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Rising costs and a smaller pool of insurance carriers are typically two of the top challenges waste and recycling executives face when it comes to accessing or renewing insurance coverage for their operations. Right now, however, companies are concerned about the uncertainties of their coverage and what would happen if their businesses shut down during the COVID-19 pandemic.
RBN Insurance Services, which works with a number of insurance carriers to provide policies and coverage forms tailored to the waste industry, has released several blogs answering questions that waste and recycling businesses have regarding their operations in the era of COVID-19.
When asked about business income coverage, RBN explains that it generally applies when a business needs to shut down because of a direct physical loss at a covered location. Under most circumstances, carriers are not likely to view transmission (or potential transmission) of a virus as a direct physical loss, so RBN expects them to deny claims for business income coverage.
Pam Caron, senior vice president of waste and recycling practice for Risk Strategies Company, also says her clients have asked about business interruption coverage during the COVID-19 pandemic.
“We have been getting inundated internally and externally with questions around insurance coverage,” she tells Waste360. “With COVID-19, the biggest concern right now that I am seeing from a coverage standpoint is business interruption coverage, which is part of a property policy. If there is a massive fire or natural disaster, they have business interruption coverage, which really covers the transfer stations and recycling facilities, etc.”
“The question I am getting inundated with from clients is: are we covered? And the answer pretty much is no because the policies are written so that it only triggers if there is direct property damage. So, there would have to be direct damage to the facility,” she adds.
So, what happens if there is a COVID-19 outbreak at a transfer station or recycling facility? Is there potential for workers’ compensation?
According to RBN, “While this has not been tested for COVID-19, at this point, we do not believe that an outbreak of sickness would lead to workers’ compensation claims. That said, if carriers or industrial commissions determine there are valid claims because people are kept out of work or need medical treatment because of something they caught at work, we expect these would be covered by workers’ compensation policies.”
“If employers are extremely negligent or force people to come into work against the advice of authorities, there may be more potential for exposure to employers’ liability claims or other claims outside of workers’ compensation, so employers should monitor and comply with any guidance issued by state, local or federal health authorities,” adds RBN.
Caron notes that from an employer standpoint, the big concern is if an employee gets COVID-19.
“The benefit of the waste industry with what is happening right now is that on the hauling side, workers are not all in one place,” she says. “Obviously, they are picking up residential trash and that is concerning, but transfer stations are a whole different risk because employees are all together. A lot of them say they are practicing keeping away from each other to mitigate that risk of being together.”
Overall, the waste industry is an essential industry that must keep going and will keep going for public health and safety. However, Caron said revenue will be down because large amounts of waste are no longer coming in from all the restaurants, stores and concert venues that have shuttered amid the COVID-19 pandemic.
“I think the waste and recycling facilities will be a wait and watch,” notes Caron. “If one person gets sick and everyone has to quarantine, how do you keep waste transfer stations operating? It is definitely being looked at every which way, and we will continue to monitor it.”
What Drives Insurance Costs for Waste Companies?
When the industry isn’t operating amid a global pandemic, waste and recycling companies should be mindful of their Department of Transportation (DOT) Federal Motor Carrier Safety Administration scores to keep insurance rates lower, says Tim Shannon, vice president of RBN Insurance Services.
Haulers also should be mindful of an increase in the number of accidents, whether they are operating in a city or rural area, as it is more expensive to operate in a city due to higher risks, and the shortage of good, experienced drivers across the country.
“We sit down with the client to understand the unique aspects of their business: length in business, safety programs, customers, nature of fleet, accident history, DOT scores, etc. …,” explains Shannon. “Based on these characteristics, we identify what we believe will be the best carriers for them. We work with carriers to help them understand clients’ business and get the absolute best pricing we can.”
RBN also provides a cyber insurance offering for haulers since the biggest cyber exposure for the waste and recycling industry is not being able to access systems, such as an electronic dispatch system.
“Electronic dispatch systems determine routes, manage where drivers go and communicate to customers,” says Shannon. “Lost system access could have a negative business impact. Cyber insurance is a relatively low cost to cover exposure.”
Recycling facilities are generally viewed as a higher risk category in the property insurance market, says Shannon, given the nature of materials that recycling facilities work with and the risk of fire and pollution.
He adds that insurance premiums for waste and recycling operations are on the rise due to contraction of the marketplace as more carriers are exiting the space because they have had bad loss history. The remaining carriers are forced to raise rates to maintain capacity.
Shannon provides the following best practices for waste and recycling companies to better control their insurance costs:
Driver/Fleet Safety: Conduct monthly safety meetings as well as daily pre- and post-inspections on all vehicles. Also, keep an eye on DOT scores.
Risk Management Practices: Operate well throughout the year and not just 90 days before insurance renewal. There is a window of five years of past claims.
Accident Free/Safe Drivers: Include safe driving history in hiring practices and review individual driver history.
Recycling Facilities: Fire is the main risk. Recyclers should work closely with their insurance broker and loss control professionals to improve the fire safety of their facilities.
Practice Basic Facility Maintenance: Make sure equipment is upgraded/serviced on an appropriate schedule—including but not limited to sprinklers, fire extinguishers, fire doors, etc.
Screening Material: Make sure that when material comes into a facility, sorters adequately separate out highly flammable products.