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As Wildfire Risks Increase, Insuring Businesses More Difficult

home wildfire

Business property coverage is getting more difficult to come by for operations located in areas that are susceptible to wildfires.

The devastating wildfires of the last few years, along with the thousands of homes and businesses that have been burned or damaged due to these events, has resulted in insurers becoming more selective about the properties they are willing to cover. This intense period of yearly wildfires has led to a record $12.8 billion in insurance claims.

As a result, some insurers have started non-renewing commercial property coverage in these high-risk areas – and others have just stopped writing new policies altogether. We are seeing renewals in wildfire-prone areas on a scale we’ve never seen before.

Companies that receive a notification that their insurer plans to non-renew their policies are faced with shopping in a market that is more selective and with insurers requiring that they take certain steps to better safeguard their properties.

What’s going on

More and more homes and businesses in areas susceptible to wildfires are at risk than ever before. The fires are becoming more frequent, hotter and more widespread. Insurers have had to pay out record amounts in fire claims during the last few years, which has taken its toll on many of them.

Some insurers are non-renewing property policies of all sizes in high-risk areas, and the practice has become widespread.

Typically, insurance companies are applying three metrics in evaluating exposure to fire:

  1. Brush mapping – This is a map of the tinder and brush, nearby trees and other natural items that could contribute to your building(s) catching fire. The insurer will use the mapping to see if you are keeping up your property by removing combustible materials from the perimeter and limiting the amount of shrubbery and trees.
  2. The nearby wildland-urban interface – The closer that a building is to wildlands (open spaces with combustible materials), the more likely it is that insurers will balk at writing the policy. A wildland-urban interface is defined by the Forest Services as a place where “humans and their development meet or intermix with wildland fuel.” Communities that are within a half a mile of the zone are included.
  3. Concentration of other properties an insurer covers in your area – If your insurance company already writes policies for many other businesses and homes in your area and they feel they have too much risk concentrated in that zone, they may opt to non-renew policies in order to reduce their exposure.

While we can sometimes work with an insurer to have the property owner clear brush and take measures that would reduce the chances of their property catching fire to satisfy the brush-mapping metric, it’s more difficult to negotiate about numbers two and three.

The options

If you have a business in a wildfire area and your insurer plans not to renew your coverage, and if other companies are not willing to underwrite your policy, we can help you find new coverage. If no admitted insurers (those that are licensed and regulated in California) are willing to cover your building, we have two options:

The non-admitted market – These insurers are not licensed to do business in California, but we can still use them to write policies for businesses. These insurers, which includes Lloyd’s of London, are usually willing to write buildings in higher-risk areas, but they too have increased their underwriting criteria.

The California FAIR Plan – If we are unable to find an insurer in the admitted or non-admitted market, the last choice is FAIR Plan, which is the state-run market of last resort for homeowners and commercial property owners that cannot get coverage in the regular market. Commercial policies are available for:

  • Buildings with five or more habitational units (e.g. apartment buildings, hotels, motels, or home-sharing services such as Airbnb)
  • Retail mercantile
  • Manufacturing risks
  • Office buildings
  • Residential or commercial buildings under course of construction.

Policies cover losses from fire, lightning, and explosion only. Also, policies are limited in what they will pay out, so if you have millions of dollars tied up in equipment and/or inventory, the policy may not be enough to cover all the damage you incur from a wildfire.

The maximum limit for commercial properties is $3 million for structures and $1.5 million for all other coverages, for a combined $4.5 million limit for all commercial properties at one location. But there are some exceptions.

What we can do if you go to the FAIR Plan

If the FAIR Plan coverage is not enough coverage or falls short, we can find another insurer that provides excess coverage that would kick in at a certain dollar amount of damage.

And for the aforementioned risks that are not covered, we would have to also find you a “differences in conditions” policy. Combined with FAIR Plan coverage, adding such a policy can nearly mimic the coverage of a commercial or homeowner’s policy.

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Cal/OSHA Issues Emergency Rules to Protect Workers from Wildfire Smoke

wildfire

Cal/OSHA has issued emergency regulations that require employers of outdoor workers to take protective measures, including providing respiratory equipment, when air quality is significantly affected by wildfires.

Smoke from wildfires can travel hundreds of miles and while an area may not be in danger of the fire, the smoke can be thick and dangerous, reaching unhealthy levels. The danger is worst for people with underlying health conditions like heart disease, asthma or other respiratory issues.

Cal/OSHA decided to start work on the new regulations after worker groups filed a petition asking the agency to step in and protect people working outside from unsafe air quality caused by wildfires.

Below is all you need to know about the new emergency regulations that are slated to take effect in early August 2019.

What to expect

The draft of the regulations, which were approved at a July 18 Cal/OSH board hearing, would require that employers take action when the Air Quality Index (AQI) for particulate matter 2.5 is more than 150, which is considered in the “unhealthy” range.

The protections would also be triggered when a government agency issues a wildfire smoke advisory or there when there is a “realistic possibility” that workers would be exposed to wildfire smoke.

All California employers with “a worker who is outdoors for more than an hour cumulative over the course of their shift” would be required to comply with these regulations:

Checking the Air Quality Index – Employers of outdoor works must check the AQI at the worksite to see if it is above 150, which would require the employer to take protective measures for the workers. AQI can be checked in the following ways:

  • The U.S. Environmental Protection Agency’s AirNow website.
  • The California Air Resources Board website.
  • Your local air pollution control district website.
  • Checking PM2.5 levels at the worksite and converting them to the corresponding AQI (Appendix A of the regulations explain how).

Communications – Employers must establish and implement a system for communicating wildfire smoke hazards to affected employees, including allowing employees to inform the employer of such hazards at the worksite. Communications should include:

  • The current AQI for PM2.5.
  • Protective measures available to workers to reduce their wildfire smoke exposure.
  • Encouraging employees to inform the employer of worsening job site air quality.
  • Reporting symptoms such as asthma attacks, difficulty breathing and chest pain.

Training – Employers with outside works should train them in:

  • The health effects of wildfire smoke.
  • The right to obtain medical treatment without fear of reprisal.
  • How employees can obtain the current AQI for PM2.5.
  • The requirements in Cal/OSHA’s regulation about wildfire smoke.
  • The employer’s communication system.
  • The employer’s methods to protect employees from wildfire smoke.
  • The importance, limitations and benefits of using a respirator when exposed to wildfire smoke.
  • How to properly put on, use and maintain the respirators provided by the employer.

Suitable protection – There are a number of methods employers can implement to protect workers when the AQI for PM2.5 exceeds 150.

  • Engineering controls, such as providing enclosed structures or vehicles with effective filtration where employees can continue working, or
  • Administrative controls like:
  • Relocating workers,
  • Changing work schedules,
  • Reducing work intensity, or
  • Giving them additional rest periods, or
  • Respiratory protective equipment. The employer must provide respirators to all employees for voluntary use, and encourage them to use them.

Respirators shall be NIOSH (National Institute for Occupational Safety and Health)-approved devices that effectively protect the wearers from inhalation of PM2.5, such as N95 filtering face-piece respirators. Respirators shall be cleaned, stored, maintained and replaced so that they do not present a health hazard to users.

Where the current AQI for PM2.5 is 501 or greater, respirator use is required.

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Cal/OSHA Working on Rules to Protect Outdoor Workers from Wildfire Smoke

wildfire

Cal/OSHA is developing regulations that would require employers of outdoor workers to provide respiratory equipment when air quality is significantly affected by wildfires.

Smoke from wildfires can travel hundreds of miles and while an area may not be in danger of the wildfire, the smoke can be thick and dangerous, reaching unhealthy levels. The danger is worst for people with underlying health conditions like heart disease, asthma or other respiratory issues.

Many employers want to hand out respirators to outside workers, but while there are no regulations or laws in place for how to protect your workers during smoky conditions, there are regulations governing the use of ventilators – and they are very specific.

The California Code or Regulations, Title 8, Section 5144 states requires that employers that distribute respirators to their employees must take certain steps, such as implementing a written respiratory protection program, requiring seal-testing before every use and conducting medical evaluations of all workers who will wear a respirator.

Cal/OSHA decided to start work on the new regulations after worker groups filed a petition asking the agency to step in and protect people working outside from unsafe air quality caused by wildfires.

What to expect

The regs are still in draft form and are unlikely to be completed this summer for the upcoming fire season. But here is what you can expect:

The draft of the regulations would require that employers take action when the Air Quality Index (AQI) for particulate matter 2.5 is more than 150, which is considered in the “unhealthy” range.

The protections would also be triggered when a government agency issues a wildfire smoke advisory or there when there is a “realistic possibility” that workers would be exposed to wildfire smoke.

All California employers with “a worker who is outdoors for more than an hour cumulative over the course of their shift” would be required to comply with these regulations:

  • Checking AQI forecasts when employees may reasonably be expected to be exposed to an AQI or more than 150.
  • Establishing a system of communication with employees to inform them about the AQI, changes in conditions that can lead to bad air quality, and protective measures.
  • Training their workers in the steps they would have to take if the AQI breaches 150.
  • First-line protections that employers could implement include:
    • Engineering controls, such as providing enclosed structures or vehicles with effective filtration where employees can continue working.
    • Administrative controls like:
      • Relocating workers,
      • Changing work schedules,
      • Reducing work intensity, or
      • Giving them additional rest periods.
  • If none of the above are feasible, the rule provides for a voluntary respirator (without fit-testing and medical examinations) use when the AQI is between 150 and 300.
  • If the AQI is above 300, fit-testing and a medical examination prior to use would be mandatory.

The new regulations by Cal/OSHA are pending with the Cal/OSHA Standards Board, which is expected to vote on them in July, but it’s unclear how quickly they would be implemented.

For now, if you do have outside employees who are confronted with working in smoky conditions, you should start stockpiling a two-week supply of N95 masks for all of your workers.