environmental insurance policy

Insuring Against Environmental Civil Fines

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The U.S. Environmental Protection Agency has drawn plenty of fire in recent years for what critics view as over-zealous regulation enforcement.

Civil penalties paid by polluters are down at the moment, so there may be a shift at hand.

Regardless of the enforcement climate, any business interested in protecting its balance sheet and brand will want to consider an environmental insurance policy.

These policies help fill coverage gaps created by pollution exclusions in general liability and property insurance policies.

The not-so-good news is that there are more than 100 different environmental insurance policy forms available on the market. Worse still, there are no industry standards for the coverages offered in an environmental insurance policy. As a result, environmental insurance policies can vary a great deal, even within the same coverage line.

So, what, fundamentally, do these policies cover? At a minimum, they will apply to losses arising from:

  • Bodily injury;
  • property damage;
  • cleanup expenses and,
  • defense costs.

The coverage is available both for incidents that are “sudden and accidental” and “gradual.” Coverage also exists for business interruption losses.

Several other types of environmental liability insurance exist. These include:

  • Environmental errors and omissions policies that cover consultants who advise third parties about environmental conditions.
  • Environmental contractor policies that cover operations that a remediation contractor performs.
  • Environmental testing laboratory coverage that addresses the liability of firms that analyze hazardous materials in the soil, ground or air.

There also are policies that protect lenders and real estate agents if they handle properties that later turn out to be contaminated.

Because of their complexity, mistakes can be made when placing or buying environmental insurance. For example, we’ve seen a hotel with an environmental policy in place better suited for an industrial site. In another case, a home-building contractor that needed only to insure for remediation in case of fire and water damage was paying to insure the cleanup of a nuclear weapons manufacturing plant.

On the flip side, many businesses are often underinsured.

According to the International Risk Management Institute, 99 percent of apartment units are either uninsured or underinsured for losses associated with pollutants, mold, lead or asbestos. The few apartments that do have environmental insurance typically are covered only for the Legionella bacteria. Ironically, an environmental policy that covers all types of bacteria as a “pollutant” can cost less than an environmental insurance policy that limits the bacteria coverage to only Legionella.

Rather than go on, allow us to repeat a point you’ve heard us make before: commercial insurance policies, including and perhaps especially environmental coverage, should not be evaluated based on premiums, deductibles and limits alone. Get an agent’s help in finding the right coverage for the right price.

Morgan P. Mahoney is a CCIG Insurance Advisor. Reach him at morganm@thinkccig.com or 720-330-7926.

CCIG is a Denver-area insurance brokerage with the full-service capabilities of a national brokerage. We do more than make sure you have the right policy. We also help you lower your long-term cost of insurance with our risk and claims management expertise and a commitment to service excellence.