Why contractors big and small should protect themselves from pollution risk
Once viewed as expensive and unnecessary, insuring one’s business from a possible pollution condition at a job site is now seen as a business essential for all types and sizes of construction and environmental contractors—not just those with high profile, high revenue projects. In fact, many times, project owners, prime contractors and clients require it.
Taking the necessary steps to protect a contractor’s business from pollution risk makes a lot of sense. After all, it’s the contractor who is on the hook should they or their subcontractor create or exacerbate a pollution condition. Exposure lurks in the form of costly remediation, and third party bodily injury and property damage claims. An often overlooked expense that can carry the largest price tag is the cost of defending the contractor involved in an environmental claim.
What is a pollution condition?
A pollution condition can be a discharge, dispersal, release, seepage, migration or escape of an irritant or contaminant into or on the air, water, land or a structure. The irritant or contaminant can be any substance. The measure is the impact of the substance in the environment it is introduced to.
Making the case for coverage
Naysayers to buying Contractor’s Pollution Insurance generally focus on two areas: they don’t have a pollution exposure and commercial general liability (CGL) policies offer pollution protection in the event they would have that exposure. Neither assumption is accurate. Adequate pollution protection is not found in the CGL by virtue of the Total Pollution Exclusion Endorsement applied to most CGL policies. The exclusion precludes coverage for bodily injury, property damage and cleanup costs arising from pollution releases. Unfortunately, all too often contractors with uninsured or underinsured pollution exposures don’t recognize this need for the coverage until they personally experience a pollution related loss that affects their bottom line.
Adequate pollution protection is not found in the CGL by virtue of the Total Pollution Exclusion Endorsement applied to most CGL policies."
The cause and effects of pollution conditions are wide ranging. Contractors should consider the ways they may inadvertently expose themselves to risk on a job site when debating the need for obtaining comprehensive pollution protection. Consider these examples:
- A construction vehicle on a project site over the weekend has its hydraulic fuel lines cut by vandals, causing fuel to leak out and contaminate the soil.
- A contractor punctures an underground storage tank during excavation, causing the product to spill into the soil and groundwater.
- Dirt excavated from one area of a site and spread at another area turns out to be contaminated with arsenic and lead, thus spreading the contamination onsite.
- A gas line ruptures during excavation causing a gas leak into a neighboring building that leads to an explosion.
- Because of a poor HVAC system installation, mold forms and spreads throughout a residential building, causing bodily injury and property damage claims.
- A contractor fails to follow proper storm water management procedures at a site adjacent to a riverbed. The soil and debris excavated enters the stream resulting in a fish kill.
- A valve breaks off a mobile asphalt plant while en route to a job site. Resulting oil spills on the highway cause multiple car accidents and shut down the highway for several hours.
- A contractor applies herbicide to reduce vegetation along a power line right-of-way. After a rain storm, the herbicide washes onto adjoining farmland, damaging the crops.
- During a sewer line installation project, a contractor improperly ties in piping causing raw sewage to migrate and contaminate a nearby water well. This leads to property damage and bodily injury claims.
- A contractor uses a concrete curing compound containing the carcinogen xylene to shorten the cure time at a job site, exposing shoppers at a nearby shopping mall to toxic vapors, making them ill.
Today’s Contractor’s Pollution Liability (CPL) insurance market for construction and environmental service contractors (go to XL Catlin’s website for more product information) has ample capacity available and offers a broad range of coverage to protect a contractor in the event of a pollution condition, stemming beyond jobsite coverage to emergency remediation expenses, protection at the contractor’s owned location, transportation and non-owned disposal sites exposures.
About the author
Matt O’Malley is president of AXA XL’s environmental insurance business in North America. With nearly 20 years of insurance industry experience, Matt leads a team devoted to helping our clients recover from pollution incidents and overcome other environmental liability concerns.
Plus, learn more about AXA XL's recent updates to its Professional and Pollution Policy for Construction and Environmental Service Firms.