Tag: contractor

What is a Pollutant? 

Any material, substance, liquid, product, etc… which is introduced into an environment for other than its intended use / purpose. In other words, something that ends up where it doesn’t belong. Fresh water, cheese, and milk have all been classified as pollutants by Insurance Carriers under various circumstances. 

Most commercial insureds assume that claims arising from their operations are covered by the general liability policy. However, claims resulting from a “pollution incident” are excluded from most general liability policies, which leaves commercial insureds with gaps in coverage. What pollutants are impacting your business?

Environmental Exposures Impacting Pallet Manufacturers & Distributors 

May include, but are not limited to:  Pollutants left behind on pallets from the materials being hauled, such as oils, greases, and other lubricants;  Pollution liabilities as a result of a fire; Waste storage/handling practices;  Air emissions;  Hazardous waste materials (i.e. drums of spent solvents, acids, caustics, paint, etc.);  Products pollution liability from a pollution incident caused due to product failure;  Products cleaning treatments;  Uncontained floor drains around the plant;  Unknown abandoned underground storage tanks;  In-ground sumps and pits;  Unsealed truck ramps;  Uncertainties about the historical use and conditions of property;  Inadequate or no auditing of hazardous and non-hazardous waste handlers, transporter and disposal companies;  Outdoor equipment storage (bone) yards where contaminants percolate into the soil/groundwater;  Nuisance odors;  Pollution liabilities as a result of a fire;  No emergency response training for employees;  Halon releases from fire suppression equipment;  Old septic systems;  Spills and leaks during the storage and handling  (loading/unloading) of material containers such as drums, totes or bags from vehicles;  Utilities that cross property;  Corroded wastewater and storm water sewers;  Improper characterization of hazardous waste;  Natural resource damages;  Asbestos or lead containing materials;  Spills from underground and/or aboveground storage tanks;  Legal defense costs for 3rd party nuisance claims;  Leaks from hydraulic fluid storage tanks and hoses;    Silica;  Mold;  Vapor intrusion;  And more…  

Environmental Claim Scenarios

Environmental Impairment Liability (EIL) 

• During the night, an unknown party illegally placed drums of hazardous waste into a dumpster behind a pallet manufacturer’s facility.  The containers were not leaking, but the cost to properly dispose of the illegally dumped waste cost the manufacturer roughly $50,000. 
• While moving a large stack of pallets, the forklift operator hit and ruptured an above ground fuel line, causing a high-pressure release. `Investigation and cleanup costs exceeded $200,000.  
• A pallet distribution facility caught on fire. The fire department’s high-pressure hoses forced melting plastics, metals, insulation, roofing, drywall, chemicals, and other materials to build up inside the building’s foundation, creating a toxic “sludge”. Some of the “sludge” escaped the building and migrated onto to neighboring properties. The property owner was responsible for clean-up, 3rd party property damage & business interruption, and natural resource damages, which totaled over $3,500,000.  NOTE: fire departments are immune to pollution claims arising from their work while putting out fires.  
• A pallet manufacturer performed loading/unloading of products and material over unsealed truck ramps.  Over a period of several decades, ground water became contaminated from pollutants that were released from idling trucks and storm water runoff.  The manufacturer had to pay over $1,400,000 in cleanup costs, 3rd party property damage, and 3rd party bodily injury claims. 

Transportation Pollution Liability (TPL) 

• A pallet manufacturer hired a waste hauler to transport their used waste materials to a 3rd party disposal site. During transportation, the hauler got into an accident, causing the truck to overturn and spills its load into a nearby stream.  Under CERCLA, the commercial insured must contribute for their apportionment of the load for cleanup cost since federal law states that you own your waste from cradle to grave.  Cost to settle the claim for the insured was $70,000. 

Products Pollution Liability 

• A pallet manufacturer was sued after a customer experienced a pollution loss while transporting their materials. The customer claims that it was a faulty pallet, which allowed large amounts of their products to fall of their truck and into a nearby steam. Total cost for legal defense, investigation, remediation, and natural resource damages was over $450,000. 

Defense Costs for Nuisance Claims 

• A pallet manufacture was sued when contamination was discovered in the drinking water at a new residential development. After further investigation, it was determined that the pollutants were not used as part of the pelleting process, nor was the pallet manufacturer’s property the source of the contamination. The manufacturer was eventually released from the lawsuit. However, they had already expensed over $100,000 in legal defense costs. 

Benefits of Environmental Liability Insurance

Unlike most liability exposures impacting Pallet Manufacturers & Distributors, pollution losses are not a frequency risk, but rather a severity risk. Since every Pallet Manufacturer & Distributor has numerous environmental liabilities, consideration needs to be given to the economies of scale afforded with environmental liability insurance as part of your risk transfer strategy, versus self-insurance.

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 can arise from the loss.

Three Overlooked benefits of environmental liability insurance:

1. 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.  
2. 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….?
3. 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 Products

Environmental Impairment Liability (EIL) 

EIL is for pallet manufacturers and distributors susceptible to economic loss caused by pollution that actually or allegedly originated from their operations.  Sometimes referred to as pollution legal liability this coverage is for those who own, operate, lease, or have any other insurable interest in real property and the operations. Coverage can be written in a variety of ways addressing unknown preexisting conditions or new conditions.  Coverage can include third party bodily injury and property damage along with business interruption and extra expense, on and off site clean-up costs, legal defense expenses, non-owned disposal sites, transportation and more. EIL can be offered on multi-year terms.  Sewer lines and pump/lift stations can be covered by EIL.  Most EIL policies cover above ground storage tanks.

Property Transfer Coverage

When buying or selling property there can be unknown preexisting environmental conditions. Since a Phase I, Phase II, All Appropriate Inquiry (AAI) survey cannot guarantee uncovering all potential environmental liabilities, insurance companies have created property transfer insurance. This coverage protects the new owner or any party with an insurable interest, against unknown environmental conditions that may be discovered during the policy period, that were not caused by the new owner.   

This coverage not only helps to keep the property at its maximum value, it will assist the purchaser in being able to secure the necessary financing to complete their transaction.  Property buyers have negotiated lower interest rates by blending property transfer coverage with their mortgage.  

Transportation Pollution Liability (TPL)

Generally, Business Auto or Truckers policies will exclude pollution losses arising from spills or other releases of their cargo. Broadened auto pollution liability (typically Form CA 9948) affords coverage during the loading, unloading and transportation, for a spill, release or sudden upset and over turn of transported cargo. 

Note:  Manufacturers have potential indirect environmental exposures from the service vendors they hire and products they purchase.  Should your vendors cause an environmental problem or exacerbate an existing environmental issue their general liability insurance policy probably will have either an, absolute or total pollution exclusion.  

How do you receive your raw materials?  Do you purchase the materials FOB point of shipment?  If you do, when your raw materials leave the shipping dock you are the owner.  What is your strategy if there is an accident while in transit and your raw materials cause a pollution loss?  

Products Pollution Liability 

Products Pollution Liability is for insureds that make and/or distribute a product that if faulty could cause a pollution incident. This coverage can be written on a stand-alone policy, or included on an environmental impairment liability policy. For Environmental Insurance markets to consider offering this coverage, they typically prefer products be intended for commercial use, as opposed to mass distribution to the general public. 

Underground Storage Tanks

Financial responsibility requirements ensure that owners and operators of underground storage tank systems have the ability to financially handle a release from an underground storage tank. 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 system.  

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 HVAC Contractors 

May include, but are not limited to: excavating through and spreading of unknown preexisting contaminated soil; storm water runoff; mold; lead; asbestos; HVAC causing build up or release of airborne bacteria;  ground water contamination; completed operations exposures including incomplete line hookup or improper system construction causing spills or emissions; impacting underground utilities; puncturing unknown underground storage tanks; silica; no auditing of waste handling and disposal companies; natural resource damages; vapor intrusion, Legionella…

Environmental Claim Scenarios

• During the installation of a geothermal heat pump system, the HVAC contractor punctured an unmarked natural gas line causing gas to release from the pipe. Due to safety concerns, local authorities ordered the evacuation of businesses and homes within a 2-block radius while the situation was being handled. Claims for clean-up and 3rd party business interruption expenses were filed, which totaled over $200,000. 

• A mechanical contractor installed a heating, ventilation, and air conditioning system in a new commercial office building. After three years, mold and mildew growth caused the release of airborne bacteria throughout the entire building, resulting in poor indoor air quality. Claims against the contractor for bodily injury and loss of property use exceeded $500,000. In addition, the contractor was responsible for decontaminating the HVAC system.

• Several office employees became ill from legionella. The cause of the legionella was the improper sealing of the ducts during the installation of a new HVAC unit which allowed condensation to build up.  The employees sued the property owner and the contractor.

• A mechanical contractor removed ductwork from a hospital’s HVAC system. It was later determined that the ductwork was home to a dangerous fungus. The dismantling activities and the on-site storage of dismantled ductwork caused the fungus to spread into the hospital. Patients became infected with the fungus; some were even critically infected. The contractor was found liable for the spread of the fungus and faced bodily injury and property damage claims in excess of $1 million.

• An HVAC contractor was sued when mold was discovered in a commercial building recently worked on by the contractor. After further investigation, the contractor’s work was not the cause of the mold growth. The contractor was removed from the suit, after having to expense over $40,000 defending the claim. 

• A mechanical contractor installed an HVAC system in an assisted living facility for seniors.  The system was constructed improperly, which caused mold growth in a portion of the residences.  The facility was forced to relocate several patients during the repair of the system, and the renovation of the moldy building materials.  A claim for clean-up costs, property damage, and 3rd party business interruption was filed.

• While working on a historical property, a contractor used a hole saw to cut through a ceiling. Unknown to the contractor, the saw inadvertently disturbed and released asbestos-containing insulation material. The contractor had to pay cleanup costs for the asbestos fibers released throughout the building, costing in excess of $75,000. 

• An HVAC contractor installed a new ventilation system as part of the renovation of a 25 story office building.  An electrical fire broke out in the building’s basement two years after the renovation was complete.  As the fire burned, ventilation shafts pumped PCBs and dioxins throughout the building.  The contractor was later held liable for a large portion of the more than $40 million cleanup costs, since ventilation shaft openings were found to be too close to transformer equipment.

Overlooked Benefits of Environmental Liability Insurance

Because environmental losses are a severity risk, rather than a frequency risk, the majority of HVAC contractors lack the financial strength to self-insure their potential environmental liabilities. Since every HVAC contractor 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

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. 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.  

Environmental Impairment Liability (EIL) 

EIL is for contractors that own, rent, lease, operate or have any other insurable interest in real property (i.e. an operating facility that may include onsite equipment storage, fuel tanks, offices, etc.) 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, off site cleanup costs, legal defense expenses, transportation pollution liability, offsite disposal coverage….  Multi year term policies can be negotiated. 

Transportation Pollution Liability

Generally, Business Auto or Truckers policies will exclude pollution losses arising from spills or other 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.    

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? 

Underground Storage Tanks

Financial responsibility requirements ensure that owners and operators of underground storage tank systems can financially handle a release from an underground storage tank. 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.  

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. What pollutants are impacting your business?

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 Fire Suppression System Contractors

May include, but are not limited to: asbestos; mercury; lead; vapor intrusion; Repair, Renovation and Painting (RRP) for child occupied facilities;  completed operations exposures including incomplete line hookup or improper system construction causing spills or emissions; fumes, emissions or spills of chemicals used during construction (finishers, sealants, adhesives, solvents, curing compounds); water contamination; raw materials stored at job sites; causing build up or release of airborne bacteria;  mold resulting from water intrusion or moisture encapsulation;  spills from mobile storage tanks;  site preparation/excavation work through preexisting contaminated soil or impacting utilities or underground storage tanks; old septic systems; raw sewage ruptures; stormwater runoff….

Environmental Loss Examples:

1. A contractor used a hole-saw while installing a new fire suppression system at an office building. Unknown to the contractor, the saw made a small puncture on the water line, allowing water to slowly drip from the pipe. Months later a tenant noticed dampness on the walls. After further investigation, the leak was discovered and mold had developed. The contractor was responsible for cleanup costs, and 3rd party business interruption, as the tenants were forced to shut-down while the mold was being remediated. Total cost of the claim exceeded $750,000.  
2. A university contracted a fire suppression system contractor to update the fire system in their chemistry building. While dismantling piping, the contractor discovered a mercury spill that resulted in mercury contamination throughout the building. Costs to clean up the contamination and restore the building to its original condition was $350,000.  The fire suppression system contractor was named in the suit for exacerbating the mercury spill.
3. The fire suppression system at a manufacturing facility accidentally turned on and began spraying through the entire building. Water from the system mixed with non-compatible chemicals, creating a hazardous vapor cloud throughout the building. Several employees were rushed to the hospital and treated for exterior and internal burns from inhaling the vapor. Total cost for 3rd party bodily injury, property damage, business interruption, and cleanup exceeded $5,000,000. 
4. A fire suppression system contractor was sued when mold was discovered in a commercial building they had worked in the year before. After further investigation, the mold was determined to have developed from faulty work by a window installation contractor. The fire suppression system contractor was removed from the suite. However, they had already expensed over $45,000 in defense fighting the claim. 
5. A fire suppression system contractor performed maintenance at a local business. As this was a seasonal business, it was several months before anyone noticed that a leak had developed in the system piping. When the owners returned after vacation, they found mold growing throughout the building. The entire building had to be gutted and refinished, costing the Insured well over $600,000.
6. A contractor exacerbated an existing environmental condition while updating and re-piping a commercial building. The contractor was named in a lawsuit for exacerbating and spreading of asbestos material throughout the building. Total cost of the claim for cleanup and legal defense exceeded $100,000

Benefits of Environmental Insurance 

Unlike most liability exposures impacting fire suppression system contractors, pollution losses are not a frequency risk, but rather a severity risk. Since every fire suppression system contractor is impacted by environmental liabilities, consideration needs to be given to the economies of scale afforded with environmental liability insurance as part of your risk transfer strategy, versus self-insurance.

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:

1. 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.  
2. 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….?
3. 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 will be impacted if you or a sub-contractor/vendor create an environmental loss.    

Environmental Liability Insurance Products

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.     

Transportation Pollution Liability

Generally, commercial auto policies will exclude pollution losses arising from spills or other releases of transported cargo. Transportation pollution liability affords coverage during the loading, unloading and transportation, for a spill, release or sudden upset and overturn of transported cargo.    

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. 

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?