When discussing pollution insurance to business owners, most often, the first thing that comes to their mind is first party clean up coverage for a spill. While that is a coverage benefit, there are many benefits offered in a pollution policy besides just clean up.
As you read, keep in mind, environmental liabilities tend to be a severity versus frequency issue.
For decades, ERMI has pointed out three benefits often overlooked in pollution policies:
- Defense Costs
- Environmental claims specialists to assist in handling a claim
- Third Party Liabilities, i.e., Bodily Injury, Property Damage, Business income…
As the environmental insurance industry continues to mature, it has been able to broaden coverage offerings in their base policy forms that were once induvial endorsements, i.e., Non-Owned Disposal Sites, Mold, Transportation Pollution Liability….
A couple of additional benefits that carriers have been adding to their base policy forms are Reputational Risk Coverage & Emergency Response Costs. Generally, each coverage will have their own set of limits. Once Reputational Risk Coverage & Emergency Response Costs limits are exhausted, the primary policy limits step up.
Reputational Risk (Image Restoration) Coverage: Environmental Insurance carriers have seen firsthand the damage to businesses that did not have an environmental financial assurance plan to proactively address their Reputational Risk after an environmental loss. Reputational Risk Coverage assists an insured to proactively protect their reputation, prevent adverse events, limit damage, while rebuilding their reputation / brand and consumer confidence after a covered cause of loss. Insurance carriers become an insureds reputational risk partner in mitigating the profitability risk associated with an environmental reputational crisis.
The strategy here is like Coverage C: Medical Payments on a Commercial General Liability policy which basically is designed to cover third party BI as a goodwill coverage providing a level of reputational protection to the insured.
Environmental Emergency Response Costs: Cover expenses incurred with remediation because of pollution conditions that require immediate action. The intent of the coverage is to minimize the insureds liability and / or impact on the environment.
The Emergency Response Costs strategy is to get remediation professionals responding to an environmental liability when it occurs, instead of having to go through the normal insurance claim reporting process to qualify for coverage. Insurance carriers understand the faster remediation professionals respond, the better chance there is to reduce the size and amount of environmental liabilities.
When an insured is questioning investing in pollution insurance, make sure they understand the importance these coverage benefits offer as part of the premium and their environmental risk transfer strategy.
In today’s business environment, insureds need to understand why insurance carriers are offering these coverage benefits. For insured’s that elect to self-insure their environmental liabilities, they still need to have an environmental financial assurance plan in place or risk going out of business when they experience an environmental liability.
Attached is an article I did in 2008 for The National Alliance, it points out how to assist your insureds in identifying and reducing their exposure to environmental liabilities by developing an Environmental Management Strategy (EMS). It is still very relevant today.