Pollution Exclusions Can Leave Your Insured Vulnerable

It’s common for insureds to assume that their General Liability policy provides adequate Pollution coverage. However, pollution exclusions can leave dangerous gaps in coverage. Carefully reviewing exclusions and explaining their meaning is part of due diligence as their agent. Unfortunately, exclusion wording is not standardized and can be problematic. Ask a specialized environmental insurance broker, underwriter, or attorney if you would like clarification regarding a policy.

Clients that unknowingly lack coverage may be shocked to learn they will not receive funds to clean up pollution incidents or contamination occurring over time. Their pollution claim proceeds may be far less than the cleanup expenses, and the cost of legal defense may fall entirely on the company. Even a false pollution accusation can become an immense financial burden for an organization.

To help protect your client, you must understand the boundaries that exclusions create and clearly explain the risks. Some GL pollution exclusions void coverage for pollution that occurs:

  • Off the premises
  • Below ground (including underground storage tank (UST) leaks)
  • From completed operations
  • Due to the failure of pollution control equipment
  • Gradually (for example, over 72 hours, or continuously)
  • During loading or unloading
  • Due to lead or asbestos

Exclusions can also narrow the definition of a covered event to those that are:

  • Not in connection with a Government Agency lawsuit – the claim or suit was not instigated by a government agency or regulatory body
  • Include injurious presence of pollutants (causing harm or likely to cause damage) and open to interpretation
  • Necessary in scope – reasonable cost (vaguely defined)

The policy may also exclude cleanup costs entirely or set limits too low to cover expenses:

  • Are cleanup costs explicitly covered or just Bodily Injury and Property Damage?
  • Sub-limited coverage

Without adequate Pollution Coverage, cleanup costs and legal fees can pile up, making self-insurance prohibitive. Contact the environmental insurance specialists at Beacon Hill Associates. Our focus on environmental risks and coverages makes us uniquely suited to assist agents.