When construction projects involving renovation of existing buildings are underwritten, the contractor must engage with the owner and insurer in management planning. The key components of this stage are a plan consistent with project specifications, which will be provided by the project designer, and a means of communicating additional details on avoiding or resolving risk issues to the contractor.
If the project involves risks that will impact personnel and property, including asbestos, lead, and mold, the contractor’s biggest issue is variability of costs. Coordinating “clean demolition” with “dirty demolition” usually involves inherent risks. This requires cost increases, schedule delays, and hiring subcontractors who are unfamiliar with the project’s scope. If the project is based on a design and build contract, all these unforeseen risks are borne by the contractor during the project’s onset. However, an occupational and environmental health and safety (OEHS) professional can help the contractor stem costs and ensure risks are controlled. The contractor and OEHS professional can correlate with building owners and insurers to reduce all risks from asbestos, lead, and mold exposures and ensure the contractor has adequate insurance coverage.
Reducing Asbestos Risks
There are extra considerations when planning to demolish or renovate buildings constructed between the 1920s and 1980s. Asbestos has never been completely banned or phased out in construction materials. Furthermore, commercial buildings do not undergo routine asbestos surveys, which are required for educational facilities under the Asbestos Hazard Emergency Response Act (AHERA).
The National Emission Standards for Hazardous Air Pollutants (NESHAP), the federal regulation that covers the demolition of asbestos-containing building materials, requires large- and small-scale commercial projects in most states to obtain a demolition contractor who is capable of safely removing asbestos. That is, the contractor must be certified and trained in asbestos removal.
One of the most serious obstacles that may be encountered by a contractor overseeing a demolition project in an occupied facility is the potential of exposing unprotected areas to asbestos when the space is not properly contained. This can lead to lost time and money between the demobilization of “clean” demolition crews and the mobilization of asbestos abatement crews.
Insuring Asbestos Risk
To secure protection from litigation, it is standard practice for OEHS professionals to obtain commercial general liability (CGL) insurance. Property owners should also require asbestos abatement contractors to obtain asbestos abatement liability insurance for protection against claims of third-party bodily injury and property damage. Depending on the contractor, this requirement will be met using one of three types of policies:
- Asbestos abatement liability insurance, combined with a standard CGL policy.
- Stand-alone asbestos abatement liability insurance.
- Contractors’ pollution legal liability (CPL) insurance, without asbestos exclusions.
These policies are triggered on occurrence basis. As with professional liability insurance, the contractor should obtain completed operations coverage that extends beyond the fulfilment of the contract. Under policies written under occurrence basis, the event that gives rise to the insurance claim must happen during the policy period, regardless of when the claim is reported. Some courts have ruled the occurrence happens when the claimant’s disease first appears. This can be years after the project has been completed due to the latency periods of many diseases, including those related to asbestos exposure. If the policy has not been extended to the time of the occurrence or renewed, coverage may be excluded.
Reducing Lead Risks
Federal regulations for contracted lead removal are designated for certain trades. For example, painting contractors are covered by EPA’s Renovation, Repair, and Painting (RRP) program. Contractors and building owners must depend on the various trades to recognize potential lead exposures during demolition and renovation. The use of trained supervisors and third-party OEHS consultants to determine and manage lead exposure ensures safety for the public, staff, and contractors. Properly managing lead prevents contamination, reduces exposures to employees, the environment, and the public, and ensures proper disposal.
Complying with regulations always costs money, but violating federal, state, and local regulations can result in legal fees, forced environmental remediation, or fines. NESHAP covers demolition projects involving both asbestos and lead. If the Clean Air Act is enforced, fines start at $37,500 per day of violation.
Insuring Lead Risks
During lead-based paint abatement operations, lead dust can cause health problems. Some of the adverse effects of lead exposure can be diagnosed almost immediately, including headaches, stomach cramps, constipation, and muscle and joint pain.
As with asbestos abatement coverage, there are three types of insurance policies available to protect contractors against claims of third-party bodily injury or property damage arising from lead-based paint incidents at abatement projects. These are:
- Lead-based paint abatement liability insurance, combined with a standard CGL policy.
- Stand-alone lead-based paint abatement liability insurance.
- CPL insurance, without lead exclusions.
Reducing Mold Risks
Building materials are often exposed to excess moisture during the construction process, leading to structural instability, corrosion, lack of adhesion, and unsanitary heating, ventilation, and air conditioning (HVAC) equipment. If excess moisture is not abated, it can delay project completion, cause structural damage, and increase occupant health risks associated with building dampness. Anticipating moisture issues may provide net savings by avoiding costly repairs and project disruption. An organized management approach begins the mold prevention process in the initial stages of the project and follows systematic steps throughout construction.
Mold may grow on materials exposed to excess moisture over a sustained period and is a health concern, as well as being malodorous and unsightly. During construction, contractors must protect susceptible materials from water contact and resolve wet conditions. Products considered to be highly porous, such as standard gypsum board, readily absorb moisture and will typically grow mold after several days if not dried. Less porous materials, such as wood, medium-density fiberboard, and moisture-resistant drywall, are not as susceptible but will eventually grow mold if they stay wet. Metals do not directly support mold growth, but mold may still develop on surface dust or oil. Corrosion of metal surfaces is a sign of a chronic and widespread moisture issue.
It is inevitable that building materials will become wet during construction, but contractors can often readily identify and correct the source and extent of the moisture. In other cases, a trained third-party OEHS consultant must investigate the site to understand moisture dynamics and resolve the problem.
Mold growth associated with construction can be prevented by taking proactive measures, such as:
- Selecting subcontractors trained in controlling moisture intrusion.
- Using moisture-resistant materials.
- Protecting stored materials.
- Immediately responding to moisture episodes.
- Eliminating moisture sources.
- Protecting HVAC systems from moisture damage.
- Controlling condensation and relative humidity.
Insuring Mold Risk
Mold coverage can be obtained by contractors who perform asbestos abatement or lead remediation projects. They may choose to purchase CPL insurance, which is also appropriate for other types of remediation projects.
If a contractor performs physical operations as well as professional services, such as by both designing and implementing a remedial system, they could choose an insurance policy combining CPL coverage on an occurrence basis with professional liability coverage on a claims-made basis. Under these combined policy forms, a loss under either coverage erodes the same liability limit. This type of combined form can also be used by an environmental consulting firm that performs or subcontracts physical remediation activities. Because the two coverages share one set of liability limits, the cost for combined policies is generally lower than for purchasing two separate policies.
While the contractor is working on the project, the building owner faces a separate set of problems. Owners tend to think of activities involving environmental hazards as falling within different silos of work. They are less concerned about time management and more concerned about liability.
Meanwhile, the insurer who underwrites builder’s risk insurance faces contractual, operational, and environmental coverage issues. Unforeseen environmental contamination, such as asbestos or lead contamination or ongoing water damage, seriously impacts costs, schedules, and performance of the policy. The insurer needs to make decisions to avoid, transfer, mitigate, or accept the risks that pose serious consequences for their coverage of the project.
Risks must be managed in all cases. Typically, third-party consultants, including licensed asbestos consultants, professional environmental engineers, or certified industrial hygienists, may be considered OEHS professionals. They can perform oversight, carry risk, and reduce the cost of overseeing skilled laborers who are performing asbestos abatement, lead removal, or mold remediation. They must weigh the types of coverage provided by the insurer with the nature of work being planned so that they are doing more than simply providing evidence of coverage. In this way, OEHS professionals perform an essential service to help contractors stay safe and healthy at work.
- EHSMaterials.com: Asbestos Project Designer Course.
- Center For Insurance Policy and Research, NAIC: Environmental Insurance (June 23, 2022).
- EPA: Lead Renovation, Repair, and Painting Program.
Paul Haas, CSP, CIH, LAC, is a senior project manager for GHP Florida with over 29 years of experience in the public and private sectors. His specialties include comprehensive industrial hygiene and building services, and his work has encompassed recovery after hurricanes, building envelope and interiors reconstruction, and response to the 9/11 attacks.