By Tracy Durham, Associate Account Executive
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 Flint, Michigan water crisis, the Freedom Industries chemical spill in West Virginia, soil and water contamination in Portland, Oregon, and the California methane leak. The fallout from the 2010 BP Deepwater Horizon spill continues to wind through the justice system. 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.
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 the inclusion of one or more endorsements. Examples of these 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 sub-limits as low as $100,000 as well as time limits on discovery and reporting of pollution incidents. The form may also include limitations on coverage offered. Any of the following may be excluded: Bodily Injury, Property Damage, or Clean-up 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. Examples of cases where claims were denied can be found at the end of this article.
In order 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 for 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 electromagnetic fields. The policies may respond to Bodily Injury, Property Damage, Natural Resource Damage, Clean-up costs, and Crisis Management. Some examples of pollution exposures and coverage solutions are found below. Pollution insurance can be tailored to how much risk the insured wants to retain instead of transfer. Businesses and landowners should not rely on the General Liability policy to address these exposures.
|Contamination of a location owned, operated, or leased by an insured:|
• Contamination from the insured’s operations, both on and off their location
• Historic contamination
• Contamination from neighboring properties migrating to the insured’s property
• Indoor air quality issues
|Broad option: Gradual Premises Pollution (EIL, PPL) with historic conditions coverage*|
Contractors Pollution Liability where services are provided (CPL), Non-owned Disposal site (NODs) or Non owned location Pollution coverage and Transportation Pollution Liability (TPL)
Focused options: Storage Tank Liability, Sudden and Accidental conditions, indoor air quality only, new conditions only
* Historic coverage may not be available for all risks
|Contamination from Manufacturers or Distributors:|
• Same exposure information as above, for contamination of a location owned, operated, or leased by and insured
• Pollution due to an insured’s products, whether they manufacture or distribute the product
• Pollution due to any services the insured provides in association with their products including installation, maintenance, and repair
|Broad option: General Liability, Gradual Premises Pollution (EIL, PPL), Products Pollution, Contractors Pollution Liability where services are provided (CPL), Non-owned Disposal site (NODs) or Non-owned location Pollution coverage and Transportation Pollution Liability (TPL)|
Focused options: Premises Pollution only (EIL, PPL), Sudden & Accidental Premises Pollution, GL/Products Pollution, Contractors Pollution Liability only
|Contractors & Consultants causing or overlooking contamination||Broad option: package (GL, CPL, E&O) for environmental contractors/consultants, CPL/E&O for non-environmental contractors, Non-Owned Disposal site (NODs) or Non-Owned location Pollution coverage and Transportation Pollution Liability (TPL)|
Focused option: CPL only , designated operations, project specific policies
Cases supporting the General Liability carrier’s denial of coverage due to pollution exclusions:
Kruger Commodities Inc. v. USF&G , 923 F. Supp. 1474 (M.D. Ala. 1996) (applying Nebraska law)
RV dealer claimed loss of business due to the odor coming from an animal rendering plant next door. The GL carrier didn’t pay because there was an absolute Pollution Exclusion on the policy. The court upheld the denial under the exclusion.
Watts-Frew, et al. v. Fireman’s Fund Ins. Co., No. 95-00882, (Fla. Cir., Dade Co., 11th Jud. Cir.) [Mealey’s 7/1/97], aff’d per curiam, 707 So.2d 1195 (1998) [Mealey’s 5/5/98]
The court upheld denial of coverage under absolute pollution exclusion for emission of toxic fumes due to construction materials used by contractor.
[REVIEW GRANTED] MacKinnon v. Truck Ins. Exchange (2002) [No. E028662. Fourth Dist., Div. Two. Jan. 15, 2002.]
“(CGL) insurance… excludes coverage for a third party personal injury claim arising from spraying an apartment building with insecticide to exterminate yellow jackets.” Court upheld the carrier’s decision to deny coverage after the carrier initially provided defense on the insured’s behalf.
Cincinnati Specialty Underwriters Insurance Co. v. Energy Wise Homes, Inc., Uhler and Poulos Insurance, Inc. (2014-165) 2015 VT 52 No. 2014-165
A homeowner sued a spray-foam installer due to Bodily Injury from exposure to airborne chemicals and residues. The General Liability carrier defended the insured initially, and then denied coverage due to the pollution exclusion. The lower court sided with the contractor, but the Vermont Supreme Court overturned the ruling and sided with the insurer.