By: Patti Maluchnik, CIC, CBIA
Georgetown Insurance Service, Inc.
When you first hear the word “pollution,” what comes to mind? Do you think of billowing dark smog clouds hovering over Beijing, noxious exhaust fumes pouring out from the car in front of you at the light, or possibly an oil spill seeping out into the ocean?
According to Dictionary.com, the technical definition of pollution can be defined as “the presence in or introduction into the environment of a substance or thing that has harmful or poisonous effects.” Unfortunately, this broad definition leaves plenty of room for interpretation and subsequent liability.
Pollution Liability for Contractors
In the context of construction and contracting, pollution becomes an inherent risk with most jobs. Virtually anything that can affect the air, soil, and environment can open your business up to risk. Since a standard general liability policy typically has pollution-specific exclusions built in, it is important to consider investing in pollution coverage. Depending on the level of coverage needed, adding endorsements to your General Liability and/or Auto policies may be sufficient. However, obtaining a standalone policy is usually the better option since it will provide the most comprehensive coverage available.
From gas or oil leaks into the soil to an accidental spill into the waterway or mold, the risk is real. Furthermore, the unfortunate reality is that pollution — particularly soil damage, mold, and residual health effects from exposure to elements such as silica– are not discovered until after a project is completed. This can make determining blame difficult and often requires all contractors involved with a project to defend themselves in court. The legal defense fees alone quickly surpass the typical pollution policy premium cost.
What Does Pollution Insurance Cover?
Pollution insurance helps financially safeguard your company from the following situations:
Legal Defense Fees: As stated above, legal defense fees can quickly add up — costing you not only money but also lost time. By having Pollution Insurance, you can rest assured that defending yourself in court won’t bankrupt you in the process.
Clean-Up Costs: From oil spills to gasoline leaks, the cost to clean up any accidental spill of hazardous material can be significant. A Pollution Insurance policy will cover the cost of clean-up and help minimize the hit your company takes as a result of the accident. Remember, fuel spills are incredibly common.
Coverage for Injuries and Medical Costs: Not only is pollution hazardous to the environment — it can be hazardous for humans as well. Even a simple error such as using equipment that emits carbon monoxide but not providing enough ventilation can wreak havoc on the human body. Another example is silica exposure, which is once again becoming a hot topic in court regarding long-term exposure and the subsequent effects on employees’ health. In both of these situations, having pollution insurance provides contractors with an added layer of financial coverage against claims of bodily harm or injuries.
Cost of Pollution Insurance
The cost of Pollution Insurance will vary based on each individual company. Factors that go into policy pricing include the type of business, industry, types of chemical/hazardous material that the company deals with, and disposal methods.
It’s always best to consult with your insurance agent to determine the best route to obtaining pollution insurance and to ensure that there are no unexpected exclusions. Some policies will even retroactively cover prior projects since claims often arise months or even years after a project is completed.
While some industries are higher risk than others, obtaining pollution insurance should really be a best practice for all contractors. The risk simply isn’t worth it.