9 Weather Risks Needed in Your Risk Management Plan
The risks caused by extreme weather have a significant impact on the risk management plan of any company. According to Deloitte Risk Management Financial Advisory, “a majority of US state insurance regulators expect all types of insurance companies’ climate change risks to increase over the medium to long term – including physical risks, liability risks, and transition risks.”
In this context, there are nine severe weather risks that you need to pay special attention to. Ranging from high to low impact, these risks include corporate concerns to product liability and fleet auto repair claims.
1. Corporate Risk Concerns
Risk Level: High impact, mid-frequency.
Corporations responsible for the well-being of their customers (like hospitals, housing complexes, and energy or water companies), are facing an increase in weather-related insurance claims. According to The Texas Tribune, there have been nearly two dozen wrongful death lawsuits filed against the Electric Reliability Council of Texas (ERCOT) because of its inability to keep up with the power grid during the snowstorm in Texas this winter. This loss of power caused a 70% breakdown and nearly 200 cases of hypothermia.
Because of this increase in unpredictable weather and an inability to prepare for it, even organizations that have kept up with damage in the past need to prepare for the extreme.
2. Pollution Liability Responsibilities
Risk Level: High impact, low frequency.
The connection between climate change and extreme weather is becoming more obvious. Because of this link, industries known for causing pollution are facing increased scrutiny. As more pollution cases are going to court, organizations are relying on pollution liability insurance coverage to keep their business secure and up to date.
The most difficult aspect of these cases for insureds is that a pollutant is anything foreign to the environment, harmful or not. This puts most organizations at risk for pollution-related lawsuits.
3. Food Borne Illness and Legionnaires Disease
Risk Level: Mid impact, mid-frequency.
When there is a severe weather event and there are power outages or floods, businesses that serve or sell food are at risk of passing on food-borne illness. For example, if there is a storm overnight and the freezers in a restaurant go out without anybody realizing, the food could thaw and refreeze before it is served. This could cause illness in customers and in severe cases, lawsuits.
If there is a flood and legionella bacteria is present in the water, inadequate cleanup of the infected area can cause Legionnaires’ disease. This disease is a severe form of pneumonia that causes inflammation in the lungs.
Businesses at risk for water or electrical damage need to make sure they have property insurance in place to help pay for repairs.
4. Product Liability and Failure
Risk Level: Low impact, low frequency.
Because of the increase in severe weather, customers are buying more flashlights, generators, space heaters, and other gear to help them get through storms. Businesses producing and selling this equipment need to have some form of product liability insurance in place and have coverages for:
- Design defects in the product before production
- Manufacturing defects that arise while the product is in production
- Strict liability to protect against product-related injury, no matter who is found at fault
- Improper warning labels that do not outline risks associated with the product
5. Business Continuity/Supply Chain Risks
Risk Level: High impact, high frequency.
Natural disasters can cause problems throughout the entire supply chain. These disruptions in supply can put businesses out for weeks and cause significant losses.
If a customer depends on a product, like a medication, for example, a disruption in the supply chain that causes delays to the customer could be detrimental.
Supply chain risk is any risk in the supply chain that could harm the organization, the processes followed, or the output of goods and services. Because these are such big risks, every organization needs to make sure they have a risk management plan in place that covers every aspect of their supply chain.
6. Construction Delays and Defects
Risk Level: High impact, high frequency.
Weather can cause problems, and this is a huge problem, especially for construction projects. To avoid this, construction contracts need to have a clause saying that weather-related delays cannot result in lawsuits. This is important because no organization has control over the weather, so delays are inevitable.
7. Infrastructure Failure
Risk Level: High impact, low frequency.
As we have seen in the case of the condominium collapse in Florida, infrastructure failure takes place. When these structures fail, many elements go into failure and weather often plays a key role in this outcome.
Organizations need to make sure buildings are inspected and extra care is in place in areas where there are known issues or increased need for repair.
Lawsuits related to infrastructure failure amount to millions, or even billions, of dollars. Because we cannot predict natural disasters when building these structures, their integrity may be in question as these events increase.
8. Workers’ Compensation
Risk Level: Low impact, high frequency.
Workers’ compensation claims are often related to accidents resulting from business functions. In places like Texas, for example, workers are experiencing extreme weather, like ice, snow, and extreme heat. In these places, there needs to be training on what workers should wear and how to navigate on these surfaces. Some weather-related claims that may be overlooked include:
- Driving for a job and getting stuck in a flood, snow, or ice
- Exposure to extreme heat or cold
- Slipping on a wet surface because of water from rain or ice from snow
- Getting struck by an object brought up by wind
9. Auto-Repairs
Risk Level: Low impact, high frequency
For organizations with fleets, better technology means a worker’s ability to do their job better. Technology in these vehicles means more expensive fleet vehicles and higher costs to repair one after a storm. Organizations with fleets need to make sure their commercial auto insurance provides coverage from weather like hail, floods, and lightning strikes.
Making Sure Your Business is Protected From Weather Claims
There is no way to stop weather from causing damage, so to assure your business does not suffer from weather-related issues, having the right insurance coverage in place to pay for repairs is crucial.
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