environmental Strategist, between the lines: Every business is impacted by environmental exposures and 98% of the business in the United States do not have the financial strength to self insure their environmental liabilities.
Below is a random sampling of environmental losses experienced by contractors.
Concrete Contractor
- Laid an undercoat of slag while creating a new runway for a large international airport in the Midwest. After the runway was complete, it was discovered that the slag was contaminated and was leaching pollutants into a tributary of one of the Great Lakes. The claim exceeded $400,000.
- A concrete contractor related a claim where he was driving rebar stakes into the ground at a gas station when setting up concrete forms and he punctured the fuel line. The station did not pick up the leak until later in the day and he was involved in a claim that his insurance denied due to the pollution exclusion.
HVAC Contractor
- Installed a HVAC system in a new office building. Within weeks after opening, the building had to close due to occupants being overcome with breathing problems and headaches. The contactor was one of many parties sued. During discovery, it was determined that the HVAC system was installed exactly as the specs described. However, the contractors had to absorb over $250,000 in uncovered defense costs because he had no environmental coverage, therefore, no defense costs.
- Improper venting of heating system results in carbon monoxide poisoning.
- Damage to compressor by maintenance contractor results in the release of refrigeration gases and the subsequent condemnation of perishable goods by FDA.
Paving Contractor
After laying the “tack” coat of Naphtha in preparation for the final coat of blacktop on a new road job, a heavy rain hit, washing the toxic material into a drainage ditch along the road and, subsequently, into a stream. The clean up of this claim cost over $150,000.
Mechanical Contractor
A contractor was called to a site where an underground storage tank was being removed. He was contracted to loosen a heavy coupling for which the tank removal company did not have the adequate tools. Several days after leaving the site, having shaken the pesky coupling free, the contractor was notified that he was being sued for the tank leaking underground, spilling hundreds of gallons of gasoline into the soil. It seems that the contractor dropped a heavy wrench down the intake spout of the fiberglass tank, cracking the bottom, and causing the leak. Total costs to defend himself (He alleged that there was no way of knowing whether something else caused the leak.) and pay damages exceeded $250,000.
Painting Contractor
While painting the interior of a nursing home, the contractor was sued by over a dozen residents alleging that they were overcome by fumes as a result of inadequate venting. Total claim was over $200,000.
Janitorial contractor
Working at a mall, a cleaning company inadvertently mixed cleaners, one ammonia based, the other chlorine based. The result was a toxic cloud of ammonia chloride that caused respiratory distress in dozens of shoppers. Total cost of this claim: $175,000.
Pipeline contractor
A contractor suffered a large claim when he installed a new storm water drainage system for a municipality in MI. Not long after completion a very heavy rain struck the city, causing a backup of water with human waste into the basements of over 100 high-priced homes. The contractor was sued for installing an inadequate system and the environmental insurance carrier paid over $800,000.
Excavation & Grading
- A grading contractor is working on a site preparation project. During the rough grading of the site, the contractor was spreading soil throughout the site to the engineers specifications. Unknowingly, the contractor spread a pocket of highly concentrated contamination in the process of rough grading. The entire site was now covered with one inch to one foot of contaminated soil. The site owner files a suit against the contractor for spreading the contamination. The one million dollar claim was denied by the general liability carrier due to a pollution exclusion.
- One general contractor was asked to move dirt at a Railroad yard. He took it as directed to a landfill.
- Later he was pulled into a claim as the soil was polluted by a cargo spill in the past that the contractor had no knowledge of. He was dismissed from the claim, but his legal expenses were uninsured.
- While completing the finish grading after installing a UST gas tank, the contractor operator ran over a riser of another existing gas tank creating a slight leak. This went undiscovered over the weekend. Our reserves are $50,000 plus.
Street and Road
- A street and road contractor is working on a road widening project in a suburban area. The contractor is excavating soil along a two mile stretch of highway. The soil was not tested prior to working on the site. The contractor’s employees are unknowingly being exposed to elevated levels of lead which are contained in the soil adjacent to the road. The elevated levels of lead are due to years of automobile exhaust that until the late 1970s contained lead. A worker begins to feel sick and seeks the consultation
- of a family doctor, who immediately diagnoses that the worker has elevated lead levels, the source of which is traced to the jobsite. The worker files a workers compensation claim which is covered under the contractor’s standard workers compensation policy. The worker also files a suit against the state for negligence and improper working conditions. The contractor’s general liability insurance, with a limited pollution endorsement, denies the claim because it is a non-sudden/gradual claim, as well as a third party action over situation, both of which are excluded under standard limited pollution endorsements.
Residential Contractor
A residential contractor is constructing new homes in a suburban area. The residential contractor is acting as the prime contractor, and has numerous subcontractors working on site, as is the case in any typical residential development construction project. Unknown to the prime contractor, a subcontractor had disposed of a half-full container of solvents containing a large concentration of toluene at the project site. The subcontractor placed the container in a municipal waste dumpster located on the project site on a Friday afternoon. On Sunday, two children from the neighboring community are playing on the project site. The two children open the dumpster and jump inside, becoming asphyxiated immediately from the toluene vapors that had concentrated over the past two days. The children were pronounced dead later Sunday evening after they were found in the closed dumpster. The prime contractor is sued by the families of the deceased children for over two million dollars. The prime contractor’s general liability policy has a limited pollution endorsement; however, the claim is still denied because the accident was deemed to be the subcontractor’s fault, and the limited pollution endorsement excludes the activities of subcontractors.
Sheetmetal Contractor
A sheetmetal contractor is replacing ductwork in a hospital. The contractor had removed the old ductwork composing the return air plenum and stored the metal waste in a designated room in the hospital. While removing and storing the old ductwork, a bacteria known as aspergillus is released into the atmosphere. Aspergillus is a bacteria that most of us breathe daily without a problem; however, immuno-suppressed people cannot be exposed to this type of bacteria. The now-airborne bacteria entered the heating ventilation and air conditioning (HVAC) system and was dispersed through the hospital. The bacteria made its way to the area of the hospital where immuno-suppressed patients are kept. The exposure to the bacteria killed two children. The source of the bacteria was traced to the sheetmetal which was removed by the contractor. Claims in excess of five million dollars were the resultant of this scenario. The general liability carrier denied the claim due to a pollution exclusion.
Electrical Contractor
Another contractor who was an electrician indicated that he had environmental problems when he ran into asbestos while drilling holes to run line. He was remodeling one store at a strip mall type of shopping center. He had to stop work and call in an asbestos contractor. Even though his exposure was incidental, the store occupying the retail space next to his work was closed for a day. He had a liability claim for the business interruption losses of the adjacent store.
Utility Contractor
- A utility contractor is installing electrical lines and poles. The contractor is utilizing an auger for pole installation. The auger hits an underground municipal sewage line during construction. The sewage line spills onto neighboring commercial properties and causes a small residential area to be evacuated. The cleanup of the spill cost over one hundred thousand dollars per day and lasts for three days. The business interruption suits total one half a million dollars. The impeding claim is denied by the general liability carrier due to a pollution exclusion.
- A utility contractor is involved with removal and replacement of residential gas meters. Three months
after the contractor had completed the operations, a small amount of mercury is discovered in one of
the homes. The family is evacuated and treated by a doctor for the exposure to mercury, which is very
harmful to the brain and kidneys. The EPA tests all homes in the area and seven more turn up with
mercury contamination. Eventually after a long investigation involving more than six public agencies,
the original house is demolished and disposed of as hazardous waste. The claims expenses have yet to be
finalized.
Transportation
For transportation, the typical auto policy does not have pollution coverage’s. The Business Auto policy pollution exclusion and a copy of the MSC 90endorsement (as many contractors auto policies have this endorsement on their policy) limit pollution coverage. The MCS 90 endorsement will pay the third party for the environmental loss, but that the money paid must be refunded and returned to the Insurance company by the CONTRACTOR, if there was no pollution coverage on the underlying auto policy.
Renovation Contractor
A contractor is renovating the façade of a five story building. The new outer façade material is a portland cement based material requiring an epoxy curing compound for weather sealing. The contractor applies a concrete sealant to the building per the material requirements. Months later, employees working in the building begin to complain of headaches and nausea. It is determined that the concrete curing compound was the source of vapors which were seeping through windows and cracks in the inner façade. The contractor is sued for causing an indoor air quality hazard, resulting in hundreds of thousands of dollars in bodily injury claims and over one million dollars in business interruption claims. The contractor’s general liability policy denies the claims citing an absolute pollution exclusion in the policy. The contractor must defend and pay the claims.
Environmental loss examples supplied by American Safety Insurance Services, Inc.