenticate. Cotinine is a majormetabolite of nicotine. The exposure to nicotine can be measured bythe amount of cotinine in the blood, saliva or urine. It is veryspecific to tobacco smoke. That means the measurement of the injuryis as clear as the measurement of other toxins for industrialhygiene exposures. It can be traced back to the place oforigin.

At immediate risk are taverns, casinos, restaurants, social andfraternal organizations, religious groups–indeed, any operationthat allows smoking in the workplace. Can you imagine having toevaluate the industrial hygiene exposure of a tavern?

At risk are the employer liability limits of the workers' compcontract because employees might claim that the employer (theinsured) has caused an unsafe workplace by allowing smoking.

Also at risk are your general liability limits, as patrons suefor exposure to measurable levels of carcinogens when they visitedthe insured establishment. And since there is no foreseeable limitto the occurrence triggers, the legal defense will be anightmare.

Immediate controls could be (but are not limited to) inspectionof location to include information on these practices, a $10,000 to$25,000 deductible, declination of operations that allow workplacesmoking, and partnering with agents to make changes towards thispractice.

The deductible will take care of the nuisance claims, which areto be expected. Developing a “smoke-free” workplace insuranceprogram is not only good public relations, but also eliminates thisrisk. A smoke-free credit could be offered to encourage smokingrestrictions, or a surcharge added for those allowing smoking.

Studies have shown that employees who work in a smoke-filledenvironment suffer higher absenteeism and lower productivity, whilesuch firms experience increasing health insurance rates andliability claims. Given that reality, you would think insuredswould recognize the overall value of changing their policies toassure a safer, lawsuit-proof workplace. Try to sell it this way toyour clients and reform might happen.

Since SHS is not yet considered unlawful in most areas, theremay be coverage. Perhaps we should all lobby to eliminate theexposure in the first place.

Barbara Reardon, a freelance writer, has 28 years ofexperience as an underwriter and trainer. She may be reached [email protected].

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, June 30, 2003.Copyright 2003 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.