Why do I need pollution insurance?
You have a general liability insurance policy and noticed that pollution claims are not covered. You aren’t alone.
The vast majority of commercial general liability (GL) policies won’t cover costs associated with pollutants. If they do, the coverage is probably limited. That’s where pollution liability insurance comes in!
Companies that buy pollution liability insurance (aka environmental insurance) usually either own real estate which can be impacted by pollution or work with pollutants themselves. Many founders are surprised to learn that, even though they’re not fracking or transporting toxic chemicals, they too have significant pollution liability exposure. It helps to know what the insurers mean when they use the word “pollutant.”
In insurance, “pollutant” describes a long list of different substances. Everything from mold to radiation could be included. As can bacteria, fuel, fungi, fertilizer, pesticides, sewage, industrial chemicals, heavy metals, and air pollutants like carbon dioxide or smog. Even electromagnetic radiation can be part of a pollution claim. What unites them all is that they are harmful materials released into the outside world that need to be cleaned up.
If your company works with or has exposure to any type of pollutant, then there’s a chance that the pollutant will be accidentally released into the ground, water or air. Any bodily injury or property damage that follows could be blamed on your company. If you actually own the real estate, any contamination found on the property is your responsibility. You could also be held liable for the pollution caused by your tenants if you were aware of it happening.
Whatever the situation, the costs of dealing with a pollution condition can be devastating for a company without adequate insurance.
What is it?
Pollution insurance is similar to GL insurance in that the policy covers claims made by third parties who say they suffered bodily injury or property damage as a result of your activities. The difference here is what actually leads to the injury.
Driven in large part by a wave of asbestos claims, the insurance industry created a separate product that addresses the unique exposures and potential costs presented by companies that handle pollutants. Pollution insurance can offer several different protections but there are two primary sources of loss: lawsuits arising out of pollution and the costs of testing, monitoring and cleaning up pollutants.
If an accidental release (or the discovery of an existing pollution condition) happens, there will be emergency expenses required to reduce any imminent threat to people or property. There will be ongoing costs to evaluate and monitor the extent of the environmental damage. Substantial costs associated with containing, neutralizing and/or removing the pollutant will follow soon after. Nearby property that was damaged will need to be replace. Not to mention people who were injured and may sue for current medical costs, ongoing medical monitoring and mental anguish they experienced as a result.
In short, the potential for loss is huge.
One policy does not fit all when it comes to environmental insurance. Companies that produce or store chemicals, those who work as contractors, transport companies and real estate owners might all have pollution insurance but their policies will offer very different terms and coverages. It’s important to work with a qualified broker who can guide you to the right product for your company.
How do I protect my company and myself?
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