What is a Pollutant?
Any material, substance, liquid, product, etc… which is introduced into an environment for other than its intended use / purpose. Fresh water, cheese, and milk have all been classified as pollutants by insurance carriers under various circumstances.
Many non-environmental contractors assume that claims arising from operations are covered by the general liability policy. However, claims resulting from a “pollution incident” are excluded from most general liability policies, which leaves many of these contractors exposed to potentially uncovered claims. What pollutants are impacting your business?
Environmental Exposures Impacting Highway Construction Contractors
May include, but are not limited to: puncturing unknown underground utilities; release of oils/fuels from equipment; spills from mobile storage tanks; excavating through and/or spreading of unknown preexisting contaminated soil; using unknown contaminated soil as fill; storm water runoff; puncturing unknown illegally buried drums or containers; lead; asbestos; silica; no auditing of waste handling and disposal companies; natural resource damages; vapor intrusion; storage and/or transportation of raw materials; business interruption expenses; leaks from hydraulic fluid storage tanks; legal defense for 3rd party nuisance claims; illegal disposal of waste by 3rd parties at jobsites (midnight dumping); and more…
Environmental Claim Scenarios
- A highway construction contractor was preparing the site at a road construction project. Over the weekend, a major thunderstorm destroyed the storm water runoff control system, allowing sediment and fill materials to flow down grade through neighboring properties, roads, and into a nearby lake. The contractor was responsible for cleanup costs and natural resource damages, which exceeded $2,000,000.
- During a highway renovation project, dry weather and high winds produced substantial amounts silica dust, which drifted onto a nearby school property. Several students and facility members sued the contactor for bodily injuries. The contactor reported the claim to their GL carrier. However, the claim was denied due to the policy’s total pollution exclusion, leaving the contractor responsible for 100% of the loss.
- While setting up concrete forms at a road renovation site, the contractor accidentally drove a rebar stake through an unmarked underground pressurized fuel line, creating a high-pressure release. Due to safety concerns, local authorities evacuated a 2-block radius around the accident while it was being contained, shutting all businesses down within that radius. Total cost of the claim exceeded $1,500,000 for cleanup, and 3rd party business interruption expenses incurred by local businesses forced to temporarily evacuate.
- A highway contractor’s 2,500-gallon diesel mobile storage tank was accidentally punctured by an excavator, allowing over 1,000 gallons to release from the tank. Total cost for investigation and remediation exceeded $90,000.
- A highway construction contractor was preparing the site for an early spring road renovation project. Unknown to the contractor, they had several machines that were leaking diesel fuel at the jobsite. Months later, large areas of ground wouldn’t grow grass. After investigation, the leaked diesel fuel was discovered in the soils. Total cost for investigation and remediation cost the contractor over $150,000.
- While transporting material to a job, a concrete contractor got into an accident, causing most for their material to spill and enter a nearby stream. Costs for remediation and natural resource damages totaled over $150,000.
- A road excavation contractor unknowingly spread petroleum-contaminated soil across a road improvement project site during fill operations. The contractor was named in a lawsuit for exacerbating the extent of contamination. After lengthy deliberations, the contractor was eventually removed from the lawsuit. However, they incurred $50,000 in defense costs fighting the claim.
- During the construction of a highway overpass, the crane used to lift concrete barriers overturned. The accident ruptured the crane’s hydraulic hoses, spilling all its fluid onto the ground. The contractor was required to pay clean-up costs from the spill.
- A road contractor was hired to apply a sealing coat to a new concrete garage next to a hospital. During the application of the sealant, fumes migrated into the hospitals air intake system. Several patients and hospital staff were overcome by the fumes and became ill. Lawsuits were filed alleging bodily injury and asserting damages in excess of $1,000,000.
- A contractor was subject to cleanup costs after vandals opened an onsite mobile refueling tank causing diesel fuel to be released onto virgin soil.
Benefits of Environmental Liability Insurance
Unlike most liability exposures impacting Highway Construction Contractors, pollution losses are not a frequency risk, but rather a severity risk. Since every Highway Construction Contractor is impacted by environmental liabilities, consideration needs to be given to the economies of scale afforded with environmental liability insurance as part of your risk transfer strategy, versus self-insurance.
Furthermore, most commercial insureds only consider the remediation costs associated with a pollution event. However, often the clean-up costs are far less than other costs that often arise from the loss.
Overlooked Benefits of Environmental Liability Insurance:
- Defense Costs: Environmental liabilities are relatively new and very litigious. Even if you do nothing wrong you can still get named in a suit and must expense defense costs i.e. legal fees, environmental investigations, etc.
- Claim Management: All policies come with specialists to assist you in handling a claim. Who oversees communications, public relations, emergency response, government compliance, financial management, third party claims for bodily injury, property damage, natural resource damages….?
- Third Party Liability: Most of the time the cost to clean up the environmental problem(s) is far less than the associated claims that come in from 3rd parties for bodily injury, property damage and business interruption. You need to look at your client’s and neighbors that can be impacted if you or a sub-contractor cause an environmental loss.
Environmental Liability Insurance Coverages
Contractors Pollution Liability (CPL)
CPL protects the insured during covered contacting operations, performed by the insured or on their behalf, should they cause or exacerbate an environmental condition while performing work at 3rd party (customer) locations (i.e. away from any premises the insured owns, rents, leases or occupies).
Coverage can be written on a blanket basis to cover all the work performed by the insured, or on a job specific basis. Most policies can be endorsed to cover transportation pollution liability, mold, lead, and asbestos, defense outside the limits, off-site disposal coverage, and more.
Contractors incorporating CPL coverage as part of their risk transfer strategy, drive their growth and profits by marketing the benefits CPL coverage affords in reducing job interruption due to environmental issues. A major environmental liability exposure faced by all contactors lies in who they are doing business with. If there is an environmental loss at a job site, innocent contractors can and do get named in lawsuits. Do your subs/vendors have CPL insurance if they cause an environmental loss?
Transportation Pollution Liability
Generally, Business Auto or Truckers policies will exclude pollution losses arising from spills or other releases of transported cargo. Transportation pollution liability affords coverage during the loading, unloading and transportation, for a spill, release or sudden upset and over turn of transported cargo.
Premise Pollution Liability (PPL)
PPL is for contractors that own, rent, lease, operate or have any other insurable interest in real property (a fixed site facility such as a contractor’s equipment storage yard & shop, batch plants, cement manufacturing/mixing plant….) that can be susceptible to pollution liabilities that actually or allegedly originated from the insured property.
Coverage can include: Pre-existing unknown pollution, new pollution conditions, first party on-site clean up, third party bodily injury, property damage, business interruption and extra expense, off site cleanup costs, legal defense expenses, transportation pollution liability, offsite disposal coverage…. Multi year term policies can be negotiated.
Incidental Professional Liability
Professional exposures are generally excluded from General Liability and monoline Contractors Pollution Liability policies. During their normal operations, contractors face all types of professional exposures. They may make slight adjustments on the provided plans to get the job done properly, they may supervise subcontractors, or provide other recommendations which could potentially be questioned in the event of a claim. In the event of a professional claim, will your insurance provide coverage?