I have been accused of many things, but seldom of being a prophet. Yet there it is, for all the world to see, in my October, 2010 American Agent & Broker article “Reality Bites” about the recent invasion of bedbugs and lack of insurance coverage for some under current personal and commercial forms:

Second, if the [bedbug] issue continues to gather attention and estimated damages escalate, it's possible, particularly in this soft market, that some creative insurance type will dream up a DIC or customized coverage approach, at least for the major commercial risks.

Well, prophecy fulfilled! Last month no less an insurance industry giant than Aon released the first salvo in the war on bed bug pestilence. This was quickly followed by a product developed by Willis.  

Just to prove the potential popularity of the Aon offering, rather than plunging into the oblivion accorded most new niche insurance products, at least in bedbug havens such as New York City, this one hit the media quickly to grateful response.

The Aon product is actually more of a risk management hybrid: part insurance, part new treatment methods, part discounted services and part education. The actual list from the Aon press release lists the benefits thusly:

• Insurance to cover the cost of bedbug elimination
• Insurance to recover lost revenue resulting from taking rooms out of service during bedbug elimination
• Dramatically reduced need to destroy room contents; in many situations, contents can be successfully treated rather than destroyed and replaced
• Multi-faceted, integrated bedbug management approach includes a new, non-toxic elimination treatment that can return a room to service in five days or less
• Discounted rates for mattress encasements and bedbug kits for greater peace of mind
• Tips to prevent further outbreaks

While showcasing the creativity and ability to react to consumer need so often claimed to be lacking in our allegedly staid industry, the Aon package seems to have left out one of the key issues facing businesses found to be harboring these tiny vampires: the potential expense of, or at least high cost of defending against, liability claims. (The Willis product does include a crisis management component to reduce brand damage.)

Perhaps this is because there is currently no exclusion under standard liability forms for any claims following an actual bedbug bite for injury or emotional anguish. Yet, as attorney Robert Friedman pointed out in another bedbug article, the very growth in the need and demand for products such as Aon's may lead to a less savory outcome for liability coverage:

If liability claims ever became a significant loss, insurers would begin to exclude coverage for bed bugs. But the cost to the insurance industry seems minor compared to standard claims. The largest cost to the insurance industry may be to defend clients who are sued. If someone is making an allegation and the lawsuit goes on for awhile, even if it is ultimately dismissed, you could spend hundreds of thousands of dollars defending the case.

So will bedbug bashers win on the property, yet ultimately lose on the liability?

This prophet is quitting while he's ahead.

And all because of tiny insect vampires who only suck blood in the dark. “True Blood” and ”Twilight” fans, welcome to my world of insurance!