TEAMing with Electrical Contractors

Continuing with our environmental risk management series for contractors, you will find attached an environmental Risk Assessment (eRA) for Electrical Contractors.

We’ve developed eRA’s for over 80+ classes of business to get you and your clients on the same page about the environmental exposures impacting their operations.  We send our eRA’s in a Word format, so you can cut and paste them into a marketing presentation that compliments your agencies marketing program.

Our partner agencies find utilizing the eRA’s is an excellent way to leverage their insurance sales through educating the client about the fiscal realities of pollution protection.  It genuinely does have a measurable impact to their bottom line and strategic financial planning.

The eRA’s come in three parts:

1. Review of environmental exposure impacting your insured.

2. Environmental loss examples

3. Environmental insurance coverage’s that are appropriate for the insured to consider.

The goal is to educate your insured, so they can make the best decisions for their business. If your insured sees value and elects to further pursue environmental insurance coverage, we’re here to make your job easier by utilizing our network and expertise to market your client’s submission and supply you with the best coverage options.

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 Electric Contractors

May include, but are not limited to; Vapor intrusion;  Lead;  Asbestos;  Mold;  Storm water runoff;  Impacting underground utilities;  Spills from mobile storage tanks;  Ground water contamination;  Puncturing unknown underground storage tanks;  Silica;  No auditing of waste handling and disposal companies;  Natural resource damages;  Defense costs for nuisance claims;  Electrical failure that leads to a pollution loss;  and more…

Environmental Loss Examples

1. While installing new overhead electrical lines, an electrical contractor had a subcontractor sinking the new utility poles. The subcontractor hit an underground sewer line with an auger spilling sewage into a neighboring stream. Through contractual liability, the electrical contractor was responsible for the actions of the subcontractor. Cleanup of spilled sewage and repair of the sewer line was in excess of $175,000.
2. An electrical contractor removed ductwork from a hospital’s HVAC system. It was later determined that the ductwork was home to a dangerous fungus. The dismantling activities and the on-site storage of dismantled ductwork caused the fungus to spread into the hospital. Patients became infected with the fungus; some were even critically infected. The contractor was found liable for the spread to the fungus and faced bodily injury and property damage claims in excess of $1 million.
3. An electrical control panel error recorded an open valve as closed resulted in a release of thousands of pounds of chlorine gas into the atmosphere. The leak was detected only after several employees and local residents became ill. These same employees and residents later filed claims against both the facility and the electrical contractor that performed the installation. Total cost of the claim forced the contractor to file bankruptcy, and eventually put them out of business.
4. While working on a historical property, an electrical contractor used a hole saw to cut through a wall. 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 $40,000.
5. An electrical contractor upgraded the odor control equipment at a poultry plant. However, the upgrades were performed incorrectly, which resulted in total failure of the odor control unit. Neighbors filed claims alleging Bodily Injury and diminution of Property Value. In the end, the electrical contractor had to re-do the job, costing them additional time, labor, and parts for which they received no compensation.
6. A utility contractor had to pay cleanup costs and business interruption expenses in excess of $500,000 when they ruptured and unmarked petroleum pipeline.
7. An electrical contractor was using an aboveground storage tank (AST) to store gasoline for his trucks and equipment. One morning, they discovered that vandals had shot a hole in the tank, releasing thousands of gallons of gasoline from the AST. This spill was the subject of a Government-mandated excavation and disposal of the contaminated soils. Cost of the cleanup exceeded $75,000.

Overlooked Benefits of Environmental Liability Insurance

Because environmental losses are a severity risk, rather than a frequency risk, the majority of Electrical contractors lack the financial strength to self-insure their potential environmental liabilities. Since every Electrical 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 times the clean-up costs are far less than other costs that often arise from the loss.

Three 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.

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.

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.

Environmental Impairment Liability (EIL)

EIL is for contractors that own, rent, lease, operate or have any other insurable interest in real property (a fixed site facility such as a shop, batch plants, cement manufacturing/mixing plant….) 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, Business Auto or Truckers 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 over turn of transported cargo.

Underground Storage Tanks

Financial responsibility requirements ensure that owners and operators of underground storage tank systems have the ability to financially handle a release from an 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 tank system.

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?

ERMI, so much more than a wholesaler, we are your TEAM member for all things environmental.