Battling a Nasty Bug
Periodic large outbreaks of Legionnaires’ disease, like the one that occurred in New York City this summer, grab a lot of headlines, but in fact many lesser-known cases of the disease are regularly recorded in the United States on a year-round basis.
The Centers for Disease Control reports that 8,000 to 18,000 cases of Legionnaires’ disease are identified annually in this country. Many of those cases resulted in death and/or life-threatening medical conditions, presenting insurance, risk management and legal problems for building owners and managers on a significant scale.
“Some people say legionella [the bacteria that causes the illness] is making a comeback, but the fact is it has never gone away,” said John Eichenberger, a Charlottesville, Va.- based engineering services manager for Marsh & McLennan Agency Environmental.
“It’s interesting that Legionnaires’ disease wasn’t identified by the scientific community prior to 1976 when a mysterious disease surfaced at an American Legion convention in Philadelphia,” Eichenberger said.
“It was a devastating outbreak that sickened 221 people and caused 34 deaths, hence the name Legionnaires’ disease.”
People become infected with the disease when they inhale microscopic water droplets containing legionella bacteria. Although it’s possible to contract Legionnaires’ disease from home plumbing systems and outdoor sources, most outbreaks occur in large buildings.
“Some people say legionella [the bacteria that causes the illness] is making a comeback, but the fact is it has never gone away.” — John Eichenberger with Marsh & McClennan Agency Environmental
Common locations for an outbreak of legionella are hot tubs and whirlpools on cruise ships, cooling towers for building air conditioning systems, and swimming pools and water systems in hotels, apartment complexes, hospitals and nursing homes.
The Mayo Clinic said individuals who are most susceptible to Legionnaires’ disease are people who smoke, have a weakened immune system, have a chronic lung disease or who are aged 50 or older.
“Legionella is similar to other high-profile indoor air calamities encountered in recent years such as asbestos, flesh-eating bacteria and mold,” said Bill Nellen, Atlanta-based executive vice president, national environmental practice, Alliant Insurance Services Inc.
“The legionella bacteria incubates in heating, ventilation and other water-based systems, including cooling towers, but also showers and public water features have been shown to be the causal links for outbreaks.
“Legionnaires’ disease can result in severe financial and public relations consequences and insurance claims,” Nellen added.
At Willis’ environmental practice, New York-based Executive Vice President Anthony M. Wagar said, “People can be exposed to legionella when they breathe in a mist or vapor from a water source that has been contaminated with the legionella bacteria. Unfortunately, it can have symptoms similar to many forms of pneumonia, making it difficult to initially diagnose.
“While most insurance policies exclude coverage for Legionnaires’ disease via various ‘pollution’ and ‘contamination’ exclusions, many environmental insurance carriers have built in affirmative coverage grants to their forms via a modification to their definition of ‘pollutants’ to include legionella pneumophila in any structure on land or the atmosphere contained in that structure,” Wagar said.
Mitigating the Threat
Experts agree that the best way for owners of hotels, resorts, nursing homes and other buildings to combat the spread of legionella is an effective risk management program wrapped around environmental insurance.
“Yes, I think that is right,” said New York-based Bill McElroy, senior vice president, Liberty International Underwriters and leader of its global environmental practice.
“If you have a complex water heating and cooling ventilation system, you should be doing things to maintain and periodically inspect the facilities. That’s just good risk management by any institutional building owner.
“From an insurance point of view, we do provide insurance that covers an owner from any claims brought by third parties for injuries caused by what we refer to as biological contamination, which could include legionella or things like mold or other biological injuries and things like certain types of viruses that are transmitted through airborne contact,” McElroy said.
“If you buy this type of insurance you can buy cover for an enhancement for biological contamination for airborne pathogens,” said McElroy.
A major breakthrough in the prevention and mitigation of legionella came on July 1, when the American Society of Heating, Refrigeration and Air-Conditioning Engineers (ASHRAE) promulgated a long-awaited set of guidelines for building water quality and legionella concerns.
This standard is written in code-ready language, facilitating integration into existing building codes, and will have the force of law. ASHRAE 188 will create a benchmark standard for legionella prevention, experts agreed.
“If the injury has been fatal, then the family has a potential claim. These claims in and of themselves are very significant claims for recovery of pain and suffering, and economic damage.” — David Rieser, head of the environmental, regulatory and redevelopment law practice at Much Shelist
Documented compliance with the standard will help to refute allegations of negligence, minimize liability exposure and create underwriting standards from which insurability can be determined.
“A combination of adhering to ASHRAE guidelines and a risk management program makes a great risk management tool,” said Philadelphia- based Marcel Ricciardelli, senior vice president, environmental, Allied World.
“As a business, you may buy insurance coverage specifically for Legionnaires’ disease as part of a legal liability policy. If you buy a pollution insurance policy, you can get legal defense and you can get clean-up coverage. Then the third leg of the stool is you can get risk management services.”
Atlanta-based Elizabeth Bannister, managing director of the Marsh environmental practice, noted that the specialized environmental market does offer coverage for Legionnaires’ disease within its specialized pollution policies, which may be obtained from specialty carriers.
“A competitive marketplace has resulted in the introduction of many different industry- or risk-specific policy forms,” Bannister said.
“As a result, coverage may differ between carriers and may be offered with a base form or added on by endorsement. It is important to review your policy and understand the extent of coverage provided.”
Further, Bannister said, clients should engage their risk advisers to confirm whether coverage is excluded from property and casualty programs.
“These policies may often be subject to pollution and/or bacteria exclusions and it is important to know how the courts have treated these exclusions in specific legal jurisdictions,” she said.
Chicago-based environmental law expert David Rieser, head of the environmental, regulatory and redevelopment law practice at Much Shelist, said a building owner faces numerous issues on the claims front.
“First and foremost, there are the third-party claims brought by the people who are injured by the disease,” said Rieser.
“If the injury has been fatal, then the family has a potential claim. These claims in and of themselves are very significant claims for recovery of pain and suffering, and economic damage,” he said.
Rieser noted that 95 percent of cases are settled before they ever get to trial because of the high cost and uncertainty involved.
An outbreak at large public facilities like hotels, resorts or cruise ships can result in significant damages.
“So you’ve got everybody cancelling their reservations, thus the reputation risk, plus the cost of remediation, trying to figure out how the facility component gave rise to the claim and figuring out what has to be done to clean up so it doesn’t happen again.”
Many companies have provisions in their pollution liability policies that include the third-party claims as well as first-party damages arising out of Legionnaires’ disease.
Eichenberger said that a critical component in establishing a good legionella risk management program is selecting an individual to assume ownership of the program. Then the program has to be put into play and not get put on a shelf to rot.
“This person has to be an active manager who makes sure the program is fully implemented and adapts as new conditions come forward,” Eichenberger said.
“Once a risk management program is created, all building water systems should be evaluated to identify any risk for legionella colonization.”
The next step, Eichenberger said, is to develop specific control measures for vulnerable building water systems.
“As with any effective risk management program, it is critical to have good recordkeeping to document activities and determine what’s working,” Eichenberger said.