Tag Archives: superstorm sandy

Mold, Asbestos, and Raw Sewage – The Toxic Stew that Sandy Left Behind

By Jonathan Cohen and Aisha Cassis

Superstorm Sandy wreaked havoc across the Eastern Seaboard and is predicted to be one of the costliest natural disasters in U.S. history.  New York’s Governor Cuomo estimates that the storm may have had a $50 billion impact on the northeastern states in damage and economic loss.  Particularly because a major Nor’easter followed right on Sandy’s heals, businesses throughout the region suffered significant property damage and lengthy business interruptions.

But Sandy’s wrath may not have ended there.  If Hurricane Katrina is a good model, Sandy’s direct property damage and business interruptions may be exacerbated by future environmental harms that will require costly environmental cleanup well after the flood waters subside.  Companies should be aware they may be able to rely on existing insurance policies to cover these costs.

Secondary hazards from Superstorm Sandy may remain for months after the flood waters have been pumped out.  Numerous communities reported that Sandy caused thousands of gallons of raw sewage to pour out from overwhelmed treatment plans into the Long Island Sound.  The storm also may have affected open-air impoundments that store millions of gallons of toxic fracking waste and sludge.  The humid conditions that Sandy left in many buildings could result in the growth of mold or other environmental risks.  And, asbestos, which previously had been encapsulated in building materials, may deteriorate if the encapsulating materials became wet, causing deterioration that could allow asbestos to become friable and requiring environmental redress.

Companies may have coverage for these costly hazards under one or more of their commercial insurance policies.  These policies may provide coverage for, among other things, the costs of cleaning up the environmental impacts, and/or property damage and business interruption resulting from those impacts.  Companies also may have coverage under general liability or other policies for third-party claims alleging tort liability for environmentally-related property damage.

But watch out – these policies may contain exclusions for certain or all of these hazards, including express and broad exclusions for damage arising from mold, bacteria, and asbestos.  As Sandy is expected to provoke four times the number of insurance claims as last year’s Hurricane Irene, policyholders reasonably should expect that insurers will try to invoke all possible exclusions.  Policyholders should prepare now to counter the insurers’ likely coverage defenses, and they should recognize where they have strong counterarguments.  For example, multiple causes of an accident may trigger coverage even if one of the causes is excluded.  Companies should review their policies carefully, with insurance counsel if needed, and take steps to preserve and pursue all available coverage.

For more information, click here for our alert on Sandy-related coverage issues, or contact Jonathan Cohen at cohenj@gotofirm.com or at (202) 772-2259.

Insurance Coverage for Wage & Hour Claims Arising Out of Superstorm Sandy

By Barry I. Buchman, Kami E. Quinn, and Jason S. Rubinstein

Although the full scope of Superstorm Sandy’s financial impact will not be known for some time, there is little debate that Sandy will go down in history as one of the nation’s most costly natural disasters.  In fact, many experts already estimate total losses in excess of fifty billion dollars.

In the aftermath of Sandy, businesses undoubtedly will focus on restoring operations as soon as possible.  Indeed, their insurers will argue that businesses have a duty to do so, in order to mitigate business interruption losses.

It is likely that such efforts will necessitate asking employees to work overtime.  Among other things, the process could involve the reorganization of work schedules and/or increased telecommuting. 

During this process, businesses must ensure that they do not inadvertently violate state and/or federal wage and hour laws (note: state and federal wage and hour laws often differ — with states sometimes imposing stricter obligations on companies than those imposed by federal law).  See, e.g., Abigail Rubenstein, Employers Can’t Ignore Wage Laws In Hurricane Sandy’s Wake, Law360, Nov. 1, 2012.  Failure to adhere to applicable wage and hour laws could result in litigation and/or government investigation down the road.

The cost of paying this overtime could be a significant cost item for businesses already struggling to rebuild from the storm.

Fortunately, commercial property insurance can help companies mitigate the expense of complying with wage and hour law in difficult times.  Most first-party commercial property insurance policies provide coverage for the increased expense to a business in compensating employees in the days and weeks following covered property damage.  This coverage is usually called “extra expense” coverage.  The purpose of extra expense coverage is to compensate businesses for the reasonable and necessary expenses that they incur after a loss to help minimize the business interruption caused by the loss.  The costs include expenses that companies incur to continue operations or to resume operations more quickly than they would have otherwise.  In this way, it benefits both the company, by allowing it to resume operations more quickly, and the insurer that would otherwise be responsible for the business interruption loss. 

Overtime pay for employees that are required to work additional time due to a covered loss is exactly the type of extra expense that often is covered by these policies.  Therefore, companies should analyze their policies, potentially with the help of an insurance professional, and keep careful records of wage expenses incurred that are related to getting the business back on its feet.  These expenses should be submitted to the insurer for payment.

Sometimes, however, even with the best intentions and efforts, wage and hour violations still can occur.  Fortunately, in the event that wage and hour litigation and/or a government investigation nevertheless develops, companies may find coverage for such claims under their employment practices liability coverage, or under their directors and officers insurance policies that include an employment practices liability coverage component.  For a more detailed discussion of insurance coverage for wage and hour claims, please see our prior article on the topic, Rethinking Common Wisdom of ‘Wage And Hour’ Insurance, Law360, May 2012.