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 Glass Contractors
May include, but are not limited to: mold resulting from water intrusion or moisture encapsulation; storm water runoff; vapor intrusion; completed operations exposures including faulty installation; fumes, emissions, or spills of chemicals used during construction (glazing liquids, finishers, sealants, adhesives, solvents, curing compounds); spills from mobile storage tanks; release of materials as a result of vandalism; lead paint; illegal disposal of waste at a jobsite by unknown 3rd parties; asbestos; product transportation…
Environmental Loss Examples
- While installing new windows, a commercial contractor unknowing drilled through a small water pipe located behind a wall. The contractor did not realize the leak occurred, and over time a substantial amount of mold grew between the walls before anyone noticed. The contractor was held liable for the clean-up costs and a number of 3rd party bodily injury claims. Total cost of the loss exceeded $250,000.
- A commercial glass contractor installed new windows at a property that had been damaged by a recent storm. 6-months after the job mold was discovered in the building. The property owner sued a number of the contractors, including the glass contractor for faulty installation. After further investigation, it was determined that the glass contractor was not at fault and the suit was dropped. However, the glass contractor had already paid over $40,000 in legal defense costs.
- A commercial glass contractor was transporting a large amount of glazing liquid to a large commercial construction site. During transportation the contractor go into an accident. Several of the containers broke, and the glazing liquid released into a nearby stream. Costs for remediation and natural resource damages exceeded $120,000.
- A glass installation contractor was contracted to install the window systems on a new research laboratory for a university. The general contractor allowed for changes to the specified caulk used around the windows. The caulk was incompatible with the building façade materials. Although the glazier conducted and documented structural proof tests to ensure that the window, frames, caulk and substrate were water and air tight, the caulk degraded quickly. As a result, adhesion was lost, and water intrusion allowed mold to grow. Cost to remediate the mold exceeded $75,000.
- While working on a property renovation project, a glass contractor removed debris to install new windows. It was later discovered that the removed material contained lead based paint. The glass contractor was held liable for “exacerbating” the situation. Remediation, 3rd party bodily injury claims, and legal defense costs exceeded $1,000,000.
Benefits of Environmental Liability Insurance
Because pollution exposures are a severity risk (versus a frequency risk), most glass contractors lack the financial strength to self-insure their environmental liabilities. Since every glass 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.
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. 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.
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.
Environmental Impairment Liability (EIL)
EIL is for contractors that own, rent, lease, operate or have any other insurable interest in real property (i.e. an operating facility that may include onsite equipment storage, fuel tanks, offices, etc.) 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, 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.
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?