Pollution Clean Up: Does Your Insured Have the Right Coverage?
By Stephen Holcombe, Vice President
The insuring agreement for Site Pollution coverage can vary drastically from carrier to carrier, and account to account. One of the considerations for this type of policy is clean-up coverage. Below I will touch on a few items to look for in carrier policy forms. These items can guide you in determining if coverage is adequate for your insured’s needs.
Sudden & Accidental vs. Gradual Coverage
One of the key areas to note is whether the coverage is providing full gradual coverage for cleanup or if terms are limited to sudden & accidental cleanup. Sudden & accidental cleanup will have wording that notes how long the insured has to discover the pollution condition from when the pollution condition first commences. It will also have wording related to how long the insured has to report the issue to the carrier. Gradual coverage for cleanup will not have those time element restrictions as long as the pollution incident is discovered during the policy period and reported as soon as practicable.
Off-Site and On-site Cleanup
Coverage for cleanup can be separated into coverage for on-site cleanup and off-site cleanup issues. Depending on the account, a carrier may not be comfortable with providing on-site cleanup coverage but will offer off-site coverage only. Carriers could also consider excluding cleanup coverage all together. It is important to review the coverage to determine whether the insured is receiving both on and off-site coverage, or any at all. Note that some markets combine both on-site and off-site cleanup coverage in one insuring agreement. They could then endorse the policy to limit exposure for on-site or off-site coverage.
Pre-existing Conditions vs. New Conditions
Determining how the retro date is applied to the coverage form is key. Some carriers offer separate insuring agreements for pre-existing and new conditions cleanup costs. In this situation, the retro date on the policy would determine if a claim would be considered a pre-existing condition or a new condition. This is based on when the pollution condition first commenced. Other carriers will combine both pre-existing and new conditions cleanup costs in to one coverage grant. In this situation, the pollution condition would have to commence after the retro date listed. If the carrier is comfortable with providing coverage for full prior conditions, they may list “N/A” or “none” for a retro date.
Coverage Trigger
Cleanup cost coverage can have two triggers of coverage. Carriers can provide a first-party trigger, where the insured discovers a pollution condition and reports it to the carrier without a third-party’s involvement. A third-party trigger would involve a claim being made against the insured by a 3rd party or governmental entity that would require cleanup.
Specific Exclusions
All properties are different, and carriers have many ways to tailor or limit cleanup coverage based on exposures inherent to the property. One very common way is to exclude certain pollutants that may be known or unknown. Another common technique to limit exposure is to add a government mandate coverage trigger. This coverage trigger would require a government agency to order that a pollution condition be remediated.
Hopefully the above can guide you determine if coverage is tailored the right way for your insured. Site Pollution policies are extremely complex in nature and Beacon Hill Associates can guide you through the process. For more information on Site Pollution Liability or questions about clean up coverage, please contact us or call (800) 596-2156.
