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ARI Blog: Article

Contractor's Pollution Liability Insurance

Pollution liability coverage used to be included in most business insurance policies, but that changed in the 1970s with the emergence of many expensive asbestos claims. Now this coverage is primarily 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. Please 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 and cover liability claims for pollution-related injuries, illnesses, or deaths. This type of commercial insurance was designed in response to the problem that liability claims were bankrupting companies, and therefore victims were not being compensated.

Policies cover any 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 corruption in the past before the harmful effects of waste products were known. For more significant, 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 billowing smokestacks, but many small businesses can benefit from this coverage. Any company that uses environmentally unsafe chemicals, such as a hair salon or a dry-cleaning service, runs the risk of a pollution lawsuit. Similarly, garages, junkyards, and industrial manufacturers face these charges.

Even contractors who construct buildings need pollution insurance if their work can affect long-term air or environmental quality. A specialized form of pollution insurance called contractors pollution liability insurance can meet the construction industry's needs.

What Does Pollution Insurance Cover?

Pollution liability insurance provides coverage for any claims brought against your company related to property pollution 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 specializing 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 and affects neighboring businesses or residents.

  • Property transfer protects property owners if they purchase a parcel of land or a contaminated or otherwise polluted building by a previous owner. If you have this insurance coverage, your insurer will cover the necessary clean-up costs.

  • Errors and omissions: This coverage is designed explicitly 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. Many contractors went bankrupt in the 1970s when they were forced to clean up asbestos-filled insulation from buildings they had worked on. If work that they do now uses later hazardous materials, the contractors are liable for damages and clean-up. Contractors' pollution liability insurance is designed to protect contractors from these unmanageable losses.

Contractors' pollution liability insurance provides contractors with coverage against bodily harm claims or injuries and includes coverage for any related court costs and legal fees.

Is Pollution Insurance Coverage Expensive?

The cost of a pollution liability insurance policy will differ significantly from one business to the next. A business that uses many 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

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