How often do you hear about a major corporation in hot water because of an environmental mishap? It happens all of the time, usually played out for all the world to see with national news coverage. But a pollution event doesn’t have to be as big as a giant oil spill into the ocean to have devastating effects on a business.
Sometimes, something as small as site runoff after a heavy rain could be just as damaging to a company’s profits and reputation.
Which is why pollution coverage is quickly becoming a can’t-miss policy for almost every contractor in the construction industry. Think you don’t need this coverage for your business?
You may want to keep reading...
Because what you don’t know about contractor pollution insurance could cost you.
What is Contractor Pollution Liability Insurance?
Let’s take a closer look at this policy. Contractor pollution liability insurance (CPL) provides coverage for third-party injury, property damage, defense, and clean-up as a result of pollution conditions which arise on behalf of your contracting operations.
The CPL policy (also known as environmental liability) protects contractors against pollution conditions caused by their work, as well as work performed by subcontractors on their behalf.
“Isn’t third-party stuff covered by my general liability policy?”
If you’re like many contractors, you may assume that your general liability policy covers pretty much every third-party injury or property damage claim that may come your way. But general liability policies typically contain a pollution exclusion which excludes bodily injury or property damage arising from the release of a pollutant.
Almost as importantly, your general liability policy doesn’t cover the costs of clean-up or remediation, which could be the most costly part of a pollution event.
What is a Pollutant?
If you don’t handle toxic waste, you may think you’re in the clear. But in insurance terms, a pollutant is defined as:
“An irritant or contaminant, whether in solid, liquid, or gaseous form, including -- when they can be regarded as an irritant or contaminant -- smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste.”
Paint fumes. Mold. Asbestos. Welding fumes. Bacteria. You may be surprised how often a contractor runs the risk of releasing contaminants while performing their work.
“It Happened to Me.” Real Life Examples of CPL Claims
Check out these real life claims examples to see how contractors were impacted by pollution events they never saw coming.
Drywall contractor: When a drywall contractor was hanging new drywall for a new construction project, he didn’t realize his employee accidentally drilled through a small water pipe. All it takes is 36 hours for mold to grow once water leaks, and substantial mold grew between the walls before anyone noticed. That one small accident by the drywall contractor’s employee, one hole in a small pipe, led to a big claim. He was held responsible for third-party injury claims from mold exposure, in addition to the costs of cleanup.
Electrical contractor: An electrical contractor was using a hole saw to cut through a ceiling while installing new electrical lines in a historic building. Unfortunately, he disturbed and released asbestos-containing insulation material with his saw. The contractor was responsible for the costs of cleanup throughout the entire building.
General contractor: A general contractor completed construction of a new school, but two years later received news that a faulty window system was letting water into the building. Mold was discovered, and faulty installation was determined to be part of the issue. The subcontractor who installed the windows was no longer in business, so the general contractor and the window manufacturer were both held responsible. In this situation, the general contractor did not have pollution coverage and had to pay over $900,000 for the incident.
HVAC contractor: When an HVAC contractor installed a new system in an office building, he didn’t realize the ducts had been improperly sealed. Once office employees began to get sick, it was discovered that the improperly sealed ducts had let condensation build up, and legionella bacteria had been sent airborne throughout the office. The employees brought a lawsuit against the contractor and property owner.
Plumbing contractor: A plumbing contractor installed a lawn sprinkler system without adequate vacuum breakers on the discharge side of the water supply valves. The result was back-siphonage of stagnant lawn water contaminating the drinking water supply. When several people drank the water and contracted dysentery, the plumbing contractor was faced with a lawsuit which included the costs of investigating the issue.
In the examples above, pollution coverage protected almost every contractor from the high costs of investigations, bodily injury, pollutant clean-ups, and lawsuits. Unfortunately for the contractor who didn’t have coverage, the out-of-pocket costs of one single incident totaled almost a million dollars.
Who Needs Contractor Pollution Liability?
All construction operations have the potential for triggering an environmental incident. Which is why environmental liability coverage is available to any type of contractor performing operations or conducting work, from general contractors to specialty trades.
Some contractors may face higher than average risks for pollution events, however, such as mold, asbestos, silica, and other contaminants.
Contractors who perform work in some of the following areas are strongly encouraged to learn more about CPL coverage:
- Abatement and remediation
- Above/below ground storage tanks
- Electrical, HVAC and mechanical
- General contractors
- Grading, site, and excavation
- Industrial and pipeline
- Sewer, waste and utility
- Street and road
What Else Do I Need to Know about Pollution Coverage?
Pollution liability coverage can be offered on a project basis or as a blanket program. A project policy will provide coverage for operations performed during the construction period, and can include “tail” coverage for an extended reporting period.
A blanket program will cover all defined operations which take place during the policy term.
No one plans on releasing a pollutant such as mold, bacteria, or asbestos while performing their construction operations. But if you do run across a mishap, the cost could be huge. Investigations as to the cause of mystery illnesses, medical expenses, lawsuits, cleanup of the area, and even reputational damage could cost you more than financial losses. It could be devastating to your business reputation, as well.
Don’t let a single mishap lead to the ruin of your contractor business. Protect yourself with pollution liability coverage, instead.