Pollution Insurance FAQ

Pollution insurance is designed to respond to claims stemming from the release of pollutants into the environment. These policies are needed to fill a gap in coverage created by the pollution exclusion in the standard CGL policy.

Pollution insurance will help fill coverage gaps and meet contractual requirements. In an environmentally conscious, litigious society, pollution coverage can provide legal defense to help protect the financial stability and reputation of a business. There is a wide range of quality, competitively priced environmental products to address the exposures many businesses face.

Standard CGL policies define a “pollution event” in part as “arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants…” This very broad definition of a pollutant creates significant exposures for many businesses.

Too much of any one substance can be considered a pollutant in certain situations. It is important to review the policy form offered as the definitions of pollutant vary by carrier, however here is an example of a fairly broad pollution definition:

Pollution condition means the discharge, dispersal, release, escape, migration, or seepage of any solid, liquid, gaseous or thermal, material matter, irritant or contaminant, including smoke, soot, vapors, fumes, acids, alkalis, chemicals, hazardous substances, hazardous materials, or waste materials, on, in, into, or upon land and structures thereupon, the atmosphere, surface water or groundwater.

An exclusion in an insurance policy that refers to losses caused by “pollution,” whether in solid, liquid, or gaseous form. The basic CGL policy provides very little pollution coverage, particularly in the area of cleanup or remediation. One of the most common misperceptions is that pollution events can only be caused by materials known to be hazardous. This is a mistake that can be very costly in the event of a release. Even products such as milk, beer, syrup, produce, or other consumables have been associated with heavy liability claims when their uncontrolled release into the environment has resulted in business interruption, fish kills, wetland destruction, or other natural resource damages.

A pollution insurance policy is designed to respond to claims stemming from the release of pollutants into the environment. These policies are needed to fill a gap in coverage created by the pollution exclusion in the standard CGL policy.

Policies are structured in many different ways, but common elements of the coverage can include coverage for:

• Third Party claims for Bodily Injury, Property Damage and Environmental Damages at, on or emanating from the insured site.
• Cleanup costs for pollutants discovered at the insured site.
• Emergency response expenses.
• Business Interruption resulting from pollution events
• Claims arising at non-owned disposal sites utilized by the insured
• Claims related to the transportation of waste materials from the site

In addition, some carriers endorse their policies to provide even more enhancements, including:

• Disinfection expense costs for response to CDC required cleanups.
• Image restoration expenses
• Coverage for claims related to transportation and disposal of hazardous waste
• And more…

No two pollution policies are the same. While they may attempt to protect the client in a similar fashion the way policies respond can be very different. There are markets that only offer pollution coverage on a very limited basis by offering only sudden/accidental time element coverage versus a policy that includes gradual issues. Other basic differences may include: policy trigger, capped defense costs, limited designated operation coverage, no coverage for indoor air quality issues and job site coverage only. It is important to look closely at the policy forms and endorsements when making sure the coverage addresses your client’s needs.

Insureds should be interested in pollution coverage because pollution losses are generally excluded from their General Liability and or Property policies. A Pollution policy will protect insureds from a loss arising from their contracting work or their premises exposure, thus fixing the gap created by the exclusion in their GL or property policy.

There are various products available depending on the services offered by your client. There is Premises Pollution Liability, Products Pollution, Contractors Pollution, Transportation pollution, and Pollution coverage for Environmental Consultants. In some cases these various products can be offered in combination with one another due to varying exposures your insured has. Please contact Beacon Hill to discuss the lines that would address your insureds’ needs.

The cost of pollution insurance varies widely depending on the size and type of insured, limits being requested, claims history, etc. Our carrier partners evaluate the range of operational risks associated with the insured, geographic location, length of time in business, and other factors that may help to shape the account. The minimum premium for a monoline Contractors Pollution Liability account starts around $1,000; Site Pollution Liability starts at $3,000. Check out our other products and pricing here.

We can offer standalone Pollution on a wide variety of clients. For General Liability to be considered the majority of your client’s receipts would need to be in environmental services. A Beacon Hill representative can assist you in determining what lines are available and applicable to your insured’s needs.

For risks with an environmental focus, we can help with: CGL, CPL, Site Pollution, E&O, Auto, Workers Comp, and Excess
For risks with no specific environmental focus, we can help with: CPL, Site Pollution, Contractors E&O

Pollution coverage is a specialty of Beacon Hill, therefore the products we offer will include a pollution line. For the products where we offer other lines of coverage, there is a pollution exposure involved and typically the additional cost for the pollution portion of the coverage doesn’t drive the pricing. For instance, one of our carriers will offer a combined GL, E&O, CPL product for the same minimum premium as their standalone CPL product.

Contractors Pollution is a third-party coverage that helps to protect work done by, or on behalf of a contractor for pollution conditions caused during their scope of work. This coverage goes above and beyond coverages given by the General Liability coverage and includes coverage for bodily injury, property damage, clean up costs, and defense relating to the pollution condition. In some cases coverage also includes emergency response costs in case immediate action is required in dealing with a pollution condition.

Site Pollution Liability insurance, also known as Premises Pollution, Environmental Impairment Liability (EIL insurance), and Pollution Legal Liability (PLL), is designed to cover claims arising from pollution releases at, on, or emanating from a specific scheduled location.

Products Pollution coverage is generally sought by manufactures and distributors and gives coverage for bodily injury, property damage, and clean up expenses for the failure of a product that would cause a pollution loss.

Site Pollution coverage is for a fixed site, it is for a property that the insured owns or leases and it provides first party coverage for spills on the insured’s site which is scheduled on the policy. It also provides third party coverage when a pollutant migrates off site onto an adjacent property and provides for the clean up and the bodily injury and property damage. A good example of this would be a dry cleaner—if pollutants spill on the site, the Site Pollution policy pays for clean up on the site and if the chemicals seep into the soil and migrate offsite causing a loss on an adjacent property, the third party liability would cover that. A Contractors Pollution Liability policy covers ongoing and completed operations for a contractor’s operations that are preformed away from their owned or leased site. An example would be an asbestos abatement contractor who goes into a local school to remove asbestos. It provides the defense costs including-bodily injury, property damage, and clean up costs.

A UST policy covers the scheduled storage tank at a location while a Site Pollution policy provides coverage for the entire facility.

Action over coverage is when an injured employee, after accepting workers compensation benefits, sues a third party for contributing to a loss. Then because of a contractual agreement, that third party passes the claim back over to the employer. This is an important issue as many GL carriers exclude this, especially in certain parts of the country. There are many insureds who are unaware that they are self-insuring this risk and assume it on a contract.

In our industry, increasing the primary policy limits is usually the lowest cost option. For an Excess policy the minimum premiums tend to be higher as these policies will go over other lines of coverage such as the Auto and Workers Comp policies.

Additional Named insured: Typically have co-ownership of the company or subsidiary company. Additional insured: Protects the rights of a 3rd party that might become legally liable for the actions of the Named Insured. This may include Property Owners for whom the Named Insured is performing operations, entities performing operations for or on behalf of the Named Insured, Landlords, etc.

Separate Defense Coverage, Transit pollution, Contingent transit pollution, Emergency Cleanup Costs, Non-owned Disposal Site, Blanket AI with Primary and Non-contributory language, etc.

The best Pollution market is the one who offers the most comprehensive forms and coverages, who can offer enhancement endorsements to best protect the insured, and who can assist in tailoring a policy to meet the specific client needs at an affordable premium. There are many carriers in the Pollution marketplace and it’s imperative that brokers do their research to find the best carrier partner to work with.

Underwriters need a full view of the insured’s loss history for at least 5 years to properly underwrite the risk. Open claims from prior years could be closed, prior policies written on occurrence forms could have claims reported for losses that took place during that policy term and total incurred amounts or reserves could be changed. All of these factors help determine the insured’s true loss experience and updated information helps the underwriter apply the appropriate rating.

The best way to get indications quickly is to provide an ample amount of information upfront. If the underwriter is provided with a fully completed application, current loss runs, financial statements and a true understanding of the risk it makes the quoting process much easier. A limited amount of information is more likely to generate multiple questions from the underwriter as they are trying to get a good overview of what the insured does and what the risk is, ultimately delaying the quoting process.

An environmental insurance underwriter closely works with a broker, agent, or insured to assess the insured’s pollution exposure risks. Based on the size of the insured’s business, number of years in business, previous loss history, and other factors, the underwriter will work to provide the coverage needed.

There is not a standard ACORD application for environmental insurance so ACORDS are really only acceptable for more standard lines such as Auto, WC, Umbrella, etc. Since each carrier’s rating system varies, slightly different questions are asked on different applications by each carrier. It is important for the carrier who is quoting or binding coverage to receive their own application so they are capturing all of the information they require to have to properly underwrite coverage for the insured. In some instances, carriers are able to accept another company’s application. This will have to be determined on a case by case basis.

This will depend on the carrier and policy written, however, most carriers do allow premium financing to be set up by the insured and agent.

All claims should be reported to the carrier directly.

Most policies are based on the insured’s annual revenue projection for the next fiscal year. Underwriters need to review current financial statements to determine how past earnings compare to projections and what the insured is trending to earn for the next year. Insurance carriers also need to determine the insured’s fiscal stability for their ability to pay premiums and deductibles.

We are a wholesale broker that is only licensed to work with agents, not insureds.

For mid-term changes to a policy, you should contact the service department either by emailing service@b-h-a.com or by calling the office and requesting to be transferred to a service representative.

This really depends on the carrier and the account. Ninety days prior to renewal, your Beacon Hill renewal representative will take a careful look at the account and discuss with the carrier what they’ll need this year. Typically we need a carrier specific application, updated loss runs, financial statements, and any details about changes to the insured’s operations. You’ll get an e-mail from someone at Beacon Hill approximately 60-90 days prior to expiration outlining exactly what we’ll need and also a copy of a blank carrier specific application if there is one.