Residential Contractors

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 Residential Contractors 

Include, but are not limited to:  storm water runoff;  vapor intrusion;  impacting underground storage tanks; 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);  improper handling and disposal of CCA Treated lumber;  HVAC causing build up or release of airborne bacteria;  mold resulting from water intrusion or moisture encapsulation;  spills from mobile storage tanks;  release of oils/fuels as a result of vandalism;  site preparation/excavation work through preexisting contaminated soil or impacting utilities;  lead paint; illegal disposal of waste in unsecured roll of boxes;  unknowingly using contaminated soil as fill;  spills and releases from application of asphalt, asbestos; silica  and more… 

Environmental Claim Scenarios

1. An excavation contractor was preparing a site for a new residential home. During the weekend, heavy rains caused the site containment barriers to fail, allowing fill material to flow into a nearby stream. Cost to remediate the stream, and natural resource damages exceeded $100,000. 
2.  A remodeling contractor was reconditioning a tile floor in a home undergoing extensive renovation.  The workers inhaled toxic vapors from the sealants used in the reconditioning process. Several subcontracted workers in the building filed bodily injury claims totaling $175,000 against the contractor. 
3. A residential construction company was sued when mold was discovered in multiple spec homes built by the contractor and its subs.  The general contractor was ordered by a court of law to pay mold remediation costs in excess of $100,000. The contractor also had legal fees of $35,000.   
4. When putting in a foundation, a concrete contractor ruptured an unmarked natural gas line and had to pay cleanup costs exceeding $100,000. 
5. A residential plumber was called in to do a simple repair on a third floor of a residential property. The contractor replaced the leaky flush valve and left the job. As this was a second home, it was several weeks before anyone noticed the water running out of the back door. When the owners got to the house, they found mold growing throughout the first and second floors, hanging in some places like Spanish Moss. The entire house had to be gutted and refinished, costing the contractor well over $600,000. 
6. A drywall contractor was hanging new drywall at a home when an employee accidentally drilled through a small water pipe located behind the wall. The drywall contractor did not realize the leak occurred and a substantial amount of mold grew between the walls before anyone noticed. The drywall contractor was held liable for the clean-up of the mold, as well as defense of 3rd party bodily injury claims. Total cost of the loss exceeded $50,000.  
7. A residential septic contractor was subject to defense costs exceeding $25,000, in addition to property damage and bodily injury claims exceeding $400,000 from a residential community.  During sewage installation, a subcontractor improperly tied in piping. This caused raw sewage to migrate into the underlying groundwater and contaminate residential wells.  
8. During renovation, a HVAC contractor removed ductwork from a home’s HVAC system. It was later determined that the ductwork was home to a dangerous mold. The dismantling activities and the on-site storage of the ductwork caused the mold to spread in the air throughout the home. Other contractors working on the property became sick from the mold; some were even critically injured. The contractor was found liable for the spread to the mold and faced bodily injury and property damage claims in excess of $1 million.  
9. A glass contractor installed new windows at a residential property that had been damaged by a recent storm. 6-months after the job was completed mold was discovered in the home. 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.  
10. While working on a residential property, an electrical contractor used a hole saw to cut through a ceiling. Unknown to the contractor, the saw inadvertently disturbed and released asbestos-containing insulation material. The contractor had to pay cleanup costs for the asbestos fibers released throughout the building, costing in excess of $20,000.   
11. A landscaper was applying fertilizers and pesticides at a job site when a nearby neighbor complained of being impacted by a chemical drift. The neighbor filed a lawsuit claiming bodily injury as a result of over application and neglect on the part of the landscaper. Because he had no CPL coverage in place, the landscaper had to expense $40,000 in legal defense costs, even though he was ultimately released from the suit. 
12. An asphalt paving contractor had a piece of equipment puncture a hole in the side of their liquid asphalt truck on a job site.  More than 800 gallons of liquid asphalt was spilled before they were able to contain the release. Clean up costs and business interruption was in excess of $150,000.  
13. A residential contractor renovated the interior of a residential house built in the 1950s.  The renovation involved paint removal from interior walls, window trim and door jambs.  During the course of renovation, the contractor used a plastic barrier to seal the areas where he was working.  The homeowners continued to occupy the house during renovations.  Additionally, the wife was six months pregnant.  Renovation was finished prior to the birth of the baby; however, upon birth, the child tested positive for blood lead poisoning.  After investigating the source of the lead, the couple sued the contractor for bodily injury as well as potential loss of future wage potential (due to a possible decreased IQ level for the baby) in the amount of $500,000.

Benefits of Environmental Liability Insurance

Because environmental losses are a severity risk, rather than a frequency risk, most General Contractors lack the financial strength to self-insure their potential environmental liabilities. Since every General 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. 

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:

1. 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.  
2. 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….?
3. 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.  

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.    

Premise Pollution Liability (PPL) 

PPL 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, 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.