What is Environmental Insurance?
Environmental 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. Standard CGL policies define a “pollution event” in part as “arising out of the discharge, dispersal, release or escape of a pollutant. Please see the definitely of a pollutant below.
What is Considered a Pollutant?
To clearly understand the exposures to environmental hazards real estate portfolios have, it is crucial to understand what an environmental hazard is, from an insurance perspective. Insurance Services Office’s (ISO) standard insurance policy language includes a broad exclusion for what it defines as “pollutants,” which are defined as follows:
“Pollutants” mean any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.
The exclusionary language includes the following triggering actions:
“Bodily injury” or “property damage” arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of “pollutants”. The important takeaway from this is that insurance policies exclude, as pollutants, many things that are not inherently hazardous or toxic. This exclusion applies to “irritants” and “contaminants” and excludes bodily injury and property damage for the release, or threatened release, of these substances.
Case law in different jurisdictions has interpreted this language in a variety of ways, with some being broader and others more narrow. There are notable cases of milk being spilled into streams from an overturned tanker truck, leading to claims denied as pollution losses, as well as dust from job sites. When evaluating environmental risk, we need to keep this broad language in mind.
Who Needs Environmental Insurance?
Virtually every type of business has a pollution exposure. See our extensive list of target risks.
The History of Environmental Insurance
1970s: The birth of environmental regulation. Clean Air Act, Clean Water Act, The Endangered Species Act, etc.
1980s: Birth of environmental insurance industry.
1990s: Beacon Hill Associates opens its doors as one of the first environmental insurance wholesale brokers.
2000s: Coverage developed to respond to wide range of needs, including water contamination, air pollution, and natural resources damage.
2010s: Environmental liability claims spike. Coverage available and affordable for all classes of business.
2020s: Environmental insurance claims continue to grow, with social inflation and the frequency & severity of pollution lawsuits at an all time high.
The State of the Environmental Insurance Market
Environmental insurance, or Pollution Liability, is a billion-dollar industry with many opportunities—every account has a pollution exposure. By discussing environmental products that can effectively address these exposures, you will provide broader coverage for your client, highlight your agency’s professionalism, help secure future renewals, and generate more revenue on your accounts.
As we see the economy roar to life, the environmental insurance marketplace has never been stronger. We have seen a huge uptick in accounts related to manufacturing, recycling, construction, waste disposal, and renewable energy. Businesses are starting to expand to fill the gaps created by the pandemic downturn and being sensitive to pollution exposures is very important. With disruptions in the U.S. supply chain & labor force, and more awareness of environmental events and their impacts, insurance professionals are gaining a new perspective on coverage.
There are currently approximately sixty insurance companies offering environmental insurance products. These products have been designed for several broad business segments, including: site owners/operators, contractors & consultants, storage tanks, property transfer and lender liability, transportation waste and materials, products pollution, and manufacturing risks.
Examples of sector-specific policies include policies for healthcare facilities, educational facilities, real estate entities, and many others. Policies designed to respond to specific situations can include environmental policies over indemnifications, policies that facilitate transactions, policies that are excess over other environmental carrier forms in order to obtain additional limits, and policies that consist of combined General Liability and environmental forms with the goal of reducing coverage gaps, overlaps, and coverage disputes.
Job site/project policies include specific types of project policies such as restoration or green projects, and practice policies that can provide coverage for any project a contractor or professional works on during the year.
Types of Products
- Contractors Pollution Liability
- Contractors Pollution & Professional
- Packaged Insurance for Environmental Contractors and Consultants
- Packaged Insurance for Environmental Facilities
- Premises Pollution Liability
- General Liability & Products Pollution
- Storage Tank Coverage
- Energy-Related Coverages
- Auto, Including Pollution
- Over the Road Pollution/Transportation Pollution Liability
- Excess Coverages
Significant Environmental Regulations That Have Environmental Liability Provisions
There are numerous environmental regulations with which companies must comply. Not complying with these regulations could result in fines, penalties, and legal actions by environmental regulators or third parties. Some of the most notable ones that include environmental liability provisions are:
The Clean Air Act (CAA) is the comprehensive federal law that regulates air emissions from stationary and mobile sources. Among other things, this law authorizes EPA to establish National Ambient Air Quality Standards (NAAQS) to protect public health and public welfare and to regulate emissions of hazardous air pollutants.
The Clean Water Act (CWA) establishes the basic structure for regulating discharges of pollutants into the waters of the United States and regulating quality standards for surface waters.
The Resource Conservation and Recovery Act (RCRA) gives EPA the authority to control hazardous waste from the “cradle-to-grave.” This includes the generation, transportation, treatment, storage, and disposal of hazardous waste. RCRA also set forth a framework for the management of non-hazardous solid wastes.
The Comprehensive Environmental Response, Compensation, and Liability Act — otherwise known as CERCLA or Superfund — provides a Federal “Superfund” to clean up uncontrolled or abandoned hazardous-waste sites as well as accidents, spills, and other emergency releases of pollutants and contaminants into the environment.
*All definitions obtained from https://www.epa.gov.
Read about other environmental laws and executive orders HERE.
What does Environmental Insurance Cost?
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.
What does an environmental underwriter do?
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.
Why should insureds be interested in pollution coverage?
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.
How do I know if my insured is a fit?
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
Glossary of Terms
For an explanation of common pollution insurance terms and acronyms, please visit our glossary.
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- Visit Our Resource Center