Skip to main content
Blog Post

Contemplating environmental risk during COVID-19

Casualty|Risk & Analytics|Corporate Risk Tools and Technology
COVID 19 Coronavirus|Risk Culture

By Anthony M. Wagar | April 24, 2020

Potential conflicts arising from communicable-disease exclusions or human-to-human contact provisions typically built into environmental insurance policies may present coverage challenges as carriers review claims.

Unlock More

About our COVID-19 coverage

In our ongoing coverage of the COVID-19 outbreak, experts from across Willis Towers Watson share insight into what you need to know to manage your business and employees and reduce your risk.

If there’s one common theme shining through the turbidity created by the COVID-19 virus, it’s that our insurance industry needs to collectively gain new insights and perspectives from many alternative sources – certainly from our clients, academia and other institutions such as Willis Towers Watson’s partnership with Wharton’s Initiative for Global Environmental Leadership and the Risk Management and Decision Processes Center. Through collaboration we gain new insights and perspectives that allow us to think more holistically about risk.

Rather than evaluating risk as individual exposures, COVID-19 demonstrates how critical it becomes to evaluate these interconnectivities and vulnerabilities collectively such as:

  • Cyber risk, as a majority of us are working remotely/electronically
  • Business interruption, as nonessential businesses have been forced to shut down and customers dwindle unabated due to some form of quarantine limitation, travel and worker migration restrictions
  • Supply chain issues – even the smallest components are essential
  • Preparedness and business continuity concerns – when the worst-case scenario becomes the new normal
  • Environmental exposures

Environmental insurance has been brought into the mix for potential coverage related to COVID-19 losses, as cleanup for viruses is sometimes included in (or added to) a standard policy form. However, the limited application of this coverage, plus potential conflicts arising from communicable-disease exclusions or human-to-human contact, may present their own set of coverage challenges.

Additionally, as businesses adapt their operations to respond to new service needs arising from COVID-19, organizations need to be mindful of a policy condition common to all environmental policies – namely the “Material Change in Risk” exclusion. This restriction essentially precludes coverage for situations where the exposure has “materially” changed (subject to carrier interpretation) from what was originally contemplated during underwriting.

For instance, a scenario where college dormitories or hotels are repurposed and converted to makeshift hospitals, or where an asbestos and lead abatement contractor is asked to perform COVID-19 disinfection services. If the insured doesn’t first obtain the carrier’s express written consent, they could jeopardize their coverage.

Fortunately, many carriers are working with insureds and brokers regarding “material change in risk” issues, as well as with the adjustment and management of claims – both essential components needed to fulfill their business model and value proposition. However, the bespoke nature of environmental insurance programs, when applied to different COVID-19-related incident scenarios and circumstances, will likely result in unique claims responses and outcomes for each client.

Please refer to our Environmental Insurance Coverage Considerations for additional commentary. Final coverage determinations and contractual challenges will ultimately rest with the carrier based upon mutually agreed upon terms, conditions, definitions and exclusions. As the industry continues to wade through these unchartered waters, it will be interesting to see how everything plays out while we hit the reset button and have a better understanding of what the new normal will become.


Executive Vice President – Middle Market & Specialty Broking Marketing Leader
Willis Towers Watson

Related Solutions

Contact Us