Pollution Liability by Industry
Across a variety of industries, pollution risks elevate the importance of proper coverage. Pollution Liability, sometimes called Environmental Liability, offers protection to companies for unexpected pollution losses often excluded from standard casualty policies. Pollution is a ‘cradle to grave’ exposure, meaning a company that caused a pollution condition is legally responsible from the moment it is created until the very end of its life cycle under the Resource Conservation and Recovery Act (RCRA). This can include transportation, treatment, storage, and disposal.
Environmental hazards arise from a multitude of sources and can affect firms in almost any industry vertical. Under federal and state laws, businesses can be held legally responsible for pollution incidents that damage property, people, or the environment. Environmental Liability policies can offer coverage for Bodily Injury, Property Damage, Pollution Clean Up Costs, and Business Interruption from environmental concerns.
Consider these industry examples:
Construction:
What are the risks? The use of diesel fuel, fumes emissions, hazardous materials/waste run-off, and spills during transportation are a few of the key risk areas that construction contractors may encounter on a job. It is important that contractors institute training and safety protocols, and adequately screen and require proof of insurance from the subcontractors they hire and maintain oversight and documentation of all activities on the job site. Every contractor should carefully assess their environmental exposure and consider a policy specifically designed for their needs.
Claim Example: A contractor burned material from a project site releasing chemicals into the air. The wind blew particulates a quarter mile to a new car dealership where the chemicals corroded paint on numerous cars. The total loss incurred was $300,000 for damages and repairs.
Manufacturing:
What are the risks? Manufacturing plant fumes emissions, chemical materials spills, and waste materials runoff are the primary risks for manufacturers.
Claim Example: A steel company manufacturing plant had a cyanide spill and runoff into a nearby river. The spill killed 3,000 fish, closed beach, and forced a water facility to temporarily close. The steel manufacturer was ordered to pay $3,000,000 in a settlement.
Real Estate Development:
What are the risks? In the real estate world, pollution risks are often connected to location – for example, if the property is in a hurricane zone – and the nature of the property – for example, an older existing building may present a mold or asbestos risk.
Claim Example: A real estate firm acquired a vacant parcel for the development of a shopping mall. The firm contracted with an environmental consulting company to comply with state environmental due diligence requirements. After investigating, the environmental consulting company told the developer that there were “no recognized environmental concerns” on their site. Development got underway, only for the firm to be notified that the property in question was a brownfields site that was not properly mitigated. Remediation costs exceeded $250,000.
Healthcare:
What are the risks? Healthcare facilities manage many environmental risks – bacteria, mold, legionella, along with medical and hazardous waste disposal. The environmental challenges faced by healthcare facilities can result in financial penalties, disruption of operations, reputational harm and legal liability.
Claim Example: A mechanical contractor was hired to perform HVAC repairs at a healthcare facility. No medical procedures were performed nor were patients onsite during the actual renovation activities and proper measures were taken to ensure proper encapsulation. Despite the controls, one year after completion of the project, the contractor was notified that several aspergilli (a type of mold species) infections had occurred several months after project completion. The healthcare facility was sued by several of the patients sustaining secondary infections. The facility and the contractor contributed to settle the claims from all patients.
Products Pollution:
What are the risks? Coverage for resulting pollution caused by an insured’s product can also be covered by an Environmental policy. This coverage, often referred to as Products Pollution Liability, applies for loss and clean-up costs due to Bodily Injury, Property Damage, or Environmental Damage caused by an Insured’s product. Coverage further applies when the product has been put to its “intended” use by anyone other than the insured and applied to conditions caused during transportation by a third party. This applies to many manufacturers, distributors, and wholesalers of products like Paint, Chemicals, Metal Goods and Machinery or Machinery Parts, Automotive Parts, Plastic and Rubber Goods etc.
Claim Example: An industrial facility had the air pollution control equipment updated and a 3rd party contractor installed new scrubbers. Over the next week, neighbors of the facility complained of dizziness, and several were hospitalized due to fumes found to be coming from the facility’s exhaust stacks. It is determined the scrubber was installed properly—the problem was the scrubber itself had been manufactured improperly. The scrubber manufacturer was sued and forced to pay over $500,000 in damages.
In addition to the above detailed mitigation tactics, having the right insurance and risk management program is critical. Premiums for Environmental coverage vary based on factors including industry class, location, pollutants, number of employees, annual payroll and annual revenues. Contact the Sentinel team today to discuss your risk and exposures and obtain a standalone policy for protection against your pollution risks today.
