Federal, state and local laws first introduced in the early 1980’s — and growing in number today — hold organizations and individuals legally responsible for environmental damage and injuries caused by pollution. When faced with billions of dollars in unexpected pollution damage and litigation costs, companies file claims with their insurers.
In order to avoid exposure to pollution claims, 98% of General Liability (GL) and Property policies have an “absolute pollution exclusion” and are designed to deny coverage for any type of environmental-based event. Seeing opportunity from adversity, some in the insurance industry realized that pollution risk was insurable and began development of dedicated environmental insurance policies providing coverage for risks the absolute pollution exclusion avoids.
Does your business need dedicated pollution insurance?
Very often, business owners and managers are convinced their businesses are not exposed to pollution risks and, therefore, they do not need environmental insurance. This general belief is based on a traditional understanding that pollution only involves events such as oil and chemical spills, toxic disposal sites and industrial air and water pollution. The insurance industry, however, has its own broader interpretation of what constitutes “pollution.” The list of occurrences that are now considered “pollution” continues to grow, including the following common events/scenarios:
- Mold
- Legionnaires’ disease
- Lead paint
- Odors
- Biological
- Viral releases
- Chemical and bioweapon terror attacks
Environmental pollution liability affects just about every type of organization, nonprofit and government agency - whether the business owns or manages a facility of any type ranging from manufacturing, schools, hospitals, hotels, etc., and or performs services for others from construction to janitorial services and more. Purchasing environmental insurance enables businesses to simply avoid the potential of an uninsured loss.
Understanding environmental insurance
The pollution exclusion comes up so often that it is by far the most common cause of litigation between insureds and their carrier.
Uniquely, an environmental policy can combine both first and third party coverages for cleanup of pollution on and or migrating from an insured’s site as well as bodily injury and property damage claims with associated defense costs. A variety of additional coverages and endorsements can be added in accordance with the insured’s specific environmental risk profile. Placement of environmental policies can be extremely complex and will often contain terms and conditions that can be unappreciated by the untrained eye.
The Need for Specialty Broker
Just as environmental issues are complex, so is the proper placement of a comprehensive insurance policy to address them.
Environmental insurance is offered by a growing number of insurers. However, these products, while appearing similar, can actually differ dramatically based on the environmental risk profiles of individual organizations. The inclusion or absence of a few words in an environmental policy can mean the difference between a covered claim and a denial. Employing the right broker with the unique knowledge and carrier relationships required for a proper environmental policy placement is key.
Contact your HUB pollution insurance specialist to find out if you’re adequately covered for your pollution liability risks.
