By Ivy Riggs, PartnerOne Environmental
When speaking with your clients or carriers, you may have often been reminded that all applicants have an environmental exposure. These range widely from premises hazards such as indoor air quality and legacy contamination to operational and products pollution exposures. Because many of these risks tend to go unacknowledged and unaddressed until after a loss has occurred, a surprising number of policyholders are self-insuring their environmental risks, albeit unknowingly.
Of course, savvy producers working in a climate of increased competition and narrowed profit margins may have been cross-selling environmental insurance for many years. Doing so has the advantages of not only reducing liability for errors and omissions allegations but also of providing a broader revenue stream. If you count yourself among these producers, you may feel you have already properly taken your clients’ pollution exposures into account. Favorite topics to discuss in this arena may have included asbestos, lead-based paint, mold, petroleum hydrocarbons, or heavy metals. These are widely known hazardous materials whose presence or usage likely suggests the purchase of an appropriate environmental insurance policy.
But what if your clients have no such exposures? Would it be fair to characterize their pollution risks as negligible? Unfortunately, the answer is no. In part this is due to the fact that every single facet of our society contributes to our nation’s waste streams, even if it is mainly through the municipal sewer systems. But it is also attributable to the fact that a material does not need to be labelled by any regulatory agency as “hazardous” to create an environmental liability. In fact, the list of unregulated chemicals that have been detected in our soil and water (including surface waters, groundwater, and drinking water) has grown exponentially as new products are brought to market, and as technological improvements have facilitated faster and more accurate analysis. Among these constituents are pharmaceuticals and personal care products, collectively referred to by the EPA as “contaminants of emerging concern,” or CEC’s.
What distinguishes CEC’s is that they typically have no human health-based guidance in place; in other words, it is unknown how much is safe for consumption. Equally concerning is that their behavior, fate, and effects on the ecosystems into which they are introduced are also often largely unknown. But lack of knowledge does not equate to lack of problems. Because limited research dollars have been allocated to this field of inquiry, scientists have narrowed their focus to identifying the top priorities: chemicals that evidence toxicity, that persist in the environment, and that concentrate in living organisms, with consequential risk of entering the human food chain.
But, you may be asking, why should you or your insureds care about the latest studies of obscure scientists? To better understand the implications, consider the following example. A Midwest contractor specializes in the land application of biosolids, which are the residual materials left behind from sewage treatment processing. Applying such substances to agricultural land is not a new process, as nutrient-rich fertilizers have long been used for amending depleted soils and increasing productivity. What is different is that the biosolids produced in the modern era–whether derived from human or animal waste–are increasingly laced with a wide range of pharmaceuticals, including antibiotics, antihistamines, and artificial hormones. In fact, a recent survey of 84 samples of U.S. biosolids found that out of 72 pharmaceuticals tested, two were found in every sample, and eight were found in 95% of them.
To what extent can the contractor be implicated in applying prescription medications to productive farmland? After the application is complete, if heavy rains should saturate the soil and transport the pharmaceuticals into rivers and lakes, who might be held responsible for resulting impacts to fish or wildlife? If the crops grown on this land should bioaccumulate the chemicals before being fed to livestock or shipped to the corner grocery store, what property damage or bodily injury claims could ensue?
The good news is that the majority of environmental insurance policies, although not standardized, contain very broad definitions of “pollutant” or “pollution condition.” Nevertheless, it is important that producers read the language carefully to determine whether or not coverage is predicated upon violation of some standard, because most CEC’s are not yet subject to any maximum contaminant level.
*Information cited from www.elsevier.com/locate/envint . Review of ‘emerging’ organic contaminants in biosolids and assessment of international research priorities for the agricultural use of biosolids. Bradley O. Clarke, Stephen R. Smith