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 Sewer Cleaning Contractors
Include, but are not limited to: Spills during the loading, unloading, and transportation of cargo; Storm water run-off; Faulty hose hook-up and/or pump failures, which allow pollutants to be released; Natural resource damages; Damaging underground utilities; Contaminating water sources; Vandalism; Exacerbating pre-existing unknown pollution conditions; 3rd party business interruption; Odor drifting; Vapor intrusion; Illegal disposal of waste by 3rd parties; Legal defense for 3rd party nuisance claims; Mold; Lead; Asbestos; Non-owned disposal site liability; Pollution events impacting your owned operating facility; etc.
Environmental Loss Examples
- A sewer cleaning contractor 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.
- While cleaning a municipal sewer, the contractors hose / pumped system failed, allowing hundreds of gallons of waste to release in the surrounding area. Cost to remediate the waste exceeded $90,000. Serval area businesses were forced to shut down during the cleanup, costing the contractor an additional $200,000 in 3rd party business interruption claims.
- A sewer cleaning contractor was sued by a municipality after a ruptured underground utility line was discovered at one of the contractor’s job sites, which had created a pollution situation. It was later determined that the contractor was not responsible for the line rupture. However, the contractor had already paid over $30,000 in legal defense costs.
- A sewer cleaning contractor used an aboveground diesel tank at their operating location for fueling their vehicles. One day it was discovered that the secondary containment of the 10,000-gallon tank was cracked. A release from the tank spilled 8,000 gallons into the secondary containment, allowing several thousand gallons of fuel to seep into the underlying soils. Costs for investigation and remediation exceeded $320,000.
- During the night, an unknown party illegally placed drums of hazardous waste into a dumpster behind a sewer cleaning contractor’s operating facility. The containers were not leaking, but the cost to properly dispose of the illegal dumped waste cost the contractor roughly $50,000.
Benefits of Environmental Liability Insurance
Because environmental losses are a severity risk (versus a frequency risk), sewer cleaning contractors generally lack the financial strength to self-insure their environmental liabilities. Since every sewer cleaning 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.
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)
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.