Willis testifies on cleanup risks in New Orleans

Willis Group Holdings Ltd’s (NYSE: WSH) North American construction practice group leader Paul Becker recently testified at a hearing held by the Senate Subcommittee on Superfund and Waste Management on the construction risks inherent in the New Orleans cleanup.
Invited as a guest of the chairman of the subcommittee Senator John Thune, Becker spoke of the distinctive risks contractors face in this unique cleanup environment and the need for a limit on the liabilities they will face.
Becker explained the need for assessment, mitigation, quantification and transfer of a client’s risks in the insurance process and pointed to a great number of uncertainties that preclude these steps from taking place at the cleanup site of New Orleans.
“Models predict likely scenarios, calculate possible losses and then intelligent plans determine how to avoid such problems and spread the risk among various parties at an appropriate price,” Becker says. “Without “the assessment, how does a carrier know what the possible losses are? And if the risks are unknown such that there could be significant unforeseen liabilities, one, how can contracting firms adopt preventative measures to avoid problems which will give rise to future claims and two, how can carriers determine the right price for the coverage?”
Various factors at the cleanup site lead to a great deal of uncertainty as to the long-term liabilities including: unusual and unknown health hazards; what chemicals are being released into the air during the clean-up; and, the limited nature of the tools available to assess the number and types of environmental factors in play.
“While many first-rate contractors are already on the ground participating in this important effort, many others are hesitant to get involved in projects of this magnitude unless they have insurance against what are normally quantifiable risks,” Becker adds, “and carriers as well tend not to write policies if they are not able to make the necessary judgments.”
Regarding the devastation in New Orleans, Becker explains it will be almost impossible to establish the proper control procedures to protect their interests. Limiting the liability of construction companies engaged in the cleanup of New Orleans such that they can gain the cover they need is critical.