Pollution Liability: Do You Need This Coverage?

Pollution liability insurance is a stand-alone policy that covers businesses against liability from damages or injuries caused by pollutants they work with, produce, or exacerbate. It is designed to fill the gap in general liability policies and provide coverage for legal liability for on- and off-site pollution claims, property damage, third-party bodily injury, and remediation costs due to pollution. The cost of pollution insurance varies, but it typically has higher limits than general liability policies, with coverage ranging from $1 million to $1 billion per occurrence. While it may not be necessary for all businesses, it is essential for those that deal with hazardous materials or substances that could cause environmental pollution.

Do I Need Pollution Liability Insurance?

Pollution liability insurance is necessary for businesses that work with pollutants

Pollution liability insurance is a standalone policy that is necessary for businesses that work with pollutants. It covers legal liability for on- and off-site pollution claims for bodily injury, property damage, business interruption, crisis management, transportation liability, and clean-up costs associated with toxic materials.

The list of substances considered pollutants is extensive, and nearly every business works with a pollutant in some form. For example, cleaning agents used in laundromats, cleaning aids used by home and commercial cleaning services, and chemicals used in parlors, salons, and spas can all be considered pollutants. Even substances like water, cheese, milk, and carbon monoxide can be considered pollutants if introduced to the wrong environment.

Some industries with a higher risk of pollution liability include waste disposal, oil, construction, HVAC, landscaping, manufacturing, dairy farming, plumbing, heating, air conditioning, and the beverage sector. These industries often deal with hazardous waste, emissions, or toxic waste that can contaminate land and water.

In addition to protecting against financial losses, pollution liability insurance can also help businesses take responsibility for any harm they may cause to people or the environment. It is important for businesses to assess their operations and understand their potential pollution risks to determine the appropriate level of coverage needed.

Pollution legal liability covers on- and off-site pollution claims

Pollution legal liability insurance is a specialty insurance policy that provides coverage for environmental claims at fixed sites that are typically excluded from general liability (GL) policies. It covers on- and off-site pollution claims, including cleanup costs, property damage, bodily injury, and legal expenses.

This type of insurance is particularly relevant to businesses that work with or produce pollutants, such as hazardous waste or emissions. This includes waste disposal companies, oil companies, construction companies, landscaping companies, and independent contractors.

For example, if a company's truck spills the contents of its tank and pollutes an area, a standalone pollution policy may be necessary to cover the costs of cleanup and any resulting legal expenses.

In addition to the protection it offers, pollution liability insurance also demonstrates a company's commitment to taking responsibility for its environmental impact and protecting those it serves.

Overall, pollution legal liability insurance is an important consideration for any business that may be at risk of pollution-related claims, as it provides coverage for a range of expenses that are typically excluded from GL policies.

Independent contractors may be required to have pollution insurance

If you are an independent contractor, you may be required to have pollution insurance if you deal with waste or pollutants. This includes independent contractors in industries such as waste disposal, oil, construction, HVAC, landscaping, plumbing, heating, air conditioning, and more.

Pollution liability insurance is a standalone policy that protects businesses and contractors from liability for damages or injuries caused by pollutants they work with, produce, or exacerbate. It covers claims for bodily injury, property damage, business interruption, crisis management, transportation liability, and clean-up costs associated with toxic materials. For example, if a contractor is drilling a hole and unknowingly disturbs asbestos, polluting the job site and surrounding areas, pollution liability insurance would cover the damages and any legal fees.

Contractors may engage in activities that unintentionally release pollutants during construction, such as excavation, laying pipelines, rehabbing property, or disposing of waste. Therefore, it is essential for contractors to have pollution liability coverage to protect themselves from potential risks and financial consequences of environmental issues.

Some contractors may be required to have Contractor Pollution Liability (CPL) coverage, which is designed to protect contractors who may release pollutants during their work. CPL provides first- and third-party liability coverage, including coverage for loss, personal injuries, or damages resulting from pollutants. It is important to note that CPL is separate from general liability insurance, which does not typically cover pollution liability.

As an independent contractor, it is essential to assess the risks, needs, and operations of your business to determine the specific type of pollution insurance required.

Storage tank pollution liability covers property damage and injury claims

If you own or operate storage tanks, you may need storage tank liability insurance. This type of insurance covers property damage and injury claims, as well as cleanup costs associated with pollution incidents originating from covered storage tanks. It is important to note that this insurance is not just for businesses that deal with polluting materials or hazardous waste. Nearly every business works with a pollutant in some way, and pollutants are considered any materials or substances that end up somewhere they weren't intended to be used.

Storage tank liability insurance can provide protection against third-party bodily injury and property damage claims, as well as the legal defence in the event of a suit against the owner. This type of insurance can also help cover the costs of corrective action and cleanup, which can be significant. For example, a leak from a storage tank can contaminate groundwater, surface water, or soil, leading to costly remediation efforts.

Typical customers for storage tank liability insurance include schools, gas stations, car dealerships, golf courses, airports, and commercial businesses that own fuel storage tanks. The cost of this insurance can vary depending on the age of the storage tanks, with older tanks being more expensive to insure and having more restrictive terms and conditions.

In some industries, such as waste disposal, oil, construction, HVAC, and landscaping, pollution insurance is a definite requirement. Independent contractors who deal with waste may also be required to have pollution insurance and may need to show proof of coverage before obtaining jobs. Additionally, businesses that use any type of chemical that can harm the environment, such as cleaning agents, cleaning aids, and chemicals used in salons and spas, should also consider this type of insurance.

Pollution liability insurance covers legal defence fees and clean-up efforts

Pollution liability insurance is a separate insurance policy that businesses need to purchase on top of their business insurance policy. It is necessary because, in 1985, the ISO introduced the "Absolute Pollution Exclusion", which led to general liability insurance policies excluding coverage for pollution claims.

Most standard pollution liability policies cover legal defence fees and clean-up efforts. Legal defence fees include lawyer's fees and other costs that may arise due to a pollution claim. If the law requires you to clean up contaminants, your policy should help cover part of the costs too. Many policies also cover catastrophic and non-catastrophic events. Catastrophic events may include fires or explosions that lead to pollution. Non-catastrophic events are cases where pollution happens over a period of time.

For example, if a metal manufacturer regularly uses hazardous chemicals to treat their products, and a storage tank accidentally leaks into a nearby ravine, environmental insurance would help pay for lawsuits over harm to the surrounding area and any necessary cleanup costs.

In some instances, the answer to whether you need pollution liability insurance is obvious. If you are in an industry where you directly deal with hazardous waste, such as a waste disposal company, an oil company, a construction company, an HVAC company, or a landscaping company, then yes, you definitely need pollution insurance. If you are an independent contractor who deals with waste, you may actually be required to have pollution insurance and may need to show proof of coverage before obtaining jobs.

Even if your company doesn’t overtly deal with waste as part of its daily operations, you could benefit from a pollution insurance policy because every company is capable of causing damage or injury with contaminants. Whether you choose to get one depends on how much risk you want to take. If you’re a small business that doesn’t work with pollutants often, will you get sued for causing damage with hazardous materials? Probably not. But could you? Absolutely. Environmental clean-up projects can cost millions of dollars, and environmental laws are always changing, so you don’t want to find yourself unexpectedly liable for a large cost.

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