“The presence in or introduction into the environment of a substance or thing that has harmful or poisonous effects.”
According to Dictonary.com, that’s the true definition of pollution. When people hear this word, it usually conjures up images of dark smog pouring from factory smoke stacks, exhaust fumes filling the air from large trucks, and oil seeping from a rig deep into the ocean. But with such a broad definition and so many potential scenarios, there’s often plenty of room for interpretation and subsequent liability.
What is Pollution Liability Insurance?
Pollution liability insurance is coverage for contractors, consultants, and many other businesses that protects them against liability from damage caused by hazardous materials. Think gas leaks, oil spills, contaminated soil, and many other conditions that can damage the environment and create large cleanup costs. This coverage can also apply to bodily injury and property damage caused by hazardous materials and other pollutants. There is no “standard” or “boilerplate” environmental insurance policy, so it is important to discuss the particular needs and exposures of each individual business.
Contractors and Pollution Liability
Pollution is an inherent danger for most contractors and construction companies. From gas or oil leaking into the soil to an accidental spill into the waterway or mold, the risk is real. Virtually anything that can affect the air, soil, and environment can open your business up to potential liability. However, most standard general liability policies often exclude pollution-specific incidents. While many companies will allow you to add endorsements to your general liability and/or auto policies, these may not be enough. Pollution coverage on modified Commercial General Liability policies is often limited to sudden and accidental coverage
Unfortunately, the damage from pollution – soil contamination, mold, and residual health effects – is not typically discovered till long after a project is completed. This can be a challenge when it comes to determining who’s at fault. Often, all contractors involved with a project are required to defend themselves in court, with legal defense fees quickly surpassing the cost of a standard pollution liability policy.
What Pollution Policies Typically Cover
Pollution insurance helps financially safeguard your company from the following situations:
- Legal Defense Fees: Legal defense fees can quickly add up. Not only does it cost you money, but it also results in lost time. Pollution insurance gives you the peace of mind that defending yourself in court won’t bankrupt you in the process. It is important to inquire if defense costs are included within the policy coverage limits (inside limits) or in addition to the policy coverage limits (outside limits)
- Injuries and Medical Costs: Pollution is not only hazardous to the environment but also to humans and other living things. Even seemingly simple errors – such as using equipment that emits carbon monoxide without proper ventilation – can wreak havoc on the human body. Another example is exposure to asbestos, which continues to be a hot topic in court because of the effects on employee’s health as a result of long-term exposure. In both situations, having pollution insurance can provide contractors with an added layer of financial coverage against claims of bodily harm or injuries.
- Property Damages and Clean-Up Costs: From oil spills to gasoline leaks, the damages caused by pollutants (which can include loss of use of a property), and the subsequent costs to clean up an accidental spill of hazardous material, can be significant. Pollution insurance can cover the cost of clean-up and helps minimize the impact to your business in the event of an accident. While you might be thinking “those situations won’t happen to me,” it’s important to remember that fuel spills are incredibly common – with the most likely cause being human error.
Cost of Pollution Insurance
The cost of pollution insurance varies based on each individual company. Type of business, industry, types of chemicals/hazardous materials to be covered, and disposal methods are all determining factors.
To determine the best route to obtaining pollution insurance and ensure there are no unexpected exclusions, it’s always best to contact your insurance agent and discuss your options. Some policies will even retroactively cover prior projects since claims often arise months or even years after its completion.
Having a pollution liability policy is a best practice. While some industries are higher risk than others, the benefits of having a policy far outweighs the cost for businesses of all shapes and sizes.
Have questions? Contact us to speak with a licensed insurance professional.