January 31, 2020 by Colleen DeMerchant
Brokers may be excused when running for the hills as soon as a client mentions the word ‘nuclear,’ because they know that as soon as they turn around to a carrier for coverage, the conversation will end pretty quickly. But there may not be a more overlooked and misunderstood exclusion than the nuclear exclusion in a general liability policy.
The confusion makes sense. The exclusion is long; it’s easy to assume everything is excluded. But that’s not the case. It’s time for everyone – underwriters, brokers, clients, and risk managers – to understand its depth and complexity. For brokers in particular, educating yourself about the exclusion and how it works will help secure opportunities that you may be missing.
Why is this important? Because over the next 15 years, nuclear facilities across Canada, especially in Ontario, are going to require major work and will need the services of contractors. When contractors call their brokers and tell them that they’re going to be working at a nuclear power station, they can’t be faced with a reaction based on a lack of knowledge.
Oftentimes, insurers consider nuclear a “decline” class of business because, well, it’s nuclear. A pool of insurers write the nuclear peril, but not all things nuclear are created equally: Not everything belongs in the nuclear pool. Just because you have a decline class of business, you still need to look at what the exposures are before you say no.
For example, the Nuclear Insurance Association of Canada (NIAC) is often asked about contractors working on power stations. They don’t need nuclear liability coverage: If they’re only working for the operators of the installation, then their liability channels to the operator under the nuclear liability regime.
What is the regime? Jurisdictions using nuclear power have a nuclear liability regime in place in the event something goes wrong. The nuclear exclusion supports the channelling under this regime, so the liability belongs to the operator.
Let’s say a broker’s client, a contractor, goes to a nuclear facility site to install a toilet. Installing a toilet in a nuclear power station is no different than installing a toilet in a conventional electricity generating station.
But there are some instances in which nuclear is covered under a general liability policy, such as commercial radioisotopes. In this example, the general liability policy exclusion will exclude all things nuclear, but then it gives a writeback – which is essentially an exception to the exclusion. This would bring back coverage for isotopes.
Such Isotopes would be used away from a nuclear facility; they have reached their final stage of fabrication as to be useable in any scientific, medical, agricultural, commercial or industrial purpose. Examples would be isotopes used in an oilfield, the wand at security in an airport, or the smoke detector in your home or office.
It’s impossible to go through all of the various examples in a short article here. NIAC has resources on its website at www.niac.biz/niacu to help. Various videos, articles and papers are available. I have collaborated with Brian DeBruin of Aon Nuclear Risk & Insurance Practice in New York to produce Understanding the GL Nuclear Energy Liability Exclusion. Understanding what this exclusion does, and layering the exclusion language on to your exposures, allows you to see what exclusions are completely excluded and should be channelled to the operator, versus what are commercial exposures that the general liability insurer should be picking up.
Brokers must work with their clients to take a look at the entire picture for both Canadian and U.S. exposures. When a risk arises that has nuclear exposure, it can be better assessed. Otherwise, brokers and insurers are missing out on business opportunities that they could otherwise be taking advantage of if they were more in tune with what they can and can’t write.