Environmental Insurance and the Pollution Exclusion
Greater public awareness about the effects of pollution on property and health, as well as the cost to mitigate those effects, has grown over the last several years. News coverage of environmental disasters is hard to avoid. Recent incidents include the train derailment and chemical spill in East Palestine, OH; the Flint, Michigan water crisis; multiple refinery explosions; and so on. Even with this news, businesses, and property owners may be unaware of the pollution exposure from their operations or locations. They may not know that the General Liability policy is often inadequate for addressing these exposures.
Insureds must understand the coverage they have, as well as what is excluded, in their policies. Many insureds believe that pollution conditions are covered under their General Liability insurance, when in fact, they are excluded.
What is a pollution exclusion?
A pollution exclusion in an insurance policy refers to losses caused by “pollution,” whether in solid, liquid, or gaseous form. The basic CGL policy provides very little pollution coverage, particularly in the area of cleanup or remediation. One of the most common misperceptions is that pollution events can only be caused by materials known to be hazardous. This mistake can be very costly in the event of a release. Even products such as milk, beer, syrup, produce, or other consumables have been associated with hefty liability claims when their uncontrolled release into the environment has resulted in business interruption, fish kills, wetland destruction, or other natural resource damages.
The pollution exclusion built into the ISO GL policy, CG 00 01 04 13, comes with some exceptions, such as those associated with smoke, vapor, or fumes released from specified sources. These exceptions and possible ambiguities can be wiped out by including one or more endorsements. Examples include the CG 21 49 09 99 Total Pollution Exclusion and exclusions specifically addressing Asbestos, Lead, Nuclear, Fungi or Bacteria, and Silica.
While some carriers offer pollution give-back endorsements on the GL form, they often contain limitations. These include sublimits as low as $100,000 as well as time limits on discovery and reporting of pollution incidents. The form may also have restrictions on coverage offered, including Bodily Injury, Property Damage, or Cleanup costs. The decision to confirm or deny coverage under a GL policy with pollution exclusions or limitations is often interpreted differently by various state courts.
Environmental insurance for pollution exposures
To address the pollution exposures businesses face, they should consider broader policy options that are designed for their particular exposure. A pollution-specific policy can provide coverage for a wider range of pollutants and conditions that lay undiscovered after the insured’s work is done or the original property owner is long gone. Pollutants that may be addressed by a pollution-specific policy include mold, lead, asbestos, silica, legionella, and many other concerns. The policies may also respond to Bodily Injury, Property Damage, Natural Resource Damage, Cleanup costs, and Crisis Management. Pollution insurance can be tailored to how much risk the insured wants to retain instead of transferring. Businesses and landowners should not rely on the General Liability policy to address these exposures.
Please contact us for more information on environmental insurance products or to speak with a Beacon Hill representative.
Type: Blog
Topic: Account Management
