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 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 most contractors exposed to potentially uncovered claims. What pollutants are impacting your business?
Environmental Exposures Impacting Pressure Cleaning Contractors
May include, but are not limited to: Mold; Silica; Asbestos; Lead; Spills during the loading, unloading, and transportation of cargo; Damaging fuel tanks, hydraulic fluid lines, boilers, utilities, or other raw materials stored at customer locations; Cleaning vehicles that contain unknown pollutants such as lubricants, which spread due to power washing; Water run-off from jobsites; Faulty hose hook-up and/or pump failures; Natural resource damages; Accidentally using contaminated water; Vandalism; 3rd party business interruption; Odor drifting; Vapor intrusion; Illegal disposal of waste by 3rd parties; Non-owned disposal site liability; Pollution events impacting your operating facility; Containment system failures; Legal defense for 3rd party nuisance claims; failure to identify or mischaracterize contamination during surveys; exacerbation of preexisting contamination during cleanup efforts; failure to notify public and/or EPA of contamination or releases; hazardous air emission from incomplete abatement; and more…
Environmental Claim Scenarios
- A power washing company was sued when mold was discovered within a building they had recently worked at. The contractor was responsible remediation, 3rd party bodily injury and property damage, as well as 3rd party business interruption, as the customer had to suspend operations while the mold was being remediated. Total cost of the claim exceeded $600,000.
- An emergency clean-up contractor was performing power washing services at a petroleum spill site. While working, the contractor’s containment system failed, allowing the petroleum to rush onto a neighboring property (which included a wetland). Total cost of remediation, 3rd party property damage, and natural resource damages exceeded $350,000.
- A contractor used high pressure cleaning equipment to clean a building’s HVAC system. It was later found that the ductwork was home to a dangerous fungus, which spread throughout the building during the cleaning. A number of employees in the building became infected with the fungus. Some of which were critically infected. The contractor was found liable for the spread of the fungus and faced bodily injury and property damage claims in excess of $1 million.
- 6-months after completing a cleaning job, the customer discovered mold in their building. The customer sued the cleaning contractor for the cost of remediation. After further investigation, it was determined that the cleaning contractor was not responsible for the mold, and was removed from the suit. However, the contractor had already expensed over $20,000 in legal fees.
- While cleaning above ground storage tanks, the cleaning contractor accidentally impacted a valve, which caused fuel to escape the tank and into the soil. Cost to remediate the contamination was over $75,000.
- A power washing contractor was transporting equipment and materials to a jobsite and got into an accident, which caused fuel being hauled for the power washers to spill into the surrounding soils. Claims for investigation, remediation, and natural resource damages were in excess of $50,000.
- While cleaning a commercial kitchen, the contractor unknowingly sprayed areas coated with lead based paint. Lucky for the contractor, the exacerbation of the lead based paint was discovered shortly thereafter. However, the total cost to remediate the lead paint was $25,000.
Benefits of Environmental Liability Insurance
Because environmental losses are a severity risk, rather than a frequency risk, the majority of power washing contractors lack the financial strength to self-insure their potential environmental liabilities. Since every power washing contractor has notable environmental exposures, consideration to the economies of scale afforded with environmental liability insurance as part of your risk transfer strategy, versus self-insuring.
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, 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 contractors 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. Do your subs/vendors have CPL insurance if they cause an environmental loss?
Transportation Pollution Liability
Generally, Business Auto policies will exclude pollution losses arising from spills or other releases of their cargo. Transportation pollution liability affords coverage during the loading, unloading and transportation, for a spill, release or sudden upset and over turn of transported cargo. Make sure you do not confuse the MCS-90 endorsement as being transportation pollution liability coverage, it is not, and the insurance carrier reserves the right to subrogate back against the insured for cost to clean up a release of the transported cargo.
Environmental Impairment Liability (EIL)
The pollution exposures impacting your contracting work in the field are well documented, but have you considered the pollution risks impacting your owned, rented or leased operating locations? Many contractors have physical locations that support their work in the field, which can include offices, storage buildings, equipment/vehicle maintenance facilities, bulk fuel storage, outdoor storage yards, raw materials, etc.
Environmental Impairment Liability (EIL) is for contractors that are susceptible to economic loss caused by pollution that actually or allegedly originated from their property. Sometimes referred to as Pollution Legal Liability (PLL), this coverage is for contractors who own, operate, lease, or have any other insurable interest in real property and the operations.
Coverage can be written in a variety of ways addressing unknown preexisting conditions or new conditions. Coverage can include third party bodily injury and property damage along with business interruption and extra expense, on and off site cleanup costs, legal defense expenses, non-owned disposal sites, transportation and more. EIL can be offered on multiyear terms. Most EIL policies cover above ground storage tanks.
Professional Liability
Professional exposures are generally excluded from General Liability and Contractors Pollution Liability policies. In the course of their normal operations, contractors face all types of professional exposures. They may make slight adjustments on plans, 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?