Are any of the properties that you own, operate, lease or manage near power lines? Substations? Transformers? How close is too close? With third party lawsuits and legal defense associated with “pollutants” on the rise, real estate owners are looking to the insurance industry to help address the risk.
Electro Magnetic Fields (EMFs) are areas of energy that surround any electrical device (i.e., with electric fields being produced by voltage and magnetic fields being produced by current). Essentially, EMFs are produced wherever electricity is used.
EMFs are come from a variety of sources with the larger and more obvious ones being power lines, substations and transformers. (However, there are some less obvious sources such as electrical wiring, computers, electric blankets and clocks, appliances and cell phones—so I guess it’s fair to say they are all around us!)
Public health and toxic tort liabilities concerns surrounding EMFs have become a rather contentious issue among utility companies, regulatory agencies, land owners and other effected stakeholders. While many studies have produced varying (and sometimes contradictory) results, there have been many epidemiological studies which suggest a possible human carcinogenic link in a classification group similar to say formaldehyde, DDT, dioxins and PCBs.
Two Main Exposures for Real Estate Owners
Two of the more predominant exposures from an ownership and insurance perspective would appear to be:
- Defending against any bodily injury claims brought forth by third parties such as tenants or any other third parties
- Third party property damage claims vis-à-vis “diminution in property value” by a neighboring property owner alleging EMF emissions from a client’s property (e.g., the property is worth less in value now because of the presence of EMFs nearby since the general public believes the exposure to be dangerous and, therefore, less valuable).
There have been numerous lawsuits and much litigation activity involving the second exposure above including: San Diego Gas & Elec. Co v. Daley; Florida Power & Light Co. v. Jennings, and Dunlap v. Loup River Public Power District. In the case of San Diego Gas & Elec. Co v. Daley, the jury awarded the property owner $190,000 for condemned property and $1,035,000 for the diminished value to the remaining property.
The Health Effects
Actual Bodily Injury lawsuits to date have had limited success since scientific evidence has not established a “definitive” link between exposure and health problems like cancer. However, a 2007 Swiss Re study concluded that it can be expected that plaintiffs will win suits dealing with the EMF issue (particularly since science and epidemiological studies continue to advance and suggest a direct health link) in which the legal defense costs can be staggering.
The health effect of EMFs, of course, can vary based upon the different levels of exposures and can be tempered by distance from the source and any shielding in the area. From a public health perspective, complete avoidance would be ideal and appears to be the best measure, however, it’s not a very realistic option considering that these sources appear to be all around us every day.
What Insurance is Available?
From an insurance perspective, when considering the potential legal and toxic tort implications, a layer of defense against EMF liabilities and exposures could be found through an environmental insurance product.
Among other coverage grants being provided, these environmental policies cover third party bodily injury and property damage claims and legal defense associated with EMFs.
Many carriers have EMF coverage built directly into their form via their definition of “pollutants” (e.g., “…any solid, liquid, gaseous or thermal pollutant, irritant or contaminant including but not limited to…smoke, vapors, toxic chemicals, hazardous substances…electromagnetic fields….”). And, most environmental policies include “diminished third party property value” in their definition of “property damage.”
Owning, buying or selling a property with EMFs nearby can become a financial disaster – particularly as more science and studies further demonstrate rising health concerns in addition to potential diminution in value claims. Those in the real estate industry are faced with many risk management challenges on a daily basis with environmental exposures being just one of them; however, there are various insurance solutions to help transfer the risk.