Managing Claims

Educational institutions sometimes are viewed as "ivory towers." School and university risk managers and other administrators responsible for environmental affairs would vehemently disagree. To them, it is clear that their facilities significantly affect the surrounding community. These school officials must be vigilant to make sure their institutions are not harming the environment.

Despite this vigilance, environmental claims are inevitable. Improper waste management might lead to government intervention. Pesticide use on green areas of campus might draw protests; chemical spills might occur in laboratories or hospitals; or petroleum might leak from antiquated heating and plumbing systems. Improperly completed renovation efforts might lead to complaints.

Adverse publicity resulting from these incidents could lead to decreased enrollment and endanger the very existence of an educational institution. Private businesses confront similar risks, but at colleges and universities, claims can be complicated by the fact that large numbers of students, faculty and others are on campus at all hours.

For example, a student at one school committed suicide by ingesting potassium cyanide. The chemical reaction created hydrogen cyanide gas, which sickened a number of paramedics, college staff and students. In addition, the gas contaminated linens and other property. The college faced the possibility of injury claims and decontamination costs.

Risk managers must be prepared to deal with environmental claims such as this, and must respond quickly. Although it is impossible to prepare for every conceivable environmental situation, school officials should take the following guidelines into account.

Awareness of issues To respond effectively to an environmental claim, a risk manager must receive prompt notice of an incident. This may be difficult-some campuses tend to operate in a fragmented manner, and different areas conduct their own affairs autonomously.

For example, at one university, a leak occurred in a heating-oil storage tank at a satellite campus. The tank was not properly contained, and the leak was not discovered for several days. As a result, the spill polluted a nearby river. Several more days passed before anyone informed the risk manager at the main campus about the spill.

In another example, a division of a university was renovating a newly purchased off-campus building and did not consult with the risk manager before hiring various contractors. The contracts contained clauses that limited liability with respect to environmental claims. Moreover, since the division did not consult the risk manager, the building was not added to the school's environmental insurance policy. If an environmental incident were to occur at the facility, the consequences could have been devastating.

These examples show that risk managers must be proactive in identifying which operations have the potential for environmental exposure. They need to be aware of their school's expansion plans or any changes in its operations. They must forecast how the school's actions could affect the environment. Finally, they must have the authority to ensure those in key positions are trained to recognize environmental liabilities and to understand the need to notify the risk manager promptly when potential claims arise.

Protecting health and the environment When faced with a potential environmental claim, the risk manager should first ensure that human health is protected. This might involve ordering an evacuation of all or part of the campus. For example, a fire at one part of the campus may not require evacuation of a building across campus, but a release of hazardous vapors from a laboratory in one area may necessitate a more widespread evacuation.

The risk manager needs to make sure authorities are notified promptly of an environmental incident. This may include not only fire, police and local emergency planning agencies, but also the appropriate local, state and federal environmental authorities. For example, a risk manager may need to report spills of certain hazardous materials to the Environmental Protection Agency's National Response Center Hotline at (800)424-8802.

There may be instances in which another agency may have jurisdiction. For example, if mercury is discovered in a building from laboratory experiments conducted decades ago, the EPA may not require a call to the EPA hotline. Instead, the risk manager may need to report the incident to the local department of health.

Schools should call upon an environmental response contractor immediately when an incident occurs. Environmental claims are often easier to manage when first discovered, before contamination spreads and pollutes a larger area. Ultimately, the larger the area affected, the more expensive the remediation will be. Workers can minimize the cleanup of a petroleum spill, for example, if they have to dispose of contaminated soil only and do not need to address any contamination in the groundwater. A response contractor can address the situation promptly and effectively.

In addition, a school or university must promptly notify its environmental insurance carrier. Failure to do so might jeopardize the insurance coverage.

Some environmental insurance carriers have response systems with consultants and attorneys on call 24 hours a day, seven days a week. Leading environmental insurance providers also maintain a list of qualified environmental response contractors available to respond to an emergency and assist in notifying the appropriate authorities. Thus, with one call, a risk manager could ensure that a qualified environmental contractor is responding to an environmental incident, that the appropriate parties are being notified, and that the insurance carrier has been told of the claim.

Finally, risk managers must initiate a prompt investigation. They must ensure that evidence is preserved so that the school will be able to pursue any claims against those responsible. A prompt and effective investigation also may help the risk manager to understand the cause of the problem and prevent a repeat incident.

Managing the public Once a school or university has responded to an environmental emergency, officials also must respond to inquiries about the incident. This may be a delicate task at a college or university where an incident could affect thousands of students. School officials must be honest about an incident and its potential health effects in order to ensure that those at risk receive proper medical treatment.

Unfortunately, school officials also must keep in mind that the university is part of a litigious society. Any admissions on the part of school officials, no matter how innocent, could be used against the school. Accordingly, it is important to consult legal counsel and the insurance carrier when releasing information about the incident.

Once someone has made an environmental claim, school officials need to address a number of issues unique to the environmental arena. Environmental claims tend to involve many federal, state and local agencies. A school or university will need to respond to the claims within the sometimes-stringent regulatory framework imposed by various governmental agencies.

A school will need to assess the nature and extent of the contamination, which can take months to complete. Moreover, the results may be subject to wide variations and interpretation by geologists, hydrogeologists, chemists, toxicologists, engineers and other experts.

For this reason, the risk manager should choose an environmental consultant carefully. The risk manager must verify the expert's credentials, experience and reputation. It is critical to remain involved at every step, questioning the consultant about remediation alternatives and costs.

For example, an unscrupulous environmental consultant could recommend a pump-and-treat system to address groundwater contamination at a site, even though it might be much less costly (and acceptable to the regulators) to excavate contaminated soil and monitor the levels of contamination in the groundwater. Thus, it is important to acquire competent advice regarding the choice of remediation technologies and to negotiate clean-up endpoints with environmental agencies.

Risk managers also must carefully review the contracts they execute. The contract must clearly spell out the work involved and state that any significant deviations from the scope of the work must be approved in writing by the school or university.

Officials should pay attention to indemnification and limitation-of-liability clauses. In order to avoid significant costs if the remediation does not go as planned, the risk manager needs to negotiate these terms.

The standard contracts used by many remediation contractors typically contain a limitation-of-liability clause capping the contractor's liability at the dollar amount of the contract. The contract also may contain an indemnification clause in which the school or university would agree to cover the environmental professional for any liability arising out of a claim brought by a third party.

In addition to negotiating these issues, the risk manager needs to verify that the remediation contractor has appropriate insurance that covers general and professional liability, as well as environmental liability claims.

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