Pollution Liability Insurance  

Save Your Business

How companies handle hazardous materials has long been an environmental issue due to a large amount of pollution. It poses a significant risk to any nearby human populations and the surrounding flora and fauna. However, a commercial pollution liability insurance policy will cover costs and claims associated with pollution caused by your business. If your business is held liable for polluting the environment, then the policy will cover the costs incurred from pollution clean-up. Additionally, you will also be covered for pollution liability claims for illness, death, and injury. Most businesses rely on general liability insurance policies to cover these pollution liability cases. However, the Insurance Information Institute states that most general liability policies will only cover the smallest portion of your expenses resulting from pollution liability. Furthermore, are you banking on your commercial umbrella insurance and commercial property insurance to save your business? Think again. These policies specifically exclude exposures relating to pollution. Therefore, it is smart to place your trust in a specific standalone pollution liability insurance policy for your business.

In this article

What does Pollution Liability Insurance cover?

Pollution liability insurance coverage provides a broad form of protection. There are two distinct form of coverages: first-party and third-party coverages.   

First-party coverage  

This pollution liability coverage covers your property against claims associated with pollution. Your property may be affected due to the actions of a previous owner or any other external sources. Pollution liability policy covers your clean-up costs in that case. Suppose your company has bought a previously owned building to conduct business operations. The previous owner has left the building in a highly polluted condition, with hazardous waste lying around the premises. Your company needs to clean the area before any work commences. It takes a long time and lots of money to get the new building ready. Luckily, a pollution liability policy will cover all the clean-up costs for your business.

Third-party coverage  

This coverage will protect your business if your business causes losses relating to pollution to others. Therefore, pollution liability insurance will provide coverage for any third-party claims brought against your company. Mentioned below are the different types of pollution insurance coverage provided for third-party claims:

Coverage for Environment Pollution Due to a Business Operation

Most manufacturing companies generate huge quantities of hazardous materials as a byproduct, as well as discard them as waste.  If not disposed of properly, these chemicals can affect people by causing injury, illness, or loss of life. Hence, pollution liability insurance covers the costs of cleaning up the environmental pollution caused by your business operations. Suppose you own a soft drink manufacturing company where you produce tons of chemical waste daily. One day, your waste drainage system malfunctions, and a huge amount of chemical waste deposits in a nearby pond. Hence, the malfunction in your company’s operations has destroyed the natural ecosystem of the pond. An environmental organization decides to file a lawsuit against your company for polluting the environment. Court decides that your company is responsible for cleaning up the pond. In this case, your pollution liability policy will take care of your costs for clean-up.
what does pollution liability insurance cover

Coverage for Clean-up Costs

Your business might be spilling hazardous materials and emitting greenhouse gases into the environment, leading to pollution. Oil spills and gas leaks are extremely harmful to a residential area, ocean life, and the earth’s atmosphere. If third parties file a lawsuit against your company for polluting the environment, then you may be heading towards bankruptcy.

The law requires all businesses to clean up these contaminants. Find here green apple cleaning. Pollution insurance coverage compensates your costs arising from the clean-up of such contaminants. It helps the businesses to minimize the effects they face as a result of the accident. 

Suppose your company installs a septic tank at a private residence. In a few weeks, however, the tank cracks and the waste products contaminate the soil. The surrounding area reeks and hazardous materials spoil the quality of the soil. In this case, pollution insurance will provide coverage for the costs resulting from the clean-up. 

Coverage for Lawsuits and Legal Fees

Garlock Sealing Technologies was known for manufacturing seals for pistons on steam engines. The company was founded in 1887, and its products were widely used in the United States. However, the company’s workers were in close proximity to asbestos, which led to them being vulnerable to lung cancer.

Thousands of people sued the company and asked for compensation. By 2010, they were slammed with over 900,000 claims relating to asbestos and filed for bankruptcy. 

Thus, these claims have the potential to destroy your business. However, there’s pollution liability insurance which provides coverage for legal fees, investigation costs, and court expenses.  

Coverage for errors and omissions

If your business is held liable for wrongful acts, pollution liability insurance will provide coverage for losses incurred due to it. It also covers the costs incurred by the damages the error caused. This type of coverage is essential for architects, engineers, and Maid Near Me Toronto consultants. For example, imagine a consultant was hired to advise a client about the state of their property. They declared that the property is free from any sort of pollutants or contaminants. However, later the client found a black mold infestation in the property. It was determined that the infestation had been there when the consultant had inspected the building. The client decides to file a lawsuit against the consultant. Pollution liability insurance will cover the losses that the consultant will incur from the claim.
Pollution Liability Insurance-infographics

  Contact our independent insurance agents for an affordable, quick quote today.

Common exclusions of pollution liability insurance 

Here are the most common exclusions of pollution liability insurance policies: Intentional acts. Pollution liability insurance does not cover damages caused by intentional acts. It also excludes damages from events such as war or terrorism. 

Negligence or refusing to comply

This policy does not provide coverage for claims relating to pollution or losses that are a result of negligence or refusal to operate according to regulations. 

Failure to maintain insurance

Oftentimes, the insurer will specify a minimum limit of insurance the insured must maintain. If the insured fails to do so, then their policy will not provide any coverage. 

Employer’s liability  

This policy does not provide coverage for claims related to an employer’s liability. Workers compensation insurance provides coverage for such employer’s liability claims. 

Product liability  

This policy does not cover any liabilities arising from the product of business causing either injury or harm. Product liability insurance provides coverage for such liabilities. 

Fine and penalties  

A pollution insurance policy doesn’t cover either losses or additional expenses resulting from fines, penalties, or internal expenses. 

Vehicles  

This policy does not cover pollution resulting from the operation or maintenance of any vehicles. 

Known conditions

Pollution insurance policy excludes coverage if the insured is aware of the hazards while applying for the policy. 
<h2Cross-liability coverage

This policy does not provide cross-liability coverage. In other words, the policy does not cover you if a contractor sues another contractor for damages, and both of them have the same policy. 

Negligence or refusing to comply

This policy does not provide coverage for claims relating to pollution or losses that are a result of negligence or refusal to operate according to regulations. 

Failure to maintain insurance

Oftentimes, the insurer will specify a minimum limit of insurance the insured must maintain. If the insured fails to do so, then their policy will not provide any coverage. 

Employer’s liability  

This policy does not provide coverage for claims related to an employer’s liability. Workers compensation insurance provides coverage for such employer’s liability claims. 

Product liability  

This policy does not cover any liabilities arising from the product of business causing either injury or harm. Product liability insurance provides coverage for such liabilities. 

Fine and penalties  

A pollution insurance policy doesn’t cover either losses or additional expenses resulting from fines, penalties, or internal expenses. 

Vehicles  

This policy does not cover pollution resulting from the operation or maintenance of any vehicles. 

Known conditions

Pollution insurance policy excludes coverage if the insured is aware of the hazards while applying for the policy.  Cross-liability coverage This policy does not provide cross-liability coverage. In other words, the policy does not cover you if a contractor sues another contractor for damages, and both of them have the same policy. 
what is contractors pollution liability insurance

Endorsements for pollution liability insurance

Here are some endorsements you can add to your pollution liability insurance:

  • Asbestos: Insureds can add coverage for pollution resulting from lead and asbestos in their existing policy with an endorsement.
  • Transportation and disposal of hazardous waste: Transporting and disposing of hazardous wastes carries special risks. Therefore, coverage for pollution claims related to disposing of or transporting hazardous materials is available as an endorsement.

Types of insurance that include pollution liability insurance 

Here are the types of insurances that include pollution insurance policy:

Factors that determine the cost of pollution liability Insurance

The cost of a pollution liability insurance policy differs widely from one business to another. So, here are some of the factors that affect the premium for a pollution insurance policy: 

The type of business

The type of work and volume of the business determines the cost of the policy. Moreover, the operational risk factors and the years of operation of the business also affect premium costs. 

Use of chemicals and hazardous materials

A business that produces large amounts of hazardous chemicals will have higher premiums than a business that doesn’t.  

The disposal method of hazardous waste

How a business disposes of hazardous waste also affects the cost of the policy’s premium.

The location of the business

The location of your business is necessary for determining the cost of the policy because it gives details about the business’s proximity to places like residential neighborhoods. A business that is located close to a residential area will have higher premium rates.

Construction of the business’s building

The construction of a building also affects policy premium rates. A business is likely to have lower premium rates if the construction of a building is environmentally friendly and safe.

what is pollution liability insurance

Occupancy history of the property

 The history of the property’s occupancy also has an impact on pollution insurance policy rates. If the past owner of the property created a lot of pollution there, then the premium rates will be high. It is because the insurer will have to cover all the clean-up costs of the property.

Claims history

 There are multiple factors in regard to claims history that affect the pricing of a pollution insurance policy, such as loss history, nature of each loss, details of the past claims, and exposure to loss factors. The premium of the policy increases if the business has made multiple claims in the past. 

It is true that precaution is better than cure. If your business is at risk of third-party claims due to pollution, then you need pollution liability insurance.

FAQs 

What does the term pollution mean under pollution liability insurance?

Pollution refers to the release of any solid, liquid, or gaseous substance or material which might contaminate the atmosphere. Some examples of pollutants are smoke, fumes, acids, chemicals, or hazardous wastes. 

Why do businesses need pollution liability insurance?

Businesses need pollution liability insurance because most of the general commercial insurance policies have specific pollution exclusions in the policy. Exposures relating to pollution are nevertheless, excluded from general liability and commercial property insurance. According to the International Risk Management Institute, pollution liability insurance covers the gap in these policies. Thus, businesses should get a separate pollution insurance policy to receive coverage for these claims. 

Are all pollution insurance policies the same?

No, all pollution policies are not the same because different carriers have different coverage limits. Some carriers exclude the endorsements, whereas other carriers might include them in the policy. Thus, one should always have a close look at the coverages included in their policy. 

What are the types of coverage available in pollution liability insurance?

There are various coverages available per the client’s needs. Some of them are premises pollution liability, contractor’s pollution liability, environmental liability insurance, and errors and omissions liability. 

What is site pollution liability coverage?

Site pollution liability coverage is another name for premises pollution liability. It provides coverage for claims arising from pollution incidents at a specific location. 

What does the bodily injury mean under pollution liability insurance?

It refers to physical injury, sickness, disease, mental stress, or anxiety sustained by parties other than the insured.

What type of coverage does a business need?

The type of coverage varies from one business to other. Here are some examples: 

  • Commercial Property owners and tenants require premises pollution liability and environmental liability insurance. 
  • Contractors such as roofers need contractor’s pollution liability insurance. 
  • Architects, engineers, and consultants need errors and omissions liability insurance. 
What does the bodily injury mean under pollution liability insurance?

It refers to physical injury, sickness, disease, mental stress, or anxiety sustained by parties other than the insured.

Do clean-up costs include restoration expenses?

Yes, restoration expenses are included in clean-up costs. It is included only if the costs of restoration do not exceed the present value of the property. 

Contact our independent insurance agents for an affordable, quick quote today.

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