Pollution and Environmental Liability Insurance
Pollution and Environmental Liability Insurance
Manufacturers, distributors, fixed facility owners, and related organizations can secure versatile Pollution and Environmental Liability insurance programs that focus on helping to mitigate risk in continuously changing environmental landscapes.
Pollution insurance is a type of insurance that covers costs related to pollution. This can include the costs of brownfield restoration and cleanup, liability for injuries and deaths caused by pollution. Most businesses will purchase broad commercial general insurance or property insurance policies but these usually contain and an "absolute pollution exclusion" and thus rarely cover pollution, although there may be limited pollution coverage. As stated, Pollution liability coverage used to be included in most business insurance policies but that changed in the 1970’s with the emergence of many expensive asbestos claims. Now this coverage is largely excluded and must be purchased separately. Pollutions claims are not limited to large manufacturers. These claims can be filed by state and local governments, other businesses, landlords and people who live near your business. Do not allow a pollution claim to bankrupt your business; protect it with pollution insurance.
Pollution insurance usually takes the form of first-party coverage for contamination of insured property either by external or on-site sources. Coverage is also afforded for liability to third parties arising from contamination of air, water, or land due to the sudden and accidental release of hazardous materials from the insured site. The policy usually covers the costs of cleanup and may include coverage for releases from underground storage tanks. Intentional acts are specifically excluded.
What Is Pollution Insurance?
Pollution insurance is a type of coverage created specifically to manage the costs associated with pollution clean-up, as well as to cover liability claims for pollution-related injuries, illnesses or deaths. This type of commercial insurance was created in response to the problem that liability claims were bankrupting companies, and therefore victims were not being compensated.
Policies cover any type of small-scale pollution that causes contamination of soil, groundwater or property. They also provide coverage for air-borne contaminates like smoke and emissions. Many policies will even cover pollution that occurred in the past before the harmful effects of waste-products was known. For larger, more extensive pollution incidents, an environmental impact liability insurance policy may be needed.
Who Needs Pollution Insurance?
When many people think of pollution insurance, they picture large factories with billowing smokestacks but many small businesses can benefit from this coverage. Any business that uses environmentally unsafe chemicals, such as a hair salon or a dry-cleaning service, runs the risk of a pollution lawsuit. Similarly, garages, junkyard and industrial manufacturers face these charges.
Even contractors who construct buildings have a need for pollution insurance if the work they do can affect long-term air or environmental quality. A specialized form of pollution insurance called contractors pollution liability insurance can meet the needs of the construction industry.
What Does Pollution Insurance Cover?
Pollution liability insurance provides coverage for any claims brought against your company that are related to pollution of property or that causes harmful effects to people. Damage awards for these claims can be extremely costly, so having this sort of insurance can protect your business from severe financial challenges or even bankruptcy.
Most of the coverage options listed below come standard with a pollution insurance policy but some companies may require you to purchase additional endorsements to get full coverage. Be sure to read the policy details well before selecting a provider. You can expect pollution insurance to cover:
- Legal defense fees: Pollution insurance companies will provide your company with attorneys who specialize in these matters to defend you in a pollution-related lawsuit. Your policy can also cover the costs of any other related legal fees and court costs.
- Clean-up efforts: If your company is required by law to clean up contaminants, this coverage will compensate you for a portion of the costs. Many insurers will allow you to buy stop-loss policies that limit the amount that your company will be responsible for during the clean-up. This is beneficial if additional pollutants are identified in the clean-up process, potentially escalating the costs.
- Operations: If your business uses chemicals or hazardous materials in the course of its operations, you will want to be sure to have coverage for accidents or oversights that may cause pollution. There are two types of coverage available:
- Catastrophic coverage: This covers you if there is a sudden, pollution-inducing event such as a fire or explosion.
- Non-catastrophic coverage: This covers you if pollution occurs over a long period of time and affects neighboring businesses or residents.
- Property transfer: This protects property owners if they purchase a parcel of land or a building that was contaminated or otherwise polluted by a previous owner. If you have this insurance coverage, your insurer will cover necessary clean-up costs.
- Errors and omissions: This coverage is specifically designed for clean-up companies and environmental consultants. It covers them for liability if they should wrongly declare a property free of pollutants or if the work they do causes further contamination.
Environmental impairment liability insurance was first made available in the 1970’s in response to the government cracking down on companies that were polluting the ground and air with hazardous waste. For the first time, corporations were being forced to clean up their damages and the costs were astronomical. Today, companies are more careful about how they store and dispose of toxic waste, but accidents and polluting disasters still happen. Environmental liability insurance can help.
What Is Environmental Liability Insurance?
Environmental Impairment Liability Insurance, also known as EIL Insurance, is an insurance policy created specifically for companies and contractors who engage in jobs or production that have toxic by-products. This hazardous waste is carefully contained but sometimes seeps through containment vessels and pollutes the ground-water, air or vegetation surrounding it. When this happens, companies are assessed fines and ordered to clean up the mess. This can be quite expensive and financially hinder a company’s growth. ELI insurance will cover many of the associated costs so that the company can continue to remain profitable.
There are two types of environmental impairment liability insurance coverage:
- Premises EIL insurance: This coverage is written for property ownership and location-based environmental hazards
- Contractors EIL insurance: This coverage is written for operations-based environmental hazards
What Does Environmental Liability Insurance Cover?
EIL insurance policies provide three basic types of coverage. This includes coverage for:
- Compensatory damages
- Required clean up costs
- Costs sustained during voluntary clean up
In some, but not all, cases, court costs and legal defense fees are included in the coverage. Read on for more information about each coverage type.
EIL Insurance Provides Compensatory Damages Coverage
If pollutants or other environmental damage done by your company lead to bodily harm or property damage to others, your environmental liability insurance coverage will provide compensation for any accrued costs.
In many cases, companies are unaware of toxic waste leaks or other environmental pollution problems. For this reason, EIL insurance companies will provide a retroactive date on their policies. If a problem or pollution event occurred after that date and the policy is in effect, you should expect to be covered. Most policies will limit coverage only to instances where:
- The injury or property damage can be shown to have been caused by a pollution event that occurred after the retroactive date on your policy.
- A claim was first made against you company while the policy was in effect.
- The claim is reported to the insurance company within 15 days of a policy termination.
The insurance company will also provide coverage for your associated legal defense fees. It is up to the EIL insurance company, not the insured company, whether or not to pay out a settlement on any claim or suit rather than allowing it to go to court.
EIL Insurance Provides Coverage for Mandated Clean Up Costs
Environmental liability insurance policies will provide compensation for costs associated with any government-mandated clean up effort so long as the mandate was initiated during the time that the policy was in effect.
In this case, the insurance company is not required to cover any associated legal fees or court costs but they may, if they choose to, step in with their own legal team if they feel the situation merits intervention.
EIL Insurance Provides Coverage for Voluntary Clean Up Costs
Sometimes clean up efforts are reasonable or necessary and may be initiated by your company prior to government intervention. When this occurs, your company can petition your insurance provider to request reimbursement for these costs.
In many cases, however, the insurance company will give consent for coverage only in the event that the pollution incident presents an imminent danger of substantial damages, whether physical, environmental or to personal property.
EIL Insurance Offers an Extended Reporting Period Option
Most environmental impact business insurance policies will enable to you purchase an extended reporting option. This will permit you to continue to submit and receive reimbursement on claims for a period of time, usually 12 months, after the termination of your policy. Payments will only be made on claims resulting from pollution events that occurred after the policy’s retroactive date but before the date of termination.
This provision was put in place so that insured companies can continue to receive reimbursements even if the insurance company refuses to renew a policy because of a severe pollution event.
What Is Excluded from EIL Insurance Coverage?
Environmental liability insurance does have limitations. Policies exclude coverage for the following:
- Damage that was intended or should have been reasonably expected by the insured
- Damage to the insured’s own property, whether rented or owned
- Bodily injury to any employee of the insured
- Damages resulting from willful non-compliance with the law