As risk manager for Panattoni Development Company, one of the largest privately owned commercial real estate companies in the United States, Guillermo Accame makes it his business to stay current with trends impacting the environmental insurance market. Today, two issues are top of his mind—the first of which is vapor encroachment.
“Vapor encroachment is a topic that sophisticated buyers and underwriters have been aware of for at least 10 years, but it had really been a back-burner issue,” Accame says. “Today, regulators are much more aware of it, and [coverage] has definitely heated up as a result.”
Encroachment involves movement of vapor pollutants from underground sources to the inside of buildings. Public awareness of health hazards associated with airborne pollutants and air quality has been growing, and testing organization ASTM's E2600 standard, revised in 2010, created new guidelines for site screening.
Panattoni requires ASTM E2600-10 Tier 1 Screening as part of all its Phase 1 environmental site assessments. However, the challenge for insurance buyers and underwriters alike is that potential exposure to vapor encroachment is difficult to predict.
“Indoor air quality can vary by season, by wind speed, whether windows are open, how well the HVAC system is operating, and due to off-gassing by commonly used man-made materials such as carpets inside buildings,” Accame says.
The second issue on risk managers' minds is mold. “Mold can grow anywhere there is moisture,” Accame says, noting that like vapor encroachment, potential mold exposure is difficult to pinpoint.
“Mold is affected by systems and processes that you might not be aware of when you assess or underwrite a property and that can change over time,” he explains.
Accame is commonly seeing sub-limits on mold coverage, and expects to see further limitations going forward. “In the future, policies that cover mold may be contingent upon certain things, such as proper roof maintenance and functioning of HVAC systems,” he predicts.
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