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.
Often times commercial insureds 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 insureds exposed to potentially uncovered claims. What pollutants are impacting your business?
Potential Environmental Exposures
May include, but are not limited to: Emulsifiers; storm water runoff; mold; transportation of raw materials; silica; asbestos; natural resource damage; storage of raw materials; illegal disposal of waste by 3rd parties at jobsites (midnight dumping); release of oils/fuels from equipment; spills from mobile storage tanks; exacerbating preexisting contaminated material; puncturing underground utilities or storage tanks; ground water contamination; pollution from neighboring properties migrating onto yours; historical contamination from past uses of the properties; vapor Intrusion; easements that cross the property which may leak or spill hazardous materials; adverse reactions and interactions of chemical compounds that accidentally commingle during a fire; No emergency and spill control plans; nuisance odors; devaluation of real estate asset due to buyers uncertainty concerning possible contaminants; Silica; etc.
Environmental Claim Examples
- While transporting material to a job site, a concrete additive contractor got into an accident which caused most for the raw materials to enter a nearby stream. Remediation costs and natural resource damages totaled over $250,000.
- A concrete contractor laid an undercoat of slag while creating a new runway for an airport in the Midwest. After the runway was completed, it was discovered that the slag was contaminated and was leaching pollutants into a tributary of one of the Great Lakes. Both the concrete and concrete additive contractors were named, with the total cost of the claim exceeding $400,000.
- A concrete additive manufacturer began expansion of the production line area. During excavation, oily soils with a petroleum odor were discovered. Further investigation uncovered an old, undocumented sludge-drying pit, which the previous owner used back in the 1940’s. The manufacturer had to remove and remediate the soils at his expense. Cleanup costs exceeded $300,000.
- The concrete secondary containment of a 10,000-gallon diesel aboveground storage tank was cracked. A release from the tank spilled 8,000 gallons into the containment. The diesel seeped into the underlying soils and required costly excavation and removal. The total cost for investigation, removal and disposal exceeded $320,000.
- A concrete additive contractor worked on a new commercial property’s foundation. 2-years after the job was completed, mold was discovered in the building. The additive contractor was named in the suit, which included other contractors that worked on the project. After a lengthy legal dispute, the concrete additive contractor was removed from the suit. However, they had already expensed over $100,000 in legal fees.
- During the night, an unknown party illegally placed drums of hazardous waste into a dumpster at a commercial company’s building. The containers were not leaking, but the cost to properly dispose of the illegally dumped waste cost roughly $50,000.
- A concrete additive manufacturer hired a waste hauler to transport their products. During transportation the hauler got into an accident, causing the truck to overturn and spills its load into a nearby stream. Under CERCLA, the concrete additive manufacturer must contribute for their apportionment of the load for cleanup cost since federal law states that you own your waste from cradle to grave. Cost to settle the claim for the was $700,000.
- While performing construction, a cement truck started leaking hazardous materials on the roadway and into a nearby grassy recreational area. Before the affected area was cleaned, it started to rain heavily. An emergency contractor was called in to prevent the spread of materials and implemented a cleanup of the affected areas.
Overlooked Benefits of Environmental Liability Insurance
Unlike most liability exposures impacting Concrete Additive Contractors, pollution losses are not a frequency risk, but rather a severity risk. Since every Concrete Additive 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.
Three Overlooked Benefits
- 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 Products
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. Policies can be endorsed to cover transportation pollution liability, mold, lead, asbestos, defense outside the limits, off-site disposal coverage, etc. 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.
Environmental Impairment Liability (EIL)
EIL is for insured’s that own, rent, lease, operate or have any other insurable interest in real property (i.e. manufacturing facility, or operating facility that may include onsite equipment and material storage, fuel tanks, offices, etc.) 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.