Pollution Coverage
If your business causes contamination or pollution, you could be held liable for cleanup costs and legal fees. These types of claims are often costly and complex. Pollution liability coverage, commonly referred to as environmental insurance, helps protect your business against liability from damage caused by hazardous materials that are the result of your work.
FAQs
What does pollution liability insurance cover?
It is important to know that standard general liability policies typically exclude pollution related losses. Some general liability policies may offer a small amount of coverage but it is not sufficient for most risks. Generally, pollution liability covers both first and third party damage caused by pollutants that are released as the result of your business operations. First-party damage applies to damage suffered by your business while third-party damage refers to damage suffered by others.
Property or environmental damage covers damages to both your property, the property of others and the environment that are damaged due to pollutants. It covers the damages themselves, cleanup operations if legally required and defense against resulting lawsuits.
Example: Your pest company accidentally contaminates a water well with insecticides.
Bodily injury applies if people are injured due to the pollution caused by your business.
Example: Your business is operating a construction site near a residential neighborhood. Several people suffer lung issues from the dust and fumes.
Products & completed operations refers to work completed or products you have installed, repaired or manufactured that cause pollution.
Example: Your company installs piping at a jobsite and after several months it is discovered that faulty installation caused fuel leakage into the surrounding soil.
Legal defense can provide funds for your legal defense, investigations, settlements and fees for third-party pollution claims. Even if you aren’t at fault, a third-party can sue your business if they believe you to be responsible for damages. Your defense limit can be in included in your limit of liability or outside of it.
Remediation refers to cleaning up pollutants and contaminants to restore a property to the state it was in prior to the pollution event.
What is a pollutant?
Most policies will define a pollutant or contaminant as: any solid, liquid, gaseous or thermal irritant or pollutant, including but not limited to smoke, vapor, odors, soot, fumes, acids, alkalis, toxic chemicals, hazardous substances, petroleum hydrocarbons, legionella, electromagnetic fields, mold, and waste materials including but not limited to municipal, industrial, medical, pathological, and low level radioactive waste and materials. It is important to note that contaminates are not always chemicals. If a storage tank containing food-safe cooking oil leaks into groundwater, the water is considered contaminated, even if it isn’t toxic to consume.
What is a pollutant condition?
The standard definition of a pollutant condition or contamination is: The discharge, dispersal, release, or escape of any contaminants into or upon land, or any structure on land, the atmosphere or any watercourse or body of water, including groundwater. Pollution can either be sudden and accidental or non-catastrophic and gradual. The former refers to pollution that occurs after a sudden event like an explosion, while the latter refers an event that causes pollution slowly over a longer period of time.
Types of pollution liability coverage
Pollution liability is not standardized, which means that coverages between carriers can differ widely. Coverage is usually tailored for your business’ specific industry and its risks, although there are a few main categories of pollution liability insurance.
Premises or site pollution liability refers to a pollution event that occurs on, at, under or migrates from your location or specific location named on the policy
Example: Your preschool’s HVAC system causes a carbon monoxide leak and many of your students fall ill.
Contractors pollution liability is designed to cover third-party losses that occur at multiple jobsites or that your business does not own.
Example: Your excavation company accidentally ruptures a fuel tank at a jobsite and fuel leaks into the soil
Errors & omissions coverage is crucial for business whose professional work is related to the environment, like pollution cleanup companies and environmental consultants. An error or omission in their work could lead to pollution or contamination. Or, your business could mistakenly allege that a property is free of pollutants when it is not.
Example: Your environmental testing company evaluates a building and reports that no asbestos was detected. Later, asbestos is found in the attic and your business is sued by the building owner.
Transportation can cover clean-up of pollutants or contaminates that are released during the transportation of materials or waste.
Example: Your business is transporting cement and the cement mixer is involved in an accident that causes it to overturn and leak cement into a river.
Non-owned disposal site is typically defined as the disposal of water or materials generated by your business operations at a location that is permitted to accept such waste and materials.
Example: Your business disposes of waste at the local landfill but the landfill later alleges that your waste caused a pollution incident.
What doesn’t pollution liability cover?
Each pollution liability policy will have different exclusions. Some common exclusions under this coverage type are:
- Pollution caused by intentional acts
- Damage caused by acid rain
- Pollution caused by war or terrorism
- Failure to comply with environmental laws
Some policies may exclude pre-existing hazards, like asbestos, mold or lead, although it may be possible to add back coverage for these.
Practice vs project policies
Practice policies are typically offered in one year terms and are for businesses that have a continual pollution risk.
Project policies typically cover the construction term and the state statute of repose for completed operations. These policies are usually taken out to cover a single project that has a pollution risk.
Claims-made vs Occurrence
Depending on the carrier, pollution liability coverage will be offered on either a claims-made basis or an occurrence basis.
Claims-made policies provide coverage for covered claims that occurred during your policy term that is triggered when the claim is made.
Occurrence policies provide coverage for covered claims that occurred during your policy term, regardless of when the claim is made.
Deductible vs self-insured retention
Your pollution liability policy made have either a deductible or self-insured retention. Policies with lower deductibles or self-insured retentions will have higher premiums.
A deductible is the amount you are responsible for paying in the event of a claim before your insurance coverage kicks in. A deductible is usually subtracted from your limit of insurance.
A self-insured retention (SIR) is also the amount you are responsible for paying in the event of a claim before your insurance coverage kicks in. An SIR is not usually subtracted from your limit of insurance.
What kinds of business need pollution liability insurance?
As government regulations and societal awareness increase, environmental liabilities also increase. The need for pollution liability coverage for mitigation, restoration and abatement businesses is more evident as their operations involve risks to hazardous waste exposures. It is important to understand that there are varying levels of pollution exposure and most business have some risk of a pollution incident. If your business regularly handles or produces potentially harmful materials and chemicals, you should consider pollution liability coverage. Below are some industries that may benefit from pollution liability insurance.
- Environmental contractors
- Oil, gas & energy
- Excavation
- Manufacturers
- Farming & agriculture
- Electrical
- Printers
- Wind/solar
- Auto repair & servicing
- HVAC
- Pool contractors
- Dry cleaning
- Highway, street and road
- Health care
- Painting
- Concrete & masonry
- Plumbing
- Cleaning
- General contractors
- Roofing
- Trucking & shipping
What does pollution liability coverage cost?
There are numerous factors that can affect pricing for this type of coverage. Insurance carriers often consider the following when calculating premium for pollution insurance: type of business, the kinds of chemicals or pollutants used in your business, your business’ proximity to residential or protected areas and the disposal methods used for hazardous materials.