When many people think of pollution insurance, they picture large factories or chemical companies that pollute the environment, such as has the historic Love Canal litigation years ago. But that’s not the whole story — or the entire picture of who could face pollution risks.
Smart Business spoke with Chris Zito, managing director of Zito Insurance Agency, about environmental risks and coverage that is available as protection.
What are the risks of pollution exposure?
Most companies in the environmental remediation or consulting business recognize their exposure to pollution claims and insure them accordingly. There are also a large number of companies not in the environmental business that have significant exposure to pollution-related claims, which in many cases have been overlooked. These risks can include Environmental Protection Agency (EPA) mandated cleanup costs as well as third-party claims alleging sickness, disease or property damage.
The financial impact to your company can be devastating if you encounter a legitimate pollution incident. If you are ultimately found to have no liability, you can still go broke proving it if you’re self-insuring this risk.
When considering the extent of your individual risk, it is important to remember that you can be held responsible for pollution incidents caused by others with whom you have contracted or are working on your behalf.
What types of companies are at risk for environmental exposures that might be surprising?
To some degree, hazardous materials, as defined by the EPA, can be found in almost any business — even something as innocuous as cleaning supplies. Significant environmental exposures exist in a number of industries that most would not consider at risk, such as:
- Contractors — pollutants that are brought to a job site (sealants, adhesives, fuel for equipment, etc.) or actions that result in the release of pollutants into the air, land or water, including mold, lead paint and asbestos.
- Manufacturers — cutting oils, solvents, paints utilized during the manufacturing process that may create an environmental hazard.
- Real estate owners — claims generated by property transfers (exposures created by prior owners), mold, lead paint, current tenants or ‘midnight dumping’ by unknown third parties.
- Service industries that utilize environmental unsafe chemicals, such as beauty salons, dry cleaners, auto repair, service stations or junkyards.
How can employers insure against these risks?
As a means to stay competitive in the market, most commercial insurance carriers have broadened the coverage included in the various policies they offer.
One exception to that statement is pollution liability coverage, which has been greatly restricted or excluded entirely from most policies since the 1970s when asbestos, lead and other environmental claims bankrupted many well-known companies.
While limited pollution coverage may be available by endorsement to general liability, the most comprehensive coverage is typically written on separate policies through companies that specialize in environmental coverage.
Pollution coverage is available for most industries and typically is categorized to address environmental risk in three basic areas:
- Job site.
- Site specific (i.e. owned premises).
- In transit.
An evaluation of your exposure to environmental claims should be included as part of your risk management program. A qualified agent or broker will be able to assist with this process and provide the appropriate solutions in cases where environmental risks are identified in your operations.
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