Underground Climate Change Puts Building Owners At Risk

Business Insurance
05/06/2024

SAN DIEGO – Underground climate change is an emerging risk, and building owners should review their commercial property policies to determine whether coverage would respond to losses, a policyholder attorney said Monday.

According to recent studies, heat emanating from basements, train tunnels, sewers and other underground systems in major metropolises is heating the ground between city surfaces and the bedrock by as much as 27 degrees Fahrenheit, said Dennis J. Artese, a shareholder in the New York office of Anderson Kill P.C.

“That rising heat is causing the soil, sand, the clay and the silt to shift, settle, contract and expand and that’s causing damage to foundations,” he said. Cracks in foundations are being exacerbated by soil shifting, he said.

Mr. Artese was speaking during a session at Riskworld, the Risk & Insurance Management Society Inc.’s annual conference.

All-risk property policies provide the broadest coverage possible that pays for all risk of physical loss and damage unless expressly excluded in the policy, he said.

“When it comes to emerging risks like this, that’s what you want,” he said.

Policyholders should read their policies cover to cover to ensure all physical loss and damage is covered unless expressly excluded, Mr. Artese said. He added they should beware of certain exclusions, exceptions and endorsements that might change how and if policies would respond, he said.

All-risk property policies may give policyholders “the warm fuzzy feeling” that the coverage is broad and their losses will be covered, but exclusions can take away a lot of coverage, he said.

Earth movement exclusions typically are written very broadly, “but just as often they're not written in a clear and unmistakable language as required to be enforced,” Mr. Artese said.

“Whenever we analyze coverage for a given loss, we always have to read the policy cover to cover, and it may be significant,” he said.

Building owners should consult with structural engineers to investigate foundation conditions, monitor cracks, and determine appropriate remediation steps, Mr. Artese said.

In the event of damage, building owners should promptly notify insurers and present claims carefully with assistance from coverage counsel to avoid attribution to potentially uncovered causes, he said.

Related People

Insurance Recovery Attorney | Anderson Kill P.C.
Dennis J. Artese
Shareholder
New York

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