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 Commercial Janitorial Contractors
Include, but are not limited to: Spills during the loading, unloading, and transportation of cleaning chemical and equipment; Contaminating water sources; PFAS chemicals; Exacerbating pre-existing unknown pollution conditions; 3rd party business interruption; Odor drifting; Illegal disposal of waste by 3rd parties; Legal defense for 3rd party nuisance claims; Mold; Lead; Asbestos; Non-owned disposal site liability; Pollution events impacting your owned operating facility; Adverse reactions and interactions of chemical compounds; No emergency and spill control plans; etc.
Environmental Claim Examples
- While transporting cleaning chemicals and supplies to a jobsite, a commercial janitorial contractor got into an accident, which resulted in the cargo catching fire. The burning cargo created toxic fumes and when the fire department put out the fire it created contaminant runoff that flowed into a nearby stream. Cost to remediate the site, third party bodily injury & property damage, and natural resource damages exceeded $800,000.
- During the night, a commercial janitorial employee accidentally punctured a hydraulic fluid hose while cleaning at commercial property. Over 50 gallons of hydraulic fluid were released before the leak could be contained. Total cost of the cleanup was only $3,000. However, they also had to pay their customer over $10,000 in business interruption costs because the customer was not able to operate the next day while the cleanup was taking place.
- A commercial janitorial contractor accidentally mixed non-compatible chemicals for cleaning. The fumes from the chemicals forced the evacuation of all of the building tenants while clean up took place. Third party bodily injury, property damage, and business interruption claims were filed against the janitorial service company, which exceeded $1,000,000.
- While working at an office building, a commercial janitorial employee accidentally spilled cleaning chemicals into a salt-water fish tank that was in the lobby, killing the aquatic life. The janitorial contractor filed a claim with their GL carrier for the price to replace the fish & coral, which totaled over $50,000. However, the claim was denied as the cleaning chemicals were determined to have “polluted” the saltwater aquarium.
- While working at a shopping center, an employee of a janitorial company inadvertently mixed ammonia and chlorine-based cleaning products. The mixture resulted in a toxic cloud of ammonia chloride that caused respiratory distress in dozens of shoppers and a shutdown of the center for a period of time. The contractor was held responsible for the defense of bodily injury claims. Additionally, numerous business interruptions claims were filed by tenants.
Unlike most liability exposures impacting Commercial Janitorial Contractors, pollution losses are not a frequency risk, but rather a severity risk. Because all Commercial Janitorial Contractors have notable environmental exposures, 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 times the clean-up costs are far less than other costs that can arise from the loss. Three of the most overlooked benefits of investing in Environmental Liability insurance include;
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 have to 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 is in charge of communications, public relations, emergency response, government compliance, financial management, third party claims for bodily injury, property damage, natural resource damages….?
- Third Party Liability: The majority of the time the cost to clean up the environmental problem/s is far less than the associated claims that come in from third 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/vendor cause an environmental loss.
Environmental Liability Insurance Coverages
Contractors Pollution Liability (CPL)
Contractors Pollution Liability (CPL) insurance protects the insured should they cause or exacerbate an environmental condition while performing their contractor services. CPL protects the insured for covered operations performed by or on behalf of the insured, while operating away from any premises they own, rent, lease or occupy.
CPL can be offered on a claims made or occurrence basis. Coverage can be written on a job specific basis, or on a blanket basis to cover all the work performed by the insured. 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?
ENVIRONMENTAL IMPAIRMENT LIABILITY (EIL)
EIL is for janitorial contractors that own, rent, lease, operate or have any other insurable interest in real property (a fixed site facility such as a shop, asphalt plants….) 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.
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 overturn of transported cargo.