Earlier today, Continental Western Insurance Group issued what appears to be one of the first nano-specific commercial insurance exclusions in the United States. Although Continental originally posted the exclusion and two supporting documents on its website, the materials were removed after BNA published an article about the exclusion this morning. We managed to print out the material before it was taken down and we provide links to it in this article.
Regular readers will recall that we have been covering nano-related insurance coverage issues for some time. Prior posts are here, here, here, here, here, and here.
A summary of each of Continental's three documents follows:
Background on Nanotubes
Continental's "Background on Nanotubes" document explains the policy behind its exclusion:
"The intent of this exclusion is to remove coverage for the, as of yet, unknown and unknowable risks created by products and processes that involve nanotubes. The exclusion is being added to make you and your customers explicitly aware of our intent not to cover injury and/or damage arising from nanotubes, as used in products and processes…"
The primary reason for the exclusion appears to be recent reports comparing carbon nanotubes to asbestos. You can find information about the press coverage of the May 2008 articles comparing multi-walled carbon nanotubes to asbestos here. Another factor in Continental's decision appears to be the often cited nano consumer product inventory published by the Project on Emerging Nanotechnologies.
Based on the asbestos analogy and PEN's product database, Continental concludes that it "would not be prudent for us to knowingly provide coverage for risks that are, as of yet, unknown and unquantifiable. We are all too aware of what happened to companies involved with asbestos-related exposure in the past, and see this as a very similar issue."
Notice to Policyholders
Continental's draft Notice to Policyholders makes it clear that it covers most of Continental's insurance groups, including: Acadia Insurance Company; Continental Western Insurance Company; Fireman's Insurance Company of Washington, D.C.; and Union Insurance Company. The notice references the actual exclusion which is attached and explains that this "endorsement excludes bodily injury, property damage, and personal and advertising injury related to the exposure of nanotubes and nanotechnology in any form. This include the use of, contact with, existence of, presence of, proliferation of, discharge of, dispersal of, seepage of, migration of, release of, escape of, or exposure to nanotubes or nanotechnology."
Nanotubes and Nanotechnology Exclusion
The exclusion itself reiterates that this "endorsement excludes bodily injury, property damage, and personal and advertising injury related to the exposure of nanotubes and nanotechnology in any form. This include the use of, contact with, existence of, presence of, proliferation of, discharge of, dispersal of, seepage of, migration of, release of, escape of, or exposure to nanotubes or nanotechnology."
It further contains specific exclusions for "existence, storage, handling, or transportation of 'nanotubes' or 'nanotechnology'…any manufacturing processes or products including same, and any losses arising from lawsuits related to 'nanotubes' and/or 'nanotechnology.'"
The exclusion defines "nanotubes" as "hollow cylinders of carbon atoms or carbon fibers or any type or form of "nanotechnology" which contains remarkable strength and electrical properties used in any products, goods, or materials. "Nanotechnology" is defined as "engineering at a molecular or atomic level."
Both definitions are vague. For example, a hollow carbon fiber fishing rod that makes no claim to contain nanoscale materials would still technically be included in the definition of 'nanotubes" because it is a hollow cylinder made of carbon atoms. Similarly, attempting to entirely exclude "nanotechnology" is unworkable because it is really just science on an extremely small scale.
Rather than excluding all "nanotechnology," Continental more likely meant to exclude all nanoscale materials. Even then, such a blanket exclusion would be extremely broad because many nanoscale materials have not been shown to pose any environmental, health, or safety risks. Further, even within the category of carbon nanotubes, recent researchers' warnings about potential EHS risks have been largely confined to long, thin, needle-like carbon nanotubes, while excluding other varieties.
Stay tuned. We will attempt to find out what happened to Continental's documents and will continue to monitor nano-related insurance coverage issues.