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. What pollutants are impacting your business?
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 Fire Suppression System Contractors
May include, but are not limited to: asbestos; mercury; lead; vapor intrusion; Repair, Renovation and Painting (RRP) for child occupied facilities; completed operations exposures including incomplete line hookup or improper system construction causing spills or emissions; fumes, emissions or spills of chemicals used during construction (finishers, sealants, adhesives, solvents, curing compounds); water contamination; raw materials stored at job sites; causing build up or release of airborne bacteria; mold resulting from water intrusion or moisture encapsulation; spills from mobile storage tanks; site preparation/excavation work through preexisting contaminated soil or impacting utilities or underground storage tanks; old septic systems; raw sewage ruptures; stormwater runoff….
Environmental Loss Examples:
- A contractor used a hole-saw while installing a new fire suppression system at an office building. Unknown to the contractor, the saw made a small puncture on the water line, allowing water to slowly drip from the pipe. Months later a tenant noticed dampness on the walls. After further investigation, the leak was discovered and mold had developed. The contractor was responsible for cleanup costs, and 3rd party business interruption, as the tenants were forced to shut-down while the mold was being remediated. Total cost of the claim exceeded $750,000.
- A university contracted a fire suppression system contractor to update the fire system in their chemistry building. While dismantling piping, the contractor discovered a mercury spill that resulted in mercury contamination throughout the building. Costs to clean up the contamination and restore the building to its original condition was $350,000. The fire suppression system contractor was named in the suit for exacerbating the mercury spill.
- The fire suppression system at a manufacturing facility accidentally turned on and began spraying through the entire building. Water from the system mixed with non-compatible chemicals, creating a hazardous vapor cloud throughout the building. Several employees were rushed to the hospital and treated for exterior and internal burns from inhaling the vapor. Total cost for 3rd party bodily injury, property damage, business interruption, and cleanup exceeded $5,000,000.
- A fire suppression system contractor was sued when mold was discovered in a commercial building they had worked in the year before. After further investigation, the mold was determined to have developed from faulty work by a window installation contractor. The fire suppression system contractor was removed from the suite. However, they had already expensed over $45,000 in defense fighting the claim.
- A fire suppression system contractor performed maintenance at a local business. As this was a seasonal business, it was several months before anyone noticed that a leak had developed in the system piping. When the owners returned after vacation, they found mold growing throughout the building. The entire building had to be gutted and refinished, costing the Insured well over $600,000.
- A contractor exacerbated an existing environmental condition while updating and re-piping a commercial building. The contractor was named in a lawsuit for exacerbating and spreading of asbestos material throughout the building. Total cost of the claim for cleanup and legal defense exceeded $100,000
Benefits of Environmental Insurance
Unlike most liability exposures impacting fire suppression system contractors, pollution losses are not a frequency risk, but rather a severity risk. Since every fire suppression system 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.
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 will be impacted if you or a sub-contractor/vendor create 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.
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, 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.
Transportation Pollution Liability
Generally, commercial auto 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.
Environmental Impairment Liability (EIL)
EIL is for contractors that own, rent, lease, operate or have any other insurable interest in real property 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; offsite cleanup costs; legal defense expenses; transportation pollution liability; offsite disposal coverage…. Multi year term policies can be negotiated.
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?