Hidden Insurance Risk Lurks in Property Leases
By Gloria Vogel, CFA | August 21, 2013
The RF Radiation Risk Factor
In February 2013, AM Best classified RF (radio frequency) radiation
from wireless antennas as an “Emerging Technology-Based Risk” (see below). This was
based, in part, on an estimated 250,000 workers per year who may be
over-exposed to RF radiation from the 600,000 governmental and
commercial RF radiating antenna systems across the nation.
The FCC recognizes RF radiation from transmitting antennas as a human
health hazard, as a single RF transmitting antenna can emit hundreds of
times more RF radiation than a cell phone. RF radiation hazards from
transmitting antennas can cause thermal and non-thermal or
cognitive/psychological injuries. Non-thermal or cognitive/psychological
injuries do not necessarily have a physical manifestation.
Cognitive/psychological RF injuries include memory loss, mood disorders,
sleep disorders, and impaired or diminished cognitive function.
RF radiation injuries should be of concern to insurers, especially
since their exposure to the risk is hidden within the lease contracts
between the commercial wireless service providers (CWSPs) and landlords
who lease space to those CWSPs for antenna systems.
The Property Leases:
Landlords who lease space to the CWSPs are completely unaware of the
potential for injury from RF transmitting antennas and that they will be
held liable for such injuries. Typical site leases include a mutual
indemnification clause, which would appear to protect the landlords from
personal injuries that may be caused by the CWSPs’ antennas. However
to enforce the indemnity provision, the landlords must demonstrate that
the primary cause of injury was the fault of the CWSPs.
CWSPs will take the position that it was the landlords who permitted
access to the RF hazard area near the antennas, which was the proximate
cause of the injury; or, that injury could have been prevented by the
landlords controlling access to the RF hazard areas. So, in reality,
the lease language indemnity provision merely buys the landlords
and their insurers a lawsuit against well-financed CWSPs with a litany
of possible legal defenses.
Who Has Liability for RF injuries?
The CWSPs employ hundreds of RF engineers and are the technical
experts on anything involving RF radiation and its ability to
cause injury to humans. Accordingly, prior to the lease being signed,
the CWSPs have a “Duty to Warn” the unsuspecting landlords, and their
insurers, of the RF radiation hazards associated with the lessee’s
By not divulging pertinent RF hazard
information in the leases, the CWSPs may be attempting to use the 1996
Telecom Act as a shield in not warning the landlords. The Act precludes
any discussion of RF radiation at municipal siting hearings. However,
there is nothing contained in the language that enjoins the CWSPs from
not informing the landlords of the hazards associated with RF radiation
in the lease agreements they unilaterally create. Their actions are
based solely on a business decision that has been used by other
industries in the past…never mention the physical harm to humans that
the product produces.
A landlord with full knowledge of their financial exposure to the
liability assumed with the lease would likely either demand a greater
monthly fee, or would decline permission to site on their property. It
stands to reason that no business person would trade hundreds of
thousands or more in attorney and legal fees associated with an RF
injury, for a few thousand dollars of rental income per month.
Once a lease has been executed without proper disclosure, “Fraud in
the Inducement” can be alleged by the landlord asserting that the CWSP
concealed material facts associated with the hazards of their
operations/equipment. The CWSP will have known at the time of
negotiating the contract that by not disclosing those material facts,
the landlord might be more inclined to sign the lease. Additionally,
theories of “Intentional and Negligent Misrepresentation of Material
Facts” may be brought against the CWSP.
Finally, there will be insistence that the CWSP has a “Non-Delegable
Duty” to ensure full compliance with the FCC RF human exposure
standard. Federal law, 47 CFR 1.130, establishes the FCC licensee’s
(CWSP) duty regarding RF safety, which cannot be transferred to the
Lack of Claims Doesn’t Mean Lack of Claimants
The insurers should not rely on the lack of RF injury claims to
proclaim there isn’t a significant RF injury problem with workers being
exposed to RF radiation on a daily basis.
The lack of claims is the
result of injured parties being unaware that they were over-exposed to
RF radiation. Just one plaintiff’s attorney with an aggressive media
campaign can quickly alter this lack of knowledge. As the population of
workers becomes aware of the hidden RF hazards and their potential for
exposure, claims will likely be filed by the thousands, and long term
litigation will result, in similar manner to the way asbestos evolved.
Vogel is senior vice president at N.Y.-based Drexel Hamilton, a service
disabled veteran broker-dealer. She also teaches finance and metrics to
graduate students as an adjunct professor at NYU-SCPS. Previously,
Vogel was a contributing author on www.seekingalpha.com. She worked at
Swiss Re and was an All-Star equity research insurance analyst at
several major investment banks, including Lehman Brothers and Bear
Founded in 1899, A.M. Best
Company is a full-service credit rating organization dedicated to serving
the insurance industry. Policyholders refer to Best's ratings and
analysis as a means of assessing the financial strength and creditworthiness of
risk-bearing entities and investment vehicles.
From A.M. Best’s February 14,
The insurance industry faces a
constantly escalating level of exposure from rapidly developing technologies
with risks that are not well understood. In many situations, the science
associated with understanding these new risks is in the early stages of
development. A.M. Best believes that it is critical for insurers to
maintain vigilant oversight of emerging technologies as a critical component of
their enterprise risk management system. Effective enterprise risk
management encompasses identifying, evaluating and addressing risks that could
threaten the earnings or viability of an insurer. This includes a
prospective look at the underwriting exposures so that changes to policy
language or underwriting criteria can properly manage losses for these new
risks. An exposure which may present only insignificant insured losses at
present, may bring future unprecedented losses . . .
. . . Insurers need to monitor
the manner in which emerging technologies are, or are likely to be, deployed;
the risks associated with their use; their residual or unintended impacts; and
the manner in which the insurance policies may be called upon to cover losses.
Emerging Technology-Based Risks
RF (Radio Frequency)
Radiation Risk – Today
there are more than 600,000 cell sites in the United States and that number is
expected to grow with the demand for faster, more reliable wireless
The risks associated with long-term use of cell phones, although
much studied over the past 10 years, remain unclear. Dangers to the
estimated 250,000 workers per year who come in close contact with cell phone
antennas, which act at close range essentially as open microwave ovens can
include eye damage, sterility and cognitive impairments. While workers of
cellular companies are well trained on the potential dangers, other workers
exposed to the antennas are often unaware of the health risks. The
continued exponential growth of cellular towers will significantly increase exposure
to these workers and others coming into close contact with high-energy cell
phone antenna radiation.
Cyber Risk - Significant data breaches have become
common (e.g., Citigroup, the International Monetary Fund, JP Morgan Chase &
Co., Sony Online Entertainment, Hilton Worldwide, Marriott International Inc.,
Verizon, and Heartland Payment Systems). These can involve, for example,
loss of sensitive financial information, personal data, and proprietary
secrets. Identity theft alone is estimated to cost consumer and companies
roughly $5 billion and $50 billion, respectively, each year. A 2009 study
found that lost data cost U.S.
companies in excess of $200 per lost customer file. In a 2011 study
conducted among large U.S.
companies more than 80% of information technology executives said that they had
detected one or more recent attacks. Such exposures continue to evolve as
companies are increasingly storing sensitive and confidential information with
cloud vendors – a vendor that provides other companies with an infrastructure
on which to store data or run applications – exposing data to new types of
Fracking Risk –Over
the past 10 years horizontal fracturing (“fracking’) has become a big business
and a highly contentious issue. The process involves pumping a
pressurized fluid into a rock layer, which causes fracturing of the rock and
release of petroleum, natural gas or other substances for extraction. The
potential benefits are enormous; however, there are significant risks,
including potential release of radioactive substances, radon (a known
carcinogen) in the natural gas going into homes and potential chemical
contamination of drinking water. The U.S. Environmental Protection Agency
has determined that fracking was the likely source of ground water
contamination in at least 36 cases. There are a variety of other concerns
including the potential for exposed workers to develop silicosis and that the
process may lead to earthquakes.
Nanotechnology Risk - A wide
variety if consumer and industry products are increasingly constructed a the
molecular level, using materials from 1 to 100 nanometers in length (a
nanometer is one billionth of a meter). Nanotechnology is employed in an
array of products, including medicines and medical devices, glass, coatings,
construction products, fire protection materials, vehicles, foods, textiles,
cosmetics, optics and sports equipment. Nano-sized particles, however,
act differently than materials built at normal scale, and existing chemical
risk assessments are not suited for exposures arising from nanoparticles.
Considerable concern has arisen that some nanoparticles may be toxic.
With the exception of airborne nanoparticles entering the lungs, understanding
of the effects of nanoparticles on the human body, including accumulation,
metabolism and organ-specific toxicity is extremely limited. Concerns
involve both the potential of immediate harms as well as harmful effects
appearing after long latency periods. Of the technology risks now
emerging, nanotechnology product exposures may be the most similar to
asbestos. While it remains unclear whether nanoparticles can lead to
asbestos-like losses, insurers need to carefully monitor developments of this
Insurers must evaluate constantly
evolving technology exposures with the knowledge that existing
scientific/technical understanding is often incomplete. A.M. Best will
review companies’ understanding of their exposure to emerging risk, and their
approaches to mitigating the risks within the framework of their enterprise
risk management programs.