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.
Many 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 of these insureds exposed to potentially uncovered claims. What pollutants are impacting your business?
Environmental Exposures Impacting Flooring Contractors
May include, but are not limited to: PFAS Chemicals; Failure to identify or mischaracterize contamination, such as mold, while performing work; Hazardous air emission from lacquer, varnish, sealants, formaldehyde and other chemicals; Silica; Disturbing lead based paint; Legal defense for 3rd party nuisance claims; Puncturing utilities within a building, such as water pipes, fire supersession systems, etc.; 3rd party business interruption; Asbestos; Spills or raw materials at jobsites or during transportation; Faulty installation, allowing mold to develop; No auditing of 3rd party disposal companies for your unused raw materials and job waste; and more…
Environmental Claim Scenarios
- While installing a new gym floor at a local high school, inadequate containment allowed fumes to exit the gym and spread throughout parts of the high school. Several students were rushed to the hospital, with one student being in severe condition. Total cost for 3rd party bodily injury claims exceeded $500,000.
- A flooring contractor hired a waste hauler to transport used materials (lacquer, sealants, varnish, etc.) to a 3rd party disposal facility. During transportation, the hauler got into an accident, causing the truck to overturn and spills its load. Under CERCLA, the contactor 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 insured was over $100,000.
- Before rehabbing an old wood floor, the flooring contractor tested for lead based paint. The test came back negative, so the contractor proceeded with reconditioning. A couple days into the project it was discovered that some of the paint did contain lead, which many people had been exposure to over the previous few days. Total cost for remediation, 3rd party bodily injury, 3rd party property damage exceeded $350,000.
- While installing new flooring at a commercial building, a contractor unknowingly punctured a small water pipe beneath the floor. A year later, a massive amount of mold was discovered within the floor and walls of the commercial building. The flooring contractor was found liability for bodily injury, remediation, and business interruption, as the commercial tenants were forced to suspend operations while the mold was being remediated. Total cost of the claim was over $1,000,000.
- While working on an upper floor in a commercial building, a contractor’s saw to cut through the floor, inadvertently disturbing and releasing asbestos-containing insulation material. The contractor had to pay cleanup costs and 3rd party liability claims in excess of $90,000.
Benefits of Environmental Liability Insurance
Unlike most liability exposures impacting Flooring Contractors, pollution losses are not a frequency risk, but rather a severity risk. Since every Flooring 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 the clean-up costs are far less than other costs that often arise from the loss.
Overlooked Benefits of Environmental Liability Insurance:
- Defense Costs: Environmental liabilities are relatively new and 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 oversees 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
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. 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.
Environmental service providers 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 environmental service providers that own, rent, lease, operate or have any other insurable interest in real property (a fixed site facility such as a service garage and shop, transfer/recycling facility, landfill….) 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.