What Is Debris?

Debris Other Than Covered Property

Debris Removal and Coinsurance

Some Special Debris Removal Problems

Introduction

Coverage for Costs of Clearing Away the Damaged Property

Debris removal clauses usually note that debris removal expenses occasioned through loss by any of the covered causes of loss are insured, and debris removal does not apply to costs to extract pollutants from land or water or to remove or replace polluted land or water.

 The debris removal clause states what amount the insurer will pay under the debris removal coverage, usually a percentage of the amount paid for the direct physical loss or damage to covered property. However, an additional amount of debris removal coverage is available if the sum of direct physical loss and debris removal exceeds the applicable limit of insurance.

Commercial Property Program

Under the standard commercial property program filed by Insurance Services Office (ISO), the debris removal provision appears as an additional coverage wherein the insurer promises to "pay your expenses to remove debris of covered property caused by or resulting from a covered cause of loss that occurs during the policy period."

The ISO Building and Personal Property Coverage form, CP 00 10 10 12, states that the most the insurer will pay under the additional coverage is 25 percent of the amount paid for the direct physical loss plus 25 percent of the amount of the deductible. For example, the amount of the debris removal expense that would be available for a paid loss of $5,000 where a $500 deductible was used would be $1,375 (25 percent of $5,500).

If this amount is insufficient to cover the cost of debris removal, or the sum of the amount of direct physical loss plus debris removal exceeds the applicable limit of insurance, an additional $10,000 per occurrence for each location is available to cover debris removal. This amount may be increased by use of endorsement CP 04 15 10 12, Debris Removal Additional Insurance.

Also, under the Building and Personal Property Coverage form, all debris removal expenses must be reported in writing to the insurance company within 180 days of the date of direct physical loss or damage. And, though the cost of debris removal is not required to be calculated for the coinsurance clause, debris removal costs still affect coinsurance calculations during loss settlement.

For more information, see the Building and Personal Property Coverage Form.

What Is Debris?

With the exception that the debris must be of covered property damaged by a covered cause of loss (the significance of these limitations is considered later in this discussion), the term debris is not otherwise defined or limited. This allows the insured to employ the broadest definition of the term to a loss, consistent with common usage. The broadest dictionary definition (from Webster's) of debris is "the remains of something broken down or destroyed."

Likewise, there is no definition of "your expenses to remove debris." In Manduca Datsun, Inc. v. Universal Underwriters Ins. Co., 676 P.2d 1274 (Id. App. 1984), the court held that damage caused by the debris removal process after a fire loss—specifically, damage to asphalt by heavy equipment being used to clear away debris—would fall within expenses incurred to remove debris after a covered loss. Another court ruled that debris removal includes cleanup costs in Interstate Gourmet Coffee Roasters, Inc. v. Seaco Ins. Co., 794 N.E.2d 607 (Mass. App. Ct. 2003).

Debris Other Than Covered Property

When property that is not covered property damages covered property, such as when trees fall or parts of a neighboring building are propelled against the insured's premises due to windstorm, under the CP 00 10, the costs of removing the property that is not covered from the insured's building are part of the costs to effect repairs, not debris removal costs. Once the noncovered property has been removed from the building, common adjustment practice allows payment for removing not only the debris of covered property, but also other debris involved in the loss on the insured property.

The debris removal provision, however, is more limited than this adjusting practice in that it extends the coverage of the property policy to include the expense of removing debris only of covered property caused by or resulting from a covered cause of loss. Thus, removal of the debris of a tree blown down by the wind is not covered unless the tree, in its fall, strikes and damages other property insured against windstorm. This is because trees, under most property forms, are either not covered or covered for only a limited group of perils, not including windstorm. If a tree is struck by lightning, on the other hand, the trees, shrubs, and plants extension in the commercial property forms will provide additional coverage up to the limit per plant ($250 in ISO form CP 00 10) for the tree's value and for the cost of cleaning up and removing the debris (up to a total amount of $1,000).

The debris removal clause of other property forms may be broader. For example, the dwellings flood policy of the National Flood Insurance Program provides coverage for removal of debris "of, on, or from the insured property," within the policy limits, including nonowned debris physically on insured property. The policy recognizes the need to cover the cost of getting rid of debris left behind by receding flood waters, as well as the debris of insured property damaged by the flood. In fact, in some cases, the principal flood loss may be the cost of removing debris deposited by the flood. However, the flood policy applicable to general property provides debris removal coverage only for the expenses of removing "debris of, on, or from the building or personal property" that are covered by the form, also within the property limit.

Debris Removal and Coinsurance

Calculations for coinsurance compliance do not include debris removal expense. Both the promise of additional coverage and the limits clause detail how debris removal is to be determined and neither relates to coinsurance.

However, the effect of coinsurance as applied to covered property has a spillover effect on debris removal since one debris removal limit is conditioned by 25 percent of the most we will pay on covered property.

Under the limits clause there is the promise of an additional $10,000, but this is in addition to the reduced payment derived from the penalized property recovery.

Some Special Debris Removal Problems

Some insureds may encounter unusually severe debris removal problems because of their special circumstances. Buildings or equipment that do not conform to current laws—such as building or zoning codes, or environmental protection laws—present special debris removal problems, as can businesses involved in processing molten material (like metals, plastics, or glass) and operations involving radioactive, toxic, or environmentally damaging materials. Unless the special nature of these exposures is recognized and adequate insurance, both as to coverage and amount, is arranged, it is likely that there will not be enough insurance available to pay the full cost of the property damage and debris removal after a loss. The following paragraphs offer more information on these potential problems.

Buildings or equipment that do not conform to current law or ordinance may be condemned after a partial loss, requiring demolition or junking of the undamaged portions and replacement only with property conforming to current requirements. Typical situations may involve operation of building construction, fire, safety, or zoning codes, electrical or plumbing codes, earthquake construction requirements, or, most recently, federal, state, or local laws relating to pollution control devices on various types of equipment.

Demolition cost coverage is available as Coverage B on endorsement CP 04 05 10 12, Ordinance Or Law Coverage endorsement (see Commercial Property Endorsements Discussed). If ordinance or law requires the demolition of undamaged property, the cost of clearing the site (debris removal) attributable to the demolition is covered under this provision. Demolition and removal cost insurance under Coverage B of CP 04 05 is limited to the lesser of the amount actually spent to demolish and clear the site, or the Coverage B limit. Thus, if the law requires demolition when a building is more than 50 percent destroyed, then the cost to demolish 50 percent of the building, including removal of its debris, is appropriate to be used as the Coverage B limit for CP 04 05. If the ordinance requires demolition and debris removal when 75 percent of the building has been destroyed, then the costs to demolish 25 percent of the building and removal of that debris can be used as a guideline for the limit.

As with debris removal coverage under form CP 00 10, the coinsurance condition does not apply to demolition and removal costs under endorsement CP 04 05 for the purpose of determining whether the insured has complied with the insurance to value requirements.

Another special problem, which actually may involve two different problems, is the removal of molten material. The molten material may escape from its container due to an accident to the container. Or the molten material may cool and solidify in its container after loss of heat or power needed to keep the process going.

Under the commercial property program, loss or damage to other property caused by the accidental discharge of (or heat from) molten material is not excluded under the special causes of loss form (unless caused by freezing when the insured has failed to take precautions against freezing). Because the debris is caused by or results from a covered cause of loss, the debris removal provisions apply to debris of discharged molten material under the special causes of loss form. (The special form also provides coverage for the cost to tear out and replace any part of the building to effect repairs to the system or appliance from which the molten material escaped.) 

Solidifying of molten material in a furnace or other vessel due to loss of power or fuel can also produce a problem of debris removal. Because of the off-premises power failure exclusion, no coverage would apply even under the special causes of loss form if the solidification is caused by an off-premises power or utility failure. Adding the Utility Services—Direct Damage endorsement (CP 04 17 10 12) solves the problem and allows for debris removal coverage in these circumstances. Care should be taken to indicate in the schedule the type of property that will be covered by the endorsement.

The insured will still have an exposure from on-premises power or utility failure, but this risk cannot be insured. For example, if lightning strikes a generator on the insured's premises, the loss from solidification of molten material is a consequential, not a direct, result of the lightning strike. The change in temperature takes place gradually after the direct damage inflicted by lightning. The rationale for allowing a buy back of coverage only in cases of off-premises utility or power failure is that insureds have greater control over the care of their own equipment and can take precautions to guard against many losses that might occur.

The debris removal problems involving radioactive, toxic, or environmentally damaging materials are of rather recent origin, arising with the advent of strict nuclear control, antipollution, and toxic waste disposal laws. The cost of disposal of potentially toxic debris in the ways required by these laws can be enormous.

Special cleanup, handling, and disposal of the toxic debris may be necessary, often including substantial extra transportation costs to remove and convey the material in an approved manner to special dump sites, sometimes at a great distance from the insured's premises. Even when radioactive contamination is added as a cause of loss through the Radioactive Contamination endorsement, CP 10 37 10 00, on a commercial property policy, the removal of contaminated debris is limited by the revised debris removal provisions found on CP 00 10 as no additional limits are made available through the endorsement. Unless the problem is anticipated and enough insurance provided through the Debris Removal Additional Insurance endorsement (CP 04 15) previously described, the insurance may be inadequate to fully cover a severe loss involving radioactive, toxic, or hazardous debris. 

The potential contamination of otherwise undamaged property by smoke or water that has picked up radioactive or toxic material as a result of fire or other accident must be considered when debris removal limits are determined. For example, assume that a large office building is contaminated throughout by smoke from a relatively minor electrical fire in a transformer. The transformer contains polychlorinated biphenyl (PCB), a common ingredient in the coolant of many older electrical transformers, but now found to be a cancer producing agent. The oily, PCB-laden smoke is picked up in the building's ventilation system and deposited on and in everything throughout the building. The presence of the PCB in the smoke necessitates an elaborate and costly cleanup of the entire building and its contents to get rid of the toxic debris from the damaged transformer.

Although the PCB debris is a pollutant, form CP 10 30 10 12 does not exclude coverage for the discharge or dispersal of pollutants if caused by a specified cause of loss. Fire and smoke are among the specified causes of loss, so coverage under the debris removal provision of form CP 00 10 (and, if available, Additional Debris Removal Limit endorsement CP 04 15) would apply to this loss. The ordinance or law exclusion does not affect this situation, even if the cost of removing the debris has been increased due to new environmental regulations. If the building was more than 50 percent damaged and had to be demolished, the ordinance or law exclusion would eliminate coverage for repairing the building, so the insured would receive only actual cash value for the damaged part. Assuming that the limit for debris removal has been increased by endorsement and is adequate, the question would be whether the PCBs would be considered debris of the damaged portion of the building, an interpretation most favorable to the insured and generally the interpretation favored in cases of contract ambiguity. Demolition coverage under the ordinance or law endorsement excludes pollution clean up coverage for the undamaged part of the building (i.e., there is no coverage for the extra costs created by having to assess or handle pollutants according to environmental regulations), but this exclusion, again, applies only to debris of the undamaged portions of the building.

This article originally published May 8, 2012

Updated May 4, 2020

Includes copyrighted material of Insurance Services Office, Inc., with its permission.