What You Need to Know about Sudden and Accidental Pollution
If an insured doesn’t clearly understand how Sudden & Accidental pollution is defined in their insurance policy, this can potentially lead to not being covered in the event of a pollution release. It can also result in E&O problems for the agent.
The way a Sudden & Accidental pollution event is defined is critical. Sudden & Accidental coverage is tied to a discovery and reporting period, and generally covers bodily injury, property damage, and cleanup caused by a pollution loss. The main issue is that if the loss happens over time or is not discovered or reported in the time allowed under the policy form, there is no coverage in place.
American courts have extensively litigated claims for sudden and accidental pollution insurance coverage. In previous years, “sudden” was often determined to mean “unexpected” rather than quick or brief, while “accidental” was usually determined to convey “unintended.” In recent years, the legal system has changed the interpretation, which has caused some confusion leading to gaps in coverage. The insured often has to meet strict reporting requirements within a specific timeline and there is usually a set period during which the insured must identify the pollution event or pollutant release and notify the insurance carrier. In an earlier article on sudden and accidental coverage, we used the example of a pipe leaking. How do you prove that a pipe leaked pollutants suddenly all at once rather than gradually? If there is reason to believe that maintenance was neglected, it might be hard to demonstrate that the resulting pollution was unexpected.
Sudden & Accidental coverage can be an endorsement to either a Contractors Pollution Liability (CPL) policy or a Site Pollution policy. Although it may be considered more restrictive on a Site Pollution form, it may be thought of as an enhancement on a CPL form, depending on what the insured’s objective is and what their site exposure is. It is fairly easy to get this coverage added to round out a policy, although we also have carriers who can underwrite for broader coverage if needed. It may be a more cost efficient alternative for businesses who need to streamline their insurance costs, and since, depending on the risk and exposure, some carriers may not want to provide full gradual on a Site Pollution form, it’s a way to provide some coverage for difficult risks versus none at all. It is crucial for an agent to communicate to the insured the specific timeframe they have to discover and report pollution conditions under a sudden and accidental policy form, and the differences between broader gradual coverage and Sudden & Accidental coverage so they can decide the coverage that best suits their needs.
For Sudden & Accidental coverage to be in place, the release must be:
- During the policy period
- At a specific identified time and place
- Typically discovered within 3-14 days from commencement (depending on the form)
- Typically reported to the insurance company within 14-30 days (depending on the form).
Working with Beacon Hill gives you the advantage of providing customized solutions for your insureds who may need guidance with this exposure. For example, for some of our energy-related risks, carriers may only want to provide Sudden & Accidental, but there may be the potential to negotiate with the carrier on the discovery and reporting time period allotted days, or provide multiple carrier options. As your environmental partner, our carrier partnerships with top environmental markets and our extensive product knowledge will help make sure the right coverage is in place for your clients.
Do you have questions about Sudden and Accidental Pollution Coverage for your client? Contact the environmental insurance specialists at Beacon Hill Associates.
Type: Blog
Topic: Sudden & Accidental
