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 Septic Service Providers
Include, but are not limited to: Spills during the loading, unloading, and transportation of cargo; Completed operations exposures including incomplete line hookup or improper system construction causing spills or emissions; Parking equipment over unsealed surfaces allowing contaminants such as oil, fuel, antifreeze, and hydraulic fluid to pollute the ground; releases from storage tanks; Improper land application; Storm water run-off; Natural resource damages; Site preparation/excavation work through preexisting unknown contaminated soils or impacting utilities, underground storage tanks, or old septic systems; Water contamination; Raw materials stored at job sites; Vandalism; Exacerbation of pre-existing contamination …
Environmental Loss Examples
- A school contracted sewer line work. 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 contractor was named in the suit for exacerbating the mercury spill.
- A septic contractor was subject to cleanup costs and business interruption expenses in excess of $500,000 when they ruptured an unmarked gas line while performing routine septic services.
- 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.
- The concrete secondary containment of a 10,000-gallon diesel aboveground storage tank was cracked. A release from the tank spilled 8,000 gallons into the containment. The diesel seeped into the underlying soils. Total cost for investigation, removal and disposal exceeded $320,000.
- A septic waste hauler got into an auto accident and the truck caught on fire. The burning cargo created toxic fumes and when the fire department put out the fire it created contaminant runoff that flowed into a nearby stream. Cost to remediate the site and claims from third parties for bodily injury and property damage due to exposure to toxic fumes exceeded $800,000.
- A septic contractor hired a waste hauler to transport its used motor oil. The waste hauler got into an accident which caused the contents of the tanker to be released directly into a creek. Under Federal law (CERCLA) you own your waste from cradle to grave so the carrier had to pay their apportionment of the remediation costs which totaled $450,000.
Benefits of Environmental Liability Insurance
Septic service providers generally lack the financial strength to self-insure their environmental liabilities. Since every septic service provider 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.
The Three Main Benefits environmental liability insurance offers:
- 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 for Septic Service Providers
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 ….
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)
EIL is for septic service providers susceptible to economic loss caused by pollution that actually or allegedly originated from their fixed site operations. Sometimes referred to as pollution legal liability, this coverage is for those 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 multi year terms. Most EIL policies cover above ground storage tanks.
Underground Storage Tanks
Financial responsibility requirements ensure that owners and operators of underground storage tank systems can financially handle a release from a regulated underground storage tank. The responsibility encompasses the ability to pay funds for corrective action and third-party bodily injury and property damage from non-sudden and sudden and accidental releases from a regulated underground system along with defense costs.