Wildfires May Reshape Pollution Insurance
Wildfires have dominated headlines across the United States. Aside from the catastrophic losses experienced in California in January 2025, the National Interagency Fire Center (NIFC) reported that the average acreage burned by wildfires has almost tripled in the past 30 years.
Experts fault climate change, which has led to high temperatures and long droughts. Invasive plant species and the expansion of residential areas into fire-prone regions have also contributed to the increased frequency and severity of wildfires.
Landowners and property operators, specifically in wildfire-prone areas, face increased liability due to the high risk of hazardous substances being released during a fire, as well as the potential effects of fire retardant products seeping into soil and water bodies. Increased claims from post-fire cleanup, including removal of debris and remediation, as well as the potential for volatile substances to catch fire, have changed the way underwriters are assessing risks in these areas. Considerations may include:
- Higher Premiums: Businesses in wildfire-prone areas may experience increased insurance costs to account for the heightened risk of pollution-related claims.
- Stricter Underwriting: Insurers may require a business’s fire prevention measures, for example, utilizing fire-resistant materials and containment systems for hazardous substances and fire sprinkler systems.
- Broader Exclusions: Policies may exclude certain wildfire-related risks, such as pollution from burning materials unless specific endorsements are added.
Some industries are particularly impacted, including construction contractors, environmental contractors, and utility & energy companies. Businesses that do not start fires may still be held responsible for pollution that escapes from their burning building, such as hazardous materials stored on-site that contaminate the air, soil, or water during the fire. Exposure examples may include:
Chemical Releases: A warehouse storing industrial chemicals is engulfed in a wildfire. Toxic smoke and runoff from firefighting efforts contaminate nearby water sources. The business may be held responsible for damages and cleanup.
Fuel Spillage: A gas station’s above-ground fuel tanks rupture during a fire. Even if the fire started elsewhere, the business could be liable for the cleanup.
Airborne Pollution: A burning factory creates hazardous air pollutants, leading to lawsuits from residents or regulatory action.
Due to the widespread impact of pollution, government agencies may also impose stricter environmental cleanup requirements in wildfire-prone regions, further increasing the likelihood of pollution insurance claims. Businesses may even face scrutiny for their preventive measures, like the use of fire retardants, which, when leaked, may contribute to pollution.
For more information on environmental coverage for businesses or to discuss an account, please contact a Beacon Hill Associates team member today.
Type: Blog
Topic: wildfire