One of the few growth areas of the economy is the eldercareindustry. Driven by the rapidly expanding senior population in theUnited States, profit and nonprofit eldercare organizations areracing to keep up with the demand for new or expanded nursinghomes, assisted and independent living facilities, adult daycareand dementia centers, and rehabilitation centers.

Among the thousands of insurance professionals across thecountry providing insurance programs covering the unique risks ofthese organizations and their operations, few have recognized thepotential financial impact to their eldercare facility clients offailing to insure pollution risk and exposures.

Although there are several reasons for this oversight, the mostcommon is simply failing to recognize pollution as a riskmanagement issue to eldercare facilities. Pollution risk istraditionally perceived as a problem faced by industrial companiesthat use or generate hazardous materials that could contaminatesoil and water resources, and potentially injure surroundingpopulations. But eldercare facilities can present an even greaterrisk and loss exposure to their owners than a manufacturing plant,refinery or waste disposal site that is closely monitored through aloss control program.

Eldercare facilities face some of the most dangerous pollutionrisks of any industry. Their environmental risk profile is muchhigher because of their full-time occupancy of a fragilepopulation, which completely changes all the rules that apply toother commercial facilities. The compromised health conditions ofthe residents that live in these facilities creates a "hot zone"where a pollution condition could result in serious injury ordeath.

To most of the population, pollution conditions such as mold,bacterial outbreaks and viral contamination are little more than anannoyance whereas they are potentially devastating to elderlyresidents. If these conditions result from facility based causessuch as Legionnaires disease outbreaks from HVAC systems, moldconditions or improper handling of medical waste, the organizationin question could potentially face catastrophic exposure tosubstantial bodily injury claims including the much feared classaction lawsuit.

In a less dramatic but equally expensive fashion, the fragileresident population could also be physically impacted by conditionsnot often thought of as pollution: fumes from freshly appliedpaint, petroleum-based materials in carpeting and furnishings, andproperly applied pesticides and herbicides. Outside air pollutionsources, such as industrial and vehicle emissions from loadingdocks, Dumpsters, unsanitary debris or building exhausts near airintakes all present serious everyday risks to these residents.

An intangible but important factor that should be consideredwhen assessing the eldercare pollution risk is the greaterawareness of environmental issues by newer generations. Babyboomers and their families have experienced the evolution ofenvironmental issues from Superfund, the EXXON Valdez oil spill,asbestos litigation, toxic mold and even anthrax attacks. Becauseof these events, they understand there is legal recourse if theyare affected by pollution incidents.

Raising awareness of environmental risk
The understanding of environmental risk and insurance has continuedto evolve among a growing variety of industry sectors as riskmanagers and administrators become more aware of the risk factorsthat could affect their organizations. Over the past couple ofyears, a significant part of this awareness includes the fact thatthe absolute pollution exclusion contained throughout theirinsurance program took away any chance of recovering financiallosses caused by environmental incidents.

One industry that really understands the benefits ofenvironmental insurance as a risk management tool is real estate.Owners of every type of commercial and large residential propertyhave recognized that their exposure to environmental loss, withparticular emphasis on indoor air pollution incidents, has producedlarge judgments and legal expense arising from alleged or realinjury and even death to individuals working, visiting and livingin their facilities. From an insurance perspective, the criticallesson this industry learned is that claims resulting from theindoor environment are as much a pollution incident as a leakingoil tank or chemical spill.

Agents are challenged to place an environmental insurance policyfor any type of client by making certain an eldercare organizationhas proper coverage proves much more difficult. Environmentalinsurers will consider insuring pollution risks involving mostindustry sectors, but when faced with providing coverage foreldercare facilities, they generally take a very conservativeunderwriting approach. In view of the magnified risk factors, thesepolicy proposals can be severely limited as to the types ofpollution conditions that are covered, with bacterial, mold andviral contamination often, if not always, excluded.

High deductibles and premium cost can also occur withendorsements limiting or eliminating critical coverage such asfirst party clean-up of pollution conditions and businessinterruption. The agent with an eldercare facility client shouldrely on a specialty broker who is not only knowledgeable inenvironmental risk but able to specifically accommodate the uniquechallenges of this industry.

The conversation an insurance agent never wants to have with aclient is one that informs them that there is no coverage availableto cover the claim they have just filed or for the damage to theirfacility. Pollution-based incidents are one of the most commontopics of those conversations and being unprepared without theappropriate environmental coverage could be both the client's andagent's worst nightmare.

A common example is when the discovery of a serious moldcondition causes the insured to face a big clean-up and some bodilyinjury allegations. The coverage questions will confront the agentin rapid-fire style: Is there a mold exclusion? Does the propertypolicy pay for cleaning up mold? Is there coverage for repairingbuilding damage caused by the mold cleanup? Is mold actuallypollution? The answers will vary from policy to policy, adjuster toadjuster and perhaps lawyer to lawyer but one thing remainsconstant: Clients want their insurance professional to make certainthe claim is paid.

Introducing environmental risk and insurance to a client isdifficult for most agents simply because they don't know that muchabout it. The easiest way for the agent to assess the pollutionrisk of their eldercare account is to explore with the client thetypes of incidents that could occur at the facility that would bedefined as pollution. A simple guideline to follow is thatpollution takes place when the release of a manmade and/or organicmaterial into a structure, soil, air or water causes harm to humansor the environment. Once everyone at the table concurs as to whatpollution is or is not, then informed decisions can be made onwhether to obtain insurance. Without this process, the agent couldsomeday be locked in an uncomfortable situation with his or herclient.

When an agent discusses this risk with their clients, it'stypical for the facility owner to maintain that nothing like thathas ever happened; why should they worry about it now? The fact isthat by now, most Americans should know that our ability to predictour economic future is extremely limited. When it comes toenvironmental matters, the future is not only unpredictable, butwhatever rules have been established in the past can change at anymoment. The only way to prepare for an unforeseen crisis is bymaking certain the eldercare client understands how pollutionrelates to their facilities and organization, and that if theychoose to not be covered that they are bearing that risk on theirown. Communicating this fact should be considered at minimum theresponsibility of every agent.

The bottom line
The good news is that environmental insurance is highly affordableand typically will only increase the total cost of the insuranceprogram by a few percentage points. As important as having thecoverage to pay claims and expenses is the fact that the insurersprovide the highly specialized legal and technical support neededwhen pollution events occur.

Even without regard to the financial element, an eldercarefacility is completely unsuited and ill prepared to respond topollution incidents that call for multiple sets of attorneys,scientists, mechanical and environmental consultants, andcontractors. The time and personnel required to manage whateffectively becomes an environmental insurance claims departmentcan be worse than the cost associated with the appropriateinsurance add on.