What is a Pollutant?
Any material, substance, liquid, product, etc… which is introduced into an environment for other than its intended use / purpose. Fresh water, cheese, and milk have all been classified as pollutants by Insurance Carriers under various circumstances.
Many non-environmental contractors assume that claims arising from operations are covered by the general liability policy. However, claims resulting from a “pollution incident” are excluded from most general liability policies, which leaves many of these contractors exposed to potentially uncovered claims. What pollutants are impacting your business?
Environmental Exposures Impacting Landscapers
May include, but are not limited to: Storage, transportation, improper or over application, and disposal of fertilizers, pesticides, and herbicides; storage and transportation of fuels, antifreeze, oil and hydraulic fluids; leaking above and/or underground storage tanks; air emissions from chemical applications; storm water runoff; vapor intrusion; spills from loading and unloading of chemicals, fuels, and supplies; overuse of irrigation or improper irrigation installation; on-site and off-site disposal of trash, garbage and other waste materials; equipment storage areas; historical contamination; natural resource damages; improper management of protected or sensitive areas like wetlands; vandalism; mold resulting from water intrusion or moisture encapsulation; spills from mobile storage tanks; release of oils/fuels as a result of vandalism; unknowingly using contaminated soil as fill; site preparation/excavation work through preexisting contaminated soil or impacting utilities; adverse reactions and interactions of chemical compounds that accidentally commingle during a fire; siltation of streams from improper erosion control management ….
Environmental Claim Scenarios
- A landscaper used treated waste water as a source for irrigation. The waste water treatment plant did not comply with permitting regulations nor was the wastewater tested prior to releasing it to the commercial landscaper. After several months of irrigation, heavy metals and high counts of fecal coliform were found in the soils. The landscaper was required to pay remediation costs in excess of $265,000.
- A landscaper was applying fertilizers and pesticides at a job site when a nearby neighbor complained of being impacted by a chemical drift. The neighbor filed a lawsuit claiming bodily injury as a result of over application and neglect on the part of the landscaper. Because he had no CPL coverage in place, the landscaper had to expense $40,000 in legal defense costs, & was ultimately released from the suit.
- A landscaper doing a large project adjacent to a small wetland and stream was fined $30,000 by the EPA and had to pay remediation costs of $150,000 for storm water runoff and stream siltation that caused environmental resource damage. The landscaper had not properly managed the grading and erosion from the property into the stream and this resulted in storm water runoff containing fertilizers, herbicides, soils, and other materials which killed of wildlife in the stream.
- A landscaper stored gasoline in steel underground storage tanks (UST’s) for use in tractors, lawn mowers, trucks, and other equipment. Tank corrosion led to a discharge of petroleum products, which contaminated the surrounding soil and groundwater. Remediation expenses incurred for the investigation and cleanup of the site amounted to $350,000.
- A residential community received its water supply from groundwater wells. Over time, the application of herbicides, pesticides, fertilizers, and other chemicals by the landscaper for the community caused groundwater contamination. Bodily injury claims were filed by local residents for perceived injuries from drinking contaminated water. Property damage claims were filed because the groundwater system was no longer a suitable drinking source. Total claims exceeded $700,000.
Benefits of Environmental Liability Insurance
Because environmental losses are a severity risk, rather than a frequency risk, the majority of landscape contractors lack the financial strength to self-insure their potential environmental liabilities. Since every landscaping business has notable environmental exposures, consideration to the economies of scale afforded with environmental liability insurance as part of your risk transfer strategy, versus self-insuring.
Furthermore, most commercial insureds only consider the remediation costs associated with a pollution event. However, often times the clean-up costs are far less than other costs that often arise from the loss
Three Overlooked Benefits of environmental liability insurance:
- Defense Costs: Environmental liabilities are relatively new and very litigious. Even if you do nothing wrong you can still get named in a suit and have to expense defense costs i.e. legal fees, environmental investigations, etc.
- Claim Management: All policies come with specialists to assist you in handling a claim. Who is in charge of communications, public relations, emergency response, government compliance, financial management, third party claims for bodily injury, property damage, natural resource damages….?
- Third Party Liability: The majority of the time the cost to clean up the environmental problem/s is far less than the associated claims that come in from third parties for bodily injury, property damage and business interruption. You need to look at your client’s and neighbors that can be impacted if you or a sub-contractor/vendor cause an environmental loss.
Environmental Liability Insurance Coverages
Contractors Pollution Liability (CPL)
Contractors Pollution Liability (CPL) insurance protects the insured should they cause or exacerbate an environmental condition while performing their contractor services. CPL protects the insured for covered operations performed by or on behalf of the insured, while operating away from any premises they own, rent, lease or occupy.
CPL can be offered on a claims made or occurrence basis. Coverage can be written on a job specific basis, or on a blanket basis to cover all the work performed by the insured. Most policies can be endorsed to cover transportation pollution liability, mold, lead, asbestos, defense outside the limits, off-site disposal coverage, etc. Contractors incorporating CPL coverage as part of their risk transfer strategy, drive their growth and profits by marketing the benefits CPL coverage affords in reducing job interruption due to environmental issues.
A major environmental liability exposure faced by all contactors lies in who they are doing business with. If there is an environmental loss at a job site, innocent contractors can and do get named in lawsuits. Do your subs/vendors have CPL insurance if they cause an environmental loss?
Transportation Pollution Liability
Generally, Business Auto or Truckers policies will exclude pollution losses arising from spills or releases of transported cargo. Transportation pollution liability affords coverage during the loading, unloading and transportation, for a spill, release or sudden upset and over turn of transported cargo. You need to strategize on your exposure to transportation. How are goods received? FOB point of Shipment or FOB point of delivery? Do not be confused by thinking the MCS-90 endorsement is auto pollution liability coverage.
Environmental Impairment Liability (EIL)
EIL is for contractors that own, rent, lease, operate or have any other insurable interest in real property that can be susceptible to pollution liabilities that actually or allegedly originated from the insured property. Coverage can include: Pre-existing unknown pollution; new pollution conditions; first party on-site clean up; third party bodily injury, property damage, business interruption and extra expense; offsite cleanup costs; legal defense expenses; transportation pollution liability; offsite disposal coverage…. Multi year term policies can be negotiated.
Underground Storage Tanks
Storage tank financial responsibility requirements ensure that owners/operators of underground storage tank systems have the ability to financially handle a release from the tank system. The responsibility encompasses the ability to pay funds for corrective action and third party bodily injury and property damage from non-sudden and sudden and accidental releases from a regulated underground tank system.
Businesses with a financial responsibility strategy dependent upon state UST funds need to regularly confirm fund solvency and length of time it will take to get reimbursed. If part of your business strategy depends upon the state fund, this means just that, you are putting the future success of your business in the hands of the state. You need to strategize on “just how strong is your business” if you are putting its future in the hands of your state government.
Incidental Professional Liability
Professional exposures are generally excluded from General Liability and monoline Contractors Pollution Liability policies. In the course of their normal operations, contractors face all types of professional exposures. They may make slight adjustments on the provided plans to get the job done properly, they may supervise subcontractors, or provide other recommendations which could potentially be questioned in the event of a claim. In the event of a professional claim, will your insurance provide coverage?