Until the mid-1980s, pollution liability was covered under the standard commercial general liability (CGL) policy. However, insurers began excluding pollution liability under the CGL policy, creating the need to purchase separate coverage for pollution liability. Contractors now must purchase Contractor Pollution Liability (CPL) coverage to ensure protection.
For many contractors, environmental risk has traditionally fallen on the lower end of the liability importance scale. This focus is changing, however, and the growing market for Contractor Pollution Liability (CPL) coverage is helping contractors stay ahead of pollution risks associated with their scope of work. Whether you’re a general contractor, HVAC, or electrical contractor, this primer on CPL will get you up to speed on why you may need CPL and what it covers.
If you’re a contractor or working in an industry that hires them, you may need to know about pollution insurance. In this blog, as part of our Certificates of Insurance 101 guides, we’ll provide a quick overview of what you need to know about pollution insurance.
Why should you trust us? We’re myCOI, the premier solution for modern-day compliance managers. We’re a team of industry experts who have been helping businesses verify their certificates of insurance (COIs) and maintain their compliance across industries for over a decade. Now, let’s dive into the realm of pollution insurance for contractors.
What Is Professional Pollution Liability Insurance?
Professional pollution liability insurance refers to policies that protect businesses against liability from damages or injury caused by pollutants involved in their work. ‘Pollutants’ are considered any substances that end up somewhere where they weren’t intended to be used, and there are a lot of them.
Pollution insurance can cover many kinds of costs related to pollutants. Generally, it provides on- and off-site pollution insurance for claims of bodily injury, property damage, associated legal fees or medical bills, business interruption, transportation liability, and clean-up costs associated with the unwanted materials.
There are a few different kinds of pollution liability insurance, which you can choose between or bundle into a comprehensive pollution insurance policy. Some of these types include:
- Pollution legal liability insurance: These policies cover legal liability for on- and off-site pollution claims.
- Professional and contractor environmental liability insurance: This is essentially the same policy as the above but for individual contractors as opposed to whole companies.
- Transporter insurance: This extends coverage to the transportation of hazardous materials from one location to another.
What Is the Purpose of Pollution Insurance?
Pollution insurance protects businesses and individuals who have a risk of pollution or hazardous waste exposure. Ultimately, pollution insurance helps mitigate the financial risks associated with pollution and environmental contamination claims by providing coverage for those expenses.
If you’re in an industry that deals with toxic waste, you definitely need pollution insurance. If you’re an independent contractor who may come into contact with pollutants on the job, you’ll probably need to obtain pollution insurance and show proof of it in order to get hired. Suppose you’re the one hiring a contractor or vendor in an industry or for a job where pollution is possible. In that case, it’s a best practice to verify their pollution liability insurance along with their general liability insurance or whatever other business certificate of insurances you require.
Is Pollution Liability the Same as General Liability?
Pollution liability is not the same as general liability. While general liability covers bodily injury, property damage, and personal injury claims resulting from general business operations, professional pollution liability covers claims related to those things only if they are associated with pollution incidents. However, it is not uncommon for pollution liability to be rolled into a larger, more comprehensive general liability policy.
What Does Pollution Cover Not Provide Coverage For?
Pollution insurance doesn’t provide coverage for everything. In fact, there are various cases you should know about that your policy may not cover:
- Known pollution conditions: Policies often exclude coverage for pollution conditions if the insured was aware of existing issues on their property before they purchased the policy.
- Intentional acts: Pollution liability insurance doesn’t cover incidents resulting from intentional polluting acts or acts of fraud committed by the insured.
- Criminal acts: Obviously, acts that are deemed criminal, such as the illegal dumping of hazardous materials, are not covered by pollution policies.
- Contractual liabilities: Certain contractual liabilities related to pollution may not be covered. For instance, contractual indemnity provisions that require an insured to assume liability for another party’s pollution-related claims might not be covered.
- War and terrorism: Pollution events resulting from war, acts of terrorism, or nuclear events are generally excluded from coverage.
- Fungus and mold: Policies sometimes exclude or limit coverage for mold and fungus-related pollution events. However, separate mold insurance or endorsements are available.
- Natural resource damage: Claims about damage to natural resources, such as bodies of water or ecosystems, are often not insured.
- Asbestos and lead: Coverage for asbestos and lead abatement or removal may be subject to specific limits or exclusions.
- Gradual pollution: Some policies exclude coverage for pollution events that occur gradually over an extended period (instead of focusing on sudden and accidental pollution incidents).
What Is Professional and Pollution Insurance for Contractors?
Contractors’ pollution insurance, also known as professional and pollution insurance, is a specialized coverage package designed to address the unique risks that contractors in the construction and environmental industries may face. It combines two important types of coverage we’ve discussed above: professional liability insurance (also known as errors and omissions insurance) and pollution liability insurance (also referred to as environmental liability insurance or pollution legal liability insurance).
This coverage is often required of third-party workers for jobs where toxic exposure or the spreading of pollutants is possible. When mandated by a prospective employer, contractors will work with their insurer to obtain a professional and pollution insurance policy and a COI proving that they did.
Contractor pollution insurance costs can range widely, with annual premiums often falling anywhere between $1,000 and $100,000. Whatever the cost, being insured and verifying that your third-party hires have adequate insurance for a job is the smartest and safest way to proceed.
Ultimately, having pollution insurance in place provides peace of mind for individuals and businesses working in industries where environmental risks are prevalent. Legal and financial pollution ramifications will not come your way when you have the insurance to protect yourself—and ensure that your hired contractors do, too.
What is CPL Coverage?
Contractor Pollution Liability (CPL) coverage protects against environmental threats or pollution that might occur as a result of a contractor’s involvement in a project. Unfortunately for contractors, however, pollutants aren’t always the substances one might expect. A pollutant is anything that is introduced into an environment that is not natural to the habitat. Even a substance or material that isn’t harmful to humans can still be considered a pollutant.
CPL directly addresses environmental pollution and the impact these hazards have on the environment. While most people might think of oil and coal as environmental hazards, there are plenty of other substances out there that can be at-risk. A recent article by Parker, Smith & Feek, Inc details several, including:
- Jobsite pollution liability
- Natural resource damage
- Mold, fungi, Legionella
- Transportation
- Non-owned disposal site
- First party emergency remediation or cleanup costs
- First party protective pollution liability
- Sudden and accidental coverage for client’s owned, leased, or rented locations.
What does it cover?
While all contractors should carry Commercial General Liability, CGL won’t fully cover pollution or environmental safety claims, if at all. Most general CGL policies contain a total pollution exclusion for third-party injury, property damage, defense, and cleanup costs. Some property policies may provide limited pollution coverage. However, this coverage applies to first-party claims and will almost never provide any coverage for third parties. If an oil tank bursts, for example, a CGL policy might cover the cost of the tank and the oil. However, it won’t cover the financial consequences of the environmental issues the oil spill caused. In many cases, environmental pollution claims are the results of unconscious accidents and contractors don’t even realize that they can be held responsible.
Let’s walk through a real-world example. If an electrician is drilling a hole for a wire and unknowingly disturbs asbestos that then pollutes the job site and other areas around the site, the electrician could be liable for a pollution claim. It’s not uncommon for claims to pile up around environmental accidents, either. Bodily injury, cleanup costs, long-term health coverage, and more can all result from a CPL claim.
Who needs Contractor Pollution Liability Coverage?
As environmental sustainability becomes a subject of focus and as potential risks to the environment continue to grow, contractors and vendors need to know their risks are covered in case of an incident.
For example, below is a list of possible pollutant exposures certain contractors and firms need to be aware of, according to Parker, Smith & Feek, Inc:
- Excavation Contractors – Impacting groundwater from drilling and excavation work (dewatering operations, etc.).
- Concrete firms – Residual contamination from improper control of oil and lubricants used for the concrete forms.
- Demolition Contractors – Inadvertent disturbance and airborne release of pre-existing contamination or products (i.e. naturally occurring asbestos in subsurface soils/geology, contaminated soils, surface or groundwater, etc.).
- Drilling Contractor – Cross-contaminating aquifers by drilling through contaminated soil and into the groundwater.
- Electrical Contractor – Responsibility for damages and/or pollution releases arising from power cut off on client’s facility pollution control equipment, fire sprinkler systems, electronic monitoring devices, etc.
- Interior Renovation Contractors – Fumes, emissions, and spills from chemicals (volatile organic compounds) applied during construction (finishers, sealants, curing compounds, floor coatings, adhesives, etc.), and from equipment exhaust, causing respiratory hazards.
- Roofing Contractors – Toxic mold exposure caused by water entering a building’s roofing system or substructure due to improper installation of the roofing system.
- Steel Erectors – Fumes from welding operations causing adverse health effects on workers. This is primarily a third party over action expense; nonetheless, it can expose the organization to environmental liability.
- All Construction Trades – Various exposures from subcontractors who perform work onsite or transport and dispose of waste materials or soils.
How myCOI Can Help
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Reach out today to learn how we can reduce your worries and ensure your compliance.