Filed Under:Claims, Catastrophe & Restoration

A Volatile Climate

Beyond Traditional Environmental Forensic Claims

The tiny pinhole in the pipe elbow probably took more than 20 years to form and cause a leak, a day or two to be discovered, and less than an hour to be repaired. This recent claim involving the corrosion of a pipe elbow on a home heating oil tank resulted in the minor release of a few gallons of heating oil into the surrounding surface soil. The insured acted appropriately, and the release was quickly investigated and repaired. Based on the size of the tank and the volume of the release, state regulations did not apply; however, local regulators quickly became concerned about the potential impact to shallow groundwater in the area.

Although the shallow aquifer was not considered a source of drinking water, it was used extensively for irrigation purposes. Furthermore, the property owner soon noticed petroleum-like odors inside the home and office, necessitating relocation for a couple of days. A few weeks after the repair of the leak, the situation was completely resolved with the excavation and removal of impacted soil from beneath a patio and a portion of the building adjoining the point of release. Fortunately, specialists were able to not only discover but also remedy the release quickly. Moreover, the volume of the spill was not sufficient to impact groundwater, which could have easily transported contaminants and associated vapors well beyond the boundaries of the insured’s property.

This type of loss is a fairly typical example of a residential environmental claim. Years ago, this claim may have been settled simply as a mechanical issue, with much less focus on the longer-term environmental considerations, regulatory impact, and vapor intrusion into the home. Recently, the complicating factors to these claims have been growing. Therefore, the methods employed to handle environmental cases continue to progress. By the nature of this type of work, environmental issues frequently evolve because of the regulatory climate, technological advances, litigation, and cost considerations.

Four Trends to Consider

To address these changes, insurers enlist the expertise of forensic consultants in crafting these strategies:

  • Crossover services. As noted in the aforementioned project, often claims that begin as standard forensic engineering investigations routinely incorporate an environmental component, such as soil and groundwater hazards, and indoor air quality issues, along with asbestos and mold concerns.
  • Cost-reduction strategies. Not surprisingly, there has been an increased focus on controlling expenditures. The insurer’s handling of the claim, the role of forensic consultants, and leveraging of technology are all areas subject to cost-control measures.
  • Application of technology. New technology is not only used to reduce expenses, but is also crucial in expediting claim resolution while improving the quality of an investigation and the speed of delivering information.
  • Third-party claims. Innovative developments in the energy production sector and previously dismissed issues in the environmental cleanup industry have resurfaced and have produced third party claim concerns that were previously uncommon. These include vapor intrusion into occupied buildings from volatile chemicals associated with new and historical releases impacting soil and groundwater, and pollution concerns regarding the use of hydraulic fracturing techniques in the production of domestic natural gas.

Under the Microscope

Over the past several years, specialized consulting services and diagnostic testing equipment have become imperative in the disposition of forensic engineering and fire claims. Unforeseen consequences of accidents, failures, and oversights often include impacts to the environment as well as human health. Forensic engineering firms are well aware of these issues and their changing complexities. Firms typically develop multidisciplinary teams of environmental consultants to support cases. These teams may include environmental scientists, geologists, microbiologists, chemists, building scientists, and indoor air quality specialists. Team members are trained to work alongside the forensic engineers and fire investigators to provide diverse consulting services, such as historical document reviews, desktop soil and groundwater evaluations, regulatory reviews, indoor air quality testing, and water penetration testing, as well as determinations regarding asbestos and lead-based paint. While supplemental services are not required on every project, each of these services can play a vital role in defining and understanding the risks associated with a given claim, as well as the value of an appropriate remedy.

Perhaps the most effective application of both traditional and multidisciplinary support resources working together is as a follow-up to emergency response. After an emergency is abated and emotions are calm, a rational and cohesive approach to addressing both the cause of the emergency and the most cost-effective, practical course of action for both the insurer and the insured may be developed. For example, the immediate goal of the fire fighter’s response to a small kitchen fire is to save lives, extinguish the fire, and ensure that it stays out. Incidental water infiltration into other adjacent areas of the building is a collateral issue that will result in fungal growth within 24 to 48 hours, spurring its own set of concerns.

Building materials containing asbestos along with volatile and semi-volatile organics and particulates associated with incomplete combustion may also remain, posing a real or perceived threat to occupants during the cleanup and restoration phase. While this may appear to be a fire loss requiring origin and cause investigation, the insurer would clearly be best served by having access to a multidisciplinary team of experienced engineering and environmental consultants working on its behalf to fully define, understand, and address risks in an appropriate and defensible manner.

Minimizing Expenditures

There are many strategies currently employed to lower the cost of claims processing. One primary strategy for insurers has been to use a clearinghouse approach to handle environmental claims by funneling them through environmental centers. These centers are staffed with adjusters possessing specialized environmental experience and knowledge. As mentioned above, consulting firms often form varied teams and appoint a single representative to meet the specific needs of the case on behalf of the insurer. Forensic consulting services may range from a routine desktop review by a single consultant to a comprehensive third-party review and extensive data verification involving several individuals. These practices should help better define and evaluate the risks, correctly focus the investigation, and reduce the amount of time spent dealing with the issue overall.

Often, a brief desktop review of readily available information supplied by the engineer or claims adjuster can help insurers understand the risks and evaluate the appropriateness of a remedy at a reasonable cost. As an example, let’s consider this scenario: Following emergency response activities addressing the release of 100 gallons of diesel fuel from an aboveground storage tank at a remote construction site, the remediation contractor excavated 25 yards of impacted soil. The soil samples that were obtained and tested from the excavation indicated that elevated concentrations of diesel were still present at depths of 1 to 2 feet. Consequently, the contractor proposed additional limited excavation in the impacted areas with subsequent retesting.

In this case, a desktop review of the available site photographs; testing data; regulatory cleanup levels; and local soil profile, topography, and geology—in addition to telephone interviews with the on-site contractor and regulatory authority—would likely yield ample information to evaluate the contractor’s recommendation and supply the insurer with adequate oversight affordably. Of course, even this simple scenario has several variables and cannot be universally applied. The type and quantity of material released, local soil, and groundwater conditions; the absence or presence of nearby sensitive receptors; concurrent health and safety issues; local environmental regulations; or the likelihood of litigation could warrant another approach and greater consultant involvement.

Time-Saving Technologies

It should be noted that the use of time-saving technologies, such as ground-penetrating radar, infrared thermography, high-resolution aerial photography, and wireless access to remote databases and other information can provide answers quickly, especially when used in conjunction with short form reports and Web-based report delivery methods. For example, water intrusion evaluations can be expedited with the assistance of an infrared camera. A trained operator can therefore quickly (and relatively easily) identify areas of moisture, a determination that would have traditionally required detailed and time-consuming moisture mapping techniques and even destructive testing.

In less than half of the time, however, areas of moisture can be imaged, mapped, and confirmed with moisture-specific measurements. Select infrared cameras are capable of receiving data from moisture meters and other field devices via Bluetooth. Moisture measurements can then be sent to the infrared camera for inclusion on their respective thermal images. This information can be processed into a usable report, and often delivered the same day using a mobile device with WiFi.

Unwelcome Intruders

Third-party claims and environmental issues go hand-in-hand. Two developing areas of potential exposure to third-party claims are vapor intrusion in buildings and hydraulic fracturing in natural gas production. Gaseous emissions of volatile chemicals from contaminated soil and groundwater can migrate into overlying buildings. These vapor emissions tend to move towards areas of lower chemical concentrations by diffusion and lower pressures by advection. Pressures inside buildings are influenced by changes in atmospheric pressure, wind flowing over and around the building, internal and external temperature changes, and building ventilation equipment. These differences in pressure within a building draw vapors inside through basement or foundation cracks and other areas of possible penetration, creating a potential health hazard to occupants. Although soil and groundwater pollution cases were regarded as a minor environmental concern for years, regulatory agencies throughout the country have now reopened closed cases to re-evaluate them for current on and off-site risks associated with vapor intrusion.

While some believe that the risks are often exaggerated, the threat of serious health concerns to occupants is now considered very real. Further, the perception of risk can be a powerful force. As a result, vapor intrusion is now fertile ground for lawsuits involving those parties responsible for both new and historical contamination, commercial building owners, construction contractors, and others. 

In the late 1940s, hydraulic fracturing was first used to enhance gas production in rock formations. Recently, techniques have changed drastically and created an exploration “boom” in the Northeast and in areas of Texas. Using this process, a company may drill a well that is several thousand feet deep and then turn horizontally through a shale formation for a great distance. Drillers pump millions of gallons of water under high pressure to fracture the shale and release trapped gas.

One key concern is the fact that the water is mixed with sand and chemicals, some known carcinogens, which could impact surrounding property and water supplies. In addition, the infiltration/migration of natural gas into drinking water is also being investigated. The impacts on adjacent property and water supplies are currently being evaluated, and litigation is forcing more transparency and innovation in the process. The success in production and the extent to which the method is used will continue to increase claims activity and will evolve greatly over the next several years.

A Changing Landscape

The need for environmental consulting services requiring specialized training and consulting expertise has steadily increased in response to regulatory changes, public awareness, and litigation. As an outgrowth of traditional forensic investigations, environmental issues often arise and typically require quick, cost-effective resolution. The strategic use of multidisciplinary teams and the application of technologies that enhance reporting quality and speed are imperative.

Public awareness of environmental issues continues to grow, increasing the likelihood of third-party claims. Forensic engineering firms are responding to these trends by expanding their environmental capabilities to immediately define current and emerging risks so insurers can in turn handle these claims appropriately on behalf of their policyholders.

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