What is a Pollutant?
Any material, substance, liquid, product, etc… which is introduced into an environment for other than its intended use / purpose. In other words, something that ends up where it doesn’t belong. Fresh water, cheese, and milk have all been classified as pollutants by Insurance Carriers under various circumstances.
Most commercial insureds assume that claims arising from their operations are covered by the general liability policy. However, claims resulting from a “pollution incident” are excluded from most general liability policies, which leaves commercial insureds with gaps in coverage. What pollutants are impacting your business?
Environmental Exposures Impacting Concrete Suppliers
May include, but are not limited to: Silica; Mixers; Release of oils/fuels from equipment; Spills from mobile storage tanks; Chemical burns from wet concrete; Products Pollution liability; Storm water runoff; Pollution cleanup and third party liabilities that occur as a result of a fire; Contamination from neighboring property migrating onto yours; No auditing of waste handling and disposal companies; Natural resource damages; Vapor intrusion; Storage and/or transportation of raw materials; Hydraulic fluid leaks; Uncertainties about the historical use and conditions of property; Obsolete and remote equipment storage (bone) yards where contaminants percolate into the soil/groundwater; Nuisance odors; No emergency response training for employees; Spills and leaks from the storage and handling (loading/unloading) of raw material containers such as drums, totes or bags from vehicles, rail cars barges…; Improper characterization of hazardous waste….
Environmental Claim Scenarios
- A waste hauler was hired to transport used equipment oil and fluids to a 3rd party recycling facility. During transportation, the hauler got into an accident, causing the contents of the tanker to spill into the soil and a nearby creek. Under Federal law (CERCLA) you own your waste from cradle to grave, so the concrete supplier had to pay their apportionment of the $2,000,000 expense for remediation.
- Over the weekend, a major thunderstorm caused the storm water runoff control system to fail at a Ready-Mix facility, allowing sediment to flow down grade through neighboring properties, roads, and into a nearby lake. The owner was responsible for cleanup costs, natural resource damages, and 3rd party property damage claims, which exceeded $3,500,000.
- Contaminants were discovered when testing water quality at a new residential development. The developers sued a nearby concrete supplier, who’s property was up gradient from the development. After extensive testing it was determined that storm water runoff from the concrete suppliers property was the source of the pollution. Total cost to the concrete supplier exceeded $1,000,000.
- 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. Total cost for investigation, removal, and disposal exceeded $275,000.
- During a particularly dry spell, heavy winds allowed silica dust to drift from a concrete supplier’s property into a neighboring community. The insured filed a claim with their GL carrier for the resulting property damage and bodily injury, but the insurer denied the claim, due to the policy’s pollution exclusion. The concrete supplier had to cover 100% of the loss, which totaled over $1,000,000.
- A Ready-Mix Company had a location on their property where they would deposit extra cement and let it dry out before disposing of it. Over several years, storm water runoff took contaminants from the drying area into the ground water. The ground water contaminated some municipal drinking water wells. Cost of remediation, third party bodily injury, legal fees… exceeded $2,000,000.
Overlooked Benefits of Environmental Liability Insurance
Unlike most liability exposures impacting Concrete Suppliers, pollution losses are not a frequency risk, but rather a severity risk. Since every Concrete Supplier has numerous 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 the clean-up costs are far less than other costs that can arise from the loss.
- 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 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: Most 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
Premise Pollution Liability (PPL)
PPL is for commercial insured’s susceptible to economic loss from pollution conditions that actually, or allegedly originated from their owned or leased properties. This coverage is for those who own, operate, lease, or have any other insurable interest in real property and the operations. Coverage can be written in a variety of ways addressing unknown preexisting conditions or new conditions. Coverage can include third party bodily injury and property damage along with business interruption and extra expense, on and off site clean-up costs, legal defense expenses, non-owned disposal sites, transportation and more. PPL can be offered on multi-year terms, and multiple properties can be packaged together on a single policy. Most PPL policies also cover above ground storage tanks.
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.
Contractors Pollution Liability (CPL)
Contractors Pollution Liability (CPL) is for insureds that perform contracting work away from any premises they own, rent, lease or occupy, should they cause or exacerbate an environmental condition while performing their contractor services.
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?
Underground Storage Tanks
Financial responsibility requirements ensure that owners and operators of underground storage tank systems have the ability to financially handle a release from an underground storage tank. The responsibility encompasses the ability to pay funds for corrective action and third party bodily injury and property damage from non-sudden and sudden and accidental releases from a regulated underground tank system.
Property Transfer Liability
When buying, or selling property there can be unknown preexisting environmental conditions. Since a Phase I or Phase II survey cannot guarantee uncovering all potential environmental liabilities, insurance companies have created property transfer insurance. This coverage protects the new owner or any party with an insurable interest, against unknown environmental conditions that may be discovered during the policy period, that were not caused by the new owner.
Property transfer coverage assists to keep the property at its maximum value while allowing the insured to negotiate more favorable loan terms than property not supported by this coverage.