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 Drywall Contractors
May include, but are not limited to; vapor intrusion; lead; asbestos; mold; silica; PFAS chemicals; impacting utilities while working at a property; no auditing of waste handling and disposal companies; transportation & storing of raw materials; adhesives and compounds used during installation; failure to effectively monitor and maintain safe working conditions; rehabilitation projects at older properties; nescience claims; failure to property identify hazards such as mold while working at a jobsite; 3rd party business interruption claims; natural resource damages, installing contaminated drywall….
Environmental Claims Scenarios
- While working on a historical property, a drywall contractor used a hole saw to cut through a wall. Unknown to the contractor, the saw inadvertently disturbed and released asbestos-containing insulation material. The contractor had to pay cleanup costs for the asbestos fibers released throughout the building, costing in excess of $40,000.
- A drywall contractor was hired to install drywall at a property that had just been restored from flooding. A month after the job had been completed, mold was discovered between the walls where the drywall contractor had worked. After further investigation, it was found that the mold was due to a failure made by the restoration contractor. The Drywall contractor was removed from the suit. However, they had already expensed over $25,000 in legal defense.
- A drywall contractor working on a project to build a new multi-story building nicked a water pipe with a drywall screw while working on the 4th floor. This caused a slow leak behind the drywall that went down to the 1st floor resulting in mold growth throughout the floors below. The affected drywall was removed and replaced, and the mold remediated at a cost of $200,000.
- A residential construction company was sued when mold was discovered in multiple spec homes built by the contractor and its subs. Because it could not be determined which party was responsible, the general contractor and a number of its subs were all held liable and were ordered by a court of law to share in the mold remediation costs.
- A child who lived in an apartment building constructed in the 1970s was diagnosed with lead poisoning. The renovation of the building by a drywall contractor allegedly caused unsafe conditions for the child, and the child’s parents filed a bodily injury claim against the drywall contractor. As part of the claim investigation, an expert was hired and other potential causes for the lead poisoning were discovered. As a result, the drywall contractor wasn’t held liable. However, they had already spent over $35,000 in legal fees fighting the claim.
- A drywall contractor unknowingly installed contaminated dry wall on numerous houses. After a period of time, homeowners began to have breathing issues and metal piping was corroding. Suits were filed against the general contractors along with the drywall contractor. The accumulated suits caused for the drywall contractors bankruptcy.
Benefits of Environmental Liability Insurance
Unlike most liability exposures impacting Drywall Contractors, pollution losses are not a frequency risk, but rather a severity risk. Because all Drywall 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 often arise from the loss.
Three 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.
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.
Environmental Impairment Liability (EIL)
EIL is for contractors that own, rent, lease, operate or have any other insurable interest in real property (a fixed site facility such as a 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.
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.
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.
Incidental Professional Liability
Professional exposures are generally excluded from General Liability and monoline Contractors Pollution Liability policies. In the course of 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?