Pollution liability coverage used to be included in most business insurance policies but that changed in the 1970’s with the emergence of many expensive asbestos claims. Now this coverage is largely excluded and must be purchased separately. These claims can be filed by state and local governments, other businesses, landlords and people who live near your business. Do not allow a pollution claim to bankrupt your business; protect it with pollution insurance.
What Is Pollution Insurance?
Pollution insurance is a type of coverage created specifically to manage the costs associated with pollution clean-up, as well as to cover liability claims for pollution-related injuries, illnesses or deaths. This type of commercial insurance was created in response to the problem that liability claims were bankrupting companies, and therefore victims were not being compensated.
Policies cover any type of small-scale pollution that causes contamination of soil, groundwater or property. They also provide coverage for air-borne contaminates like smoke and emissions. Many policies will even cover pollution that occurred in the past before the harmful effects of waste-products was known. For larger, more extensive pollution incidents, an environmental impact liability insurance policy may be needed.
Who Needs Pollution Insurance?
When many people think of pollution insurance, they picture large factories with billowing smokestacks but many small businesses can benefit from this coverage. Any business that uses environmentally unsafe chemicals, such as a hair salon or a dry-cleaning service, runs the risk of a pollution lawsuit. Similarly, garages, junkyard and industrial manufacturers face these charges.
Even contractors who construct buildings have a need for pollution insurance if the work they do can affect long-term air or environmental quality. A specialized form of pollution insurance called contractors pollution liability insurance can meet the needs of the construction industry.
What Does Pollution Insurance Cover?
Pollution liability insurance provides coverage for any claims brought against your company that are related to pollution of property or that causes harmful effects to people. Damage awards for these claims can be extremely costly, so having this sort of insurance can protect your business from severe financial challenges or even bankruptcy.
Most of the coverage options listed below come standard with a pollution insurance policy but some companies may require you to purchase additional endorsements to get full coverage. Be sure to read the policy details well before selecting a provider. You can expect pollution insurance to cover:
Legal defense fees: Pollution insurance companies will provide your company with attorneys who specialize in these matters to defend you in a pollution-related lawsuit. Your policy can also cover the costs of any other related legal fees and court costs.
Clean-up efforts: If your company is required by law to clean up contaminants, this coverage will compensate you for a portion of the costs. Many insurers will allow you to buy stop-loss policies that limit the amount that your company will be responsible for during the clean-up. This is beneficial if additional pollutants are identified in the clean-up process, potentially escalating the costs.
Operations: If your business uses chemicals or hazardous materials in the course of its operations, you will want to be sure to have coverage for accidents or oversights that may cause pollution. There are two types of coverage available:
Catastrophic coverage: This covers you if there is a sudden, pollution-inducing event such as a fire or explosion.
Non-catastrophic coverage: This covers you if pollution occurs over a long period of time and affects neighboring businesses or residents.
Property transfer: This protects property owners if they purchase a parcel of land or a building that was contaminated or otherwise polluted by a previous owner. If you have this insurance coverage, your insurer will cover necessary clean-up costs.
Errors and omissions: This coverage is specifically designed for clean-up companies and environmental consultants. It covers them for liability if they should wrongly declare a property free of pollutants or if the work they do causes further contamination.
What Is Contractors Pollution Liability Insurance?
Contractors work on other people’s property. If work that they do now uses materials that are later found to be hazardous, the contractors are liable for damages and clean-up. Many contractors went bankrupt in the 1970’s when they were forced to clean up asbestos-filled insulation from buildings they had worked on. Contractors pollution liability insurance is designed to protect contractors from these unmanageable losses.
Contractors pollution liability insurance provides contractors with coverage against claims of bodily harm or injuries and provides coverage for any related court costs and legal fees.
Is Pollution Insurance Coverage Expensive?
The cost for a pollution liability insurance policy will differ significantly from one business to the next. A business that uses a lot of hazardous chemicals will have higher premiums than one that uses only a few. Some factors that influence costs include:
– The type of business being insured
– The type of chemicals and hazardous materials used
– The disposal method of hazardous waste
– The proximity of the business to residential neighborhoods