We continue our series of claims we have encountered and the lessons our agents and their insureds have learned from them. Today we will highlight environmental contractor/consultant claims. Contractors who work with hazardous substances on a regular basis, as well as consultants who assess the effects of contaminants, have always required specialized coverage. As the environmental insurance marketplace has expanded, many of these firms have found that coverage is readily available. As an agent or wholesaler, your challenge—and opportunity—is deciding if the coverage is right for your insured and if it will bring them the greatest protection and advantages. Check out some of the claims we have come across for environmental contractors and consultants:
A hazardous waste site hired a consultant to develop a health and safety plan and provide inspection services. During remediation of the site, a subcontractor who was not equipped with proper respiratory protection died from inhalation of unknown contaminants. The subcontracted firm and the employee’s family filed a claim against the consultant for improper health and safety precautionary measures and negligent oversight of the work in progress.
What to learn from this: Contractors and consultants need to make sure subcontractors are properly insured and require them to follow proper safety precautions. Don’t assume a subcontractor is covered by his/her own policy.
During remedial activities at a Superfund landfill site, a remedial action contractor (RAC) inadvertently crushed several drums that were improperly classified as “empty.” As a result, several gallons of hazardous contents were released, causing localized soil contamination. The RAC failed to notify the EPA of the release, which resulted in both criminal and civil actions against the contractor. The RAC was held liable under CERCLA, and was required to pay penalties exceeding $6.1 million.
What to learn from this: Something as simple as mislabeling a drum can lead to a catastrophic claim, resulting in legal and financial consequences, as well as ruining the reputation of a contractor. The insured needs to follow correct procedures in the event of an environmental exposure, or the insurance company may not pay a claim.
An excavation contractor was responsible for a portion of the cleanup costs at a landfill after the material discarded contained a variety of contaminants, including asbestos. Even though the contractor was unaware that the material was contaminated, the landfill filed suit against the contractor for improper classification and disposal of waste material.
What to learn from this: Contractors aren’t always aware of all the materials in the items they discard, which means they may not know they need to handle them in a specific manner (or to even look for them). Contractors need to be covered in the event they cause damage or contamination from something they work with.
A developer retained an environmental consultant to perform a geologic/geotechnical investigation for a residential subdivision. During final grading of the site, a major landslide occurred which extended off-site and impacted adjacent properties. The developer filed a suit against the consultant for breach of contract and negligence in failing to provide proper design engineering services during excavation of a sloped area. The resulting settlement totaled $300,000.
What to learn from this: Contractors and consultants have no control over natural disasters, but if their work doesn’t stand up to them, the contractors may be found negligent.