Printed in the January 2010 issue of Rough Notes
“Insurance coverage is not concerned with the known, but rather with the unknown.” That observation was made by William Pritchard Jr., president of Beacon Hill Associates, Inc., in a recent Rough Notes magazine interview. For more than two decades, Beacon Hill has prided itself on being a leading provider of environmental liability insurance nationwide. Based in Charlottesville, Virginia, the firm has two divisions—Beacon Hill Brokerage, a wholesale brokerage unit that places coverage for agents through several insurers, and the PartnerOne Environmental underwriting division, which assesses risks and offers an array of environmental insurance products.
Pritchard was speaking specifically about environmental insurance, which not too long ago was thought to be needed only by industries where environmental exposures were obvious.
“You don’t have to be an environmental organization to be exposed to losses from asbestos, mold, lead paint and, in more recent years, Chinese drywall,” cautions Pritchard.
Explaining that drywall was imported from China in the years after Hurricane Katrina, he says, “These products were used in the rebuilding of homes and commercial establishments, for the most part between 2004 and 2007. What was not known was that the Chinese drywall contains significantly higher amounts of sulfur than drywall constructed in the United States. The sulfur corrodes metals in the building, which severely damages electrical wiring. The only thing to do is to tear down the walls, rewire everything, and then rebuild—an extremely costly proposition,” Pritchard explains. “Every entity that had a hand in building the home or commercial establishment could be held liable to some extent.”
Among both insurers and business owners, Pritchard observes, there seems to be a growing awareness of the need for insurance protection for such exposures. “We’re seeing a good many organizations not in the environmental mainstream buying coverage for environmental exposures,” he says.
“More and more people are thinking about pollution insurance as a necessary thing,” explains Pritchard. “In addition, there are more carriers coming into the market. Today, business owners can buy coverages that didn’t exist even as recently as a year ago.”
Agents also are aware of the broader scope of environmental exposures, Pritchard remarks. “Most agents are aware of the pollution exposures for their contractor clients, and many are becoming familiar with premises pollution policies for commercial and industrial facilities. However, products pollution coverage for manufacturing risks still appears to be a bit of a mystery.”
Products pollution coverage, Pritchard explains, provides liability insurance for bodily injury and property damage to third parties arising out of a manufactured product. Pollutant cleanup coverage may be provided separately or included within the definition of property damage. Coverage can be provided by either a stand-alone policy or an endorsement to a CGL form and can be offered with either a claims-made or an occurrence trigger, depending on the carrier and the kind of product being insured.
Says Pritchard: “Basically, the market is divided into two segments—one termed ‘soft products’ and the other termed ‘hard products.’ Soft products would encompass blending and manufacturing for industries such as chemical, detergent, petroleum and fertilizer. Hard products would include manufacturers of drums and barrels, tanks and vessels, pipe, pollution control, and filtration devices. In addition to manufacturers, importers and distributors of either soft or hard products should also consider purchasing this coverage.”
Pritchard provides some examples of risks for which Beacon Hill arranges products pollution coverage:
- A firm that rents out large industrial pumps. They do not manufacture the pumps, but they do repair and refurbish them. Products pollution coverage was provided by endorsement to their CGL policy.
- A manufacturer of flexible hoses and couplings used in retail gas stations
- An importer/distributor of water filters used to clean ponds and small lakes
- A custom blender of specialized lubricants for the petroleum industry
“While not every carrier is willing to offer products pollution coverage, there are a number of carriers who write it,” says Pritchard. “Obtaining a quote is relatively straightforward, with a short questionnaire to be completed and supplemented by the necessary ACORD applications. This type of coverage is relatively inexpensive, with some carriers offering minimum premiums below $10,000. Premiums are rated on revenue and the types of products sold.”
Kudos from retailers
Beacon Hill works with agencies across the country to arrange environmental insurance. Says Carlton Gill of W.T. Chapin, Inc., Newport News, Virginia: “We have had great success using Beacon Hill for environmental insurance coverages through their various insurers. They have helped us to close some gaps in our clients’ insurance programs, which is great for both us and our clients. We frequently see contractual requirements for these coverages, and Beacon Hill has been able to meet every need we have had thus far.”
“Providing environmental coverages is just another value-added service that goes hand in hand with the professional offerings we extend to our clients,” says Tim Hafling of Sterling G. Thompson Co., Louisville, Kentucky. “Beacon Hill has been an important partner in helping us achieve this goal.”
And from Dave Wonnacott of the Oakland Companies, Troy, Michigan: “I had the opportunity to work with Beacon Hill recently on an account for an environmental contractor. I went to them because of their knowledge of the environmental market and could not have been more pleased with the final result, as I was up against tough competition. The Beacon Hill staff pointed out many coverage gaps in the current program and delivered a very competitive price. We ended up writing the entire account.”
Asked how the recession has affected the environmental insurance market, Pritchard says the market has not taken the hit that other insurance lines have. “Actually, my writings are increasing as more companies are including environmental insurance in their contractual arrangements,” he says.