Environmental insurance 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.
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 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.
These losses or damages typically arise in the form of claims against insureds for bodily injury, property damage, cleanup costs, and business interruption. Insureds often think they have coverage for pollution releases under their General Liability and Property policies, however, in our experience, those policies either restrict coverage by having time-element clauses, exclude coverage for certain pollutants altogether, or do not provide enough limits to investigate a pollution-related claim, let alone provide enough limits to adequately respond to a claim or clean up a pollution condition.
The State of the Environmental Insurance Market
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 Environmental Insurance Products
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:
Clean Air Act (CAA)
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.
Clean Water Act (CWA)
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.
Resource Conservation and Recovery Act (RCRA)
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.
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)
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.
Glossary of Terms
For an explanation of common environmental insurance terms and acronyms, please visit our glossary.
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