Loss adjusters will be left in the dark after terrorist strike, says Jeff Charlton
In the US, the end of the TRIA arrangement, where the government backs policies in a similar way to the UK's Pool Re, has resulted in building owners now having direct responsibility for building cover.
This has created a new problem for building owners in the event of a chemical, biological or radiological (CBR) terrorist attack - how to deal with the ensuing contamination.
In the UK, Pool Re has determined the scope of cover for contamination. Even pre-9/11 many policies excluded contamination and several even excluded mould, but in the US few if any insurers will insure against contamination or decontamination.
Although terrorist cover has been available for explosion for years in the US, the huge likely cost from a terrorist CBR event is most likely to bankrupt even the biggest insurer.
You might wonder if such a statement can be justified and I would point to the cost and time involved in the decontamination programme at the mail handling facility at Brentwood, US. Just two unopened letters containing anthrax passed through the facility resulting in two deaths, hundreds on prophylactic care for months. The decontamination programme lasted two years and cost a massive $130m.
Now imagine a few such letters being delivered along Cannon Street and the cost can only be assumed as substantial. The ultimate costs must take into account property values, leasehold responsibilities and pension fund property portfolios. So is cover available and what limitations exist?
The example of Brentwood shows that insurance cost against premium may be geared too low and most would be unlikely to afford sensible premiums. This poses the first question: will loss adjusters even be required after a CBR event? Should a nuclear device be detonated, the recovery will be unlikely to focus on loss adjustment or insurers.
Risk reduction against a CBR event is almost non-existent in the UK with few if any knowing what to do in such an event. There would be instructions to close doors, evacuate, turn off the air conditioning - a thousand decisions but no information or knowledge base. CBR planning usually relies on existing contingency and disaster recovery plans, which unfortunately are almost diametrically opposed to the requirements of the "plan for effect not cause" ideology.
Defra recently published advice of how to decontaminate CBR-contaminated buildings. It may be relevant to assume that, for example, using sand blasting with or without bleach, in an open environment, will cause secondary contamination. Will that be covered?
Loss adjusters have suggested that they may be in the front line with police in assessing damage. Has this been thought through? The contaminated 'hot zone' will be a scene of crime and no unauthorised personnel will be allowed entry. The affected area from say a dirty bomb could contain hundreds of thousands of people and remain closed for weeks or months. What training in level A, B, or C protection has the loss adjuster, what personal insurance does he have and most importantly what is the risk?
The loss adjuster would need to assess what was written off or likely to be salvaged. Unfortunately, there are no levels of clearance for CBR contamination and therefore almost all affected materials and equipment can be assumed as contaminated or likely to be affected. Depending on the type of dirty bomb or terrorist action, I would be surprised if many buildings on either side of the Atlantic would be seen as economical for salvage or recovery if targeted in a CBR event.
Buildings within the 'hot zone', or indeed downwind, which again has extreme ramifications within the built environment, may be closed for access for months or years, and the secondary aerosolisation of contaminant may continuously increase the spread of affected buildings. This means that unless a loss adjuster can seal off a building, which he can confirm without doubt has not been contaminated, his assessment must be that all contents, and probably the building itself are a total write-off.
Although the analogy of a wide-area contamination has been used, individual buildings may be affected by an internal CBR release. The assessment is as simple, without effective clearance guidelines, and coupled to the cost of decontamination. It must be assumed all contents and structure are contaminated.
Jeff Charlton is a visiting lecturer at Royal Military College, Cranfield University on terrorism and contingency planning
