Do You Need Contractor Pollution Liability Coverage?

September 2018
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Environmental issues make headlines every day. From scientists announcing that air pollution may be linked to diabetes to plastic pollution discovered at the extreme reaches of the world’s oceans to oil spills on land and sea, pollutants are a big story and an even bigger concern.

Even for contractors.

Because it’s not just the big corporations who get into hot water over environmental mishaps. Sometimes, something as small as disturbing asbestos during a remodel or rainwater carrying painting primer into a nearby sewage system can be just as damaging to a construction company’s reputation and profits.

Pollution liability may not be a frequent claim faced by contractors, but it can be a severe one. Which is why contractor pollution coverage is becoming a must-have policy for contractors across all class codes.

What is Contractor Pollution Liability Insurance?

Contractor pollution liability insurance (CPL) provides coverage for third-party injury, property damage, defense, and clean-up as a result of pollution conditions which arise on behalf of your contracting operations.

The CPL policy (also known as environmental liability) protects contractors against pollution conditions caused by their work, as well as work performed by subcontractors on their behalf.

What Does Pollution Liability Insurance Cover?

Contractor pollution liability insurance will generally cover bodily injury, property damage, and expenses incurred in investigating, settling, or defending a pollution claim.

Pollution liability insurance will typically also cover cleanup costs to remove, neutralize, and restore damaged property as part of the covered damages.

Contractor pollution liability can even cover crisis management expenses and emergency response expenses.

What is a Pollutant?

When you hear the term pollutant, you probably imagine noxious fumes, barrels of oil, or even toxic waste. But in insurance terms, a pollutant is defined as:

“An irritant or contaminant, whether in solid, liquid, or gaseous form, including -- when they can be regarded as an irritant or contaminant -- smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste.”

Old paint containing lead. Asbestos-containing materials. Bacteria. Contaminated fill dirt. Welding fumes. You may be surprised how often a contractor runs the risk of releasing contaminants while performing their work.

What Does a Pollution Liability Claim Look Like?

General and trade contractors not only have to worry about the liability and damages for substances they bring onto a site, such as paints, sealants, lubricant oils, and asphaltic cement, but also the potential for hidden contaminants which may already be present on a project site.

Here are some real-life examples of pollution liability incidents and costs:

  • A flooring contractor’s wood stripping and refinishing activities emitted fumes, resulting in a $138,000 claim for property damage and bodily injury.
  • A pipeline contractor punctured a benzene pipeline with a backhoe, resulting in hundreds of gallons of benzene pouring into the soil and a nearly-million-dollar claim.
  • A concrete contractor applied epoxy sealant in a building. The fumes traveled throughout the building, resulting in business interruption, evacuation, and a claim for $190,000.
  • An HVAC contractor installed a new HVAC system in a commercial office building. Mold and mildew from the installation led to a $500,000 claim for bodily injury and property damage.

In these examples, pollution coverage protected the contractors from the high costs of investigations, bodily injury, pollutant clean-ups, and lawsuits.

General Liability Doesn’t Cover Pollution Claims

“Doesn’t my general liability policy cover third-party stuff?” Your general liability coverage is there to protect you from claims for bodily injury or property damage as a result of your work.

However, most GL policies contain some exclusions that prevent the policy from covering every possible incident. One of the most notable exclusions in a GL policy is the “total pollution exclusion” clause which excludes bodily injury or property damage arising from the release of a pollutant.

Almost as importantly, your general liability policy doesn’t cover the costs of clean-up or remediation, which could be the most costly part of a pollution event.

Do You Need Contractor Pollution Liability?

All construction operations have the potential for triggering an environmental incident. Which is why environmental liability coverage is available to contractor performing operations or conducting work across every trade.

Some contractors may face higher than average risks for pollution events, however.

Contractors who perform work in some of the following areas are strongly encouraged to learn more about CPL coverage:

  • Abatement and remediation
  • Above/below ground storage tanks
  • Demolition
  • Disaster restoration
  • Electrical, HVAC, and mechanical
  • General contractors
  • Grading, site, and excavation
  • Industrial and pipeline
  • Maintenance
  • Roofing
  • Sewer, waste, and utility
  • Street and road

More Things to Know about Pollution Coverage

Pollution liability coverage can be offered on a project basis or as a blanket program. A project policy will provide coverage for operations performed during the construction period, and can include “tail” coverage for an extended reporting period. A blanket program will cover all defined operations which take place during the policy term.

A pollution policy that covers both gradual and sudden pollutant releases will give you the broadest protection against accidents and mishaps. If your policy only covers a sudden, accidental pollution incident, you could be left at risk for pollution events that aren’t discovered until months (or even years) down the road

Contractor Pollution Liability: Good for the Environment, Good for Business Fumes from sealants, floor coatings, and finishes; disturbing lead paint, asbestos-containing materials, or naturally occurring asbestos; excavating contaminated soil; leaking storage tanks… you run the risk of a pollution event happening on a daily basis.

No one plans on releasing a pollutant such as mold, bacteria, or asbestos while performing their construction operations. But if you do run across a mishap, the cost could be huge. Investigations as to the cause of mystery illnesses, medical expenses, lawsuits, cleanup of the area, and even reputational damage could cost you more than financial losses.

Don’t let a single mishap lead to the ruin of your contractor business. Only pollution liability insurance will offer you the peace of mind and broad protection against the risk that you unearth, disturb or release a pollutant while doing your job.

Financial stress can pour over from your business life to your personal life. Stress can have a negative impact on your health, wellbeing, and even your family. Getting a handle on your financial stress may feel difficult, but the payoff is huge. Easing cash flow problems and improving credit means more money to hire employees, invest in new equipment, market your business, and grow.

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