Companies often forget about, or underestimate, their environmental exposures, which can lead to significant financial loss from uncovered claims. We think it’s important that your clients understand the type of work / events that can lead to a loss and the following are examples of claim scenarios that can result from environmental exposure.
Demolition Contractor – Asbestos
During the demolition of a portion of a museum, a contractor inadvertently disturbed unknown asbestos that had been contained in the floor tiles. The asbestos contaminated other areas of the museum, forcing closure during the remediation. The demolition contractor was held responsible for the clean-up costs and business interruption.
Drilling Contractor – Raw Sewage
A subsurface drilling contractor caused the release of raw sewage into both the soil and groundwater after failing to identify a sewer line before drilling. The clean-up included the excavation of several tons of impacted soil and caused a number of nearby businesses to be shut down for a few days after their basements filled with sewage. Substantial claims for business interruption and clean-up costs were filed.
Drywall Contractor – Mold
A drywall contractor was hanging new drywall at a construction project when an employee accidentally drilled through a small water pipe located behind the wall. The drywall contractor did not realize the leak occurred and a substantial amount of mold grew between the walls before anyone noticed. The drywall contractor was held responsible for clean-up of the mold, as well as defense of third-party bodily injury claims.
Electrical Contractor – Asbestos
While installing new electrical lines in a historic building, the contractor used a hole saw to cut through a ceiling. Unknown to the contractor, the saw inadvertently disturbed and released asbestos-containing insulation material. The contractor had to pay clean‐up costs for the asbestos fibers released throughout the building.
Environmental Contractor – Petroleum
While performing soil removal activities at a Brownfield project, the contractor inadvertently broke an abandoned underground petroleum pipeline with their excavator. Product was released and caused extensive contamination. The contractor was held responsible for the cost to remove the pooled petroleum, the contaminated soil and to confirm that groundwater had not been impacted.
Excavation Contractor – Contaminated Soil
An excavation contractor spread contaminated soil throughout a site while performing site-preparation work for a new building. The contractor was held partially responsible for exacerbating the contaminated soil.
HVAC Contractor – Mold
A mechanical contractor installed an HVAC system in an assisted living facility for seniors. The system was constructed improperly, which caused mold growth in a portion of the residences. The facility was forced to relocate several patients during the system repair and the renovation of the moldy building materials. A claim for clean-up costs and property damage was filed.
Industrial Cleaning Contractor – Contaminated Water
An industrial cleaning contractor was hired to clean a former petroleum storage tank previously used for backup power purposes. Plastic sheeting and an associated dike were placed around the tank to prevent the runoff of contaminated rinse water. The sheeting and dike were not properly placed around the tank, allowing a substantial amount of petroleum-impacted wash water to move onto an adjacent property. The adjacent property owner filed suit for property damage and remediation costs related to the contaminated wash water.
Masonry Contractor – Silica
A masonry contractor, performing a renovation project at a historic building, was sued by employees of a nearby office building who asserted that they were exposed to silica dust coming from the job site. The claimants reported damages for bodily injury, declaring that required measures were not taken to prevent or minimize dust emission during the project.
Mechanical Contractor – Hydraulic Fluid
A mechanical contractor improperly installed fittings during routine maintenance of a hydraulically driven conveyor system and a subsequent leak was not discovered until the next routine maintenance cycle. The leaking hydraulic fluid migrated into a floor drain beneath the equipment that discharged directly into an adjacent drainage ditch. Property owners adjacent to the site noticed sheen on the water in the ditch and requested an environmental investigation by regulators. The regulators required clean-up of the spill and the site owner subsequently filed actions against the mechanical contractor to pay for the clean-up costs.
Painting Contractor – Lead
A child who lived in an apartment building constructed in the 1970s was diagnosed with lead poisoning. The renovation of the building by a painting contractor allegedly caused unsafe conditions for the child, and the child’s parents filed a bodily injury claim against the painting contractor. As part of the claim investigation, an expert was hired and other potential causes for the lead poisoning were discovered. As a result, the painting contractor was held liable for only a portion of the claim.
Pile Driving Contractor – Waste Oil
A pile-driving contractor punctured an unknown underground storage tank, which resulted in the release of waste oil. The waste oil impacted adjacent soils and forced a work stoppage until the materials could be delineated, excavated and properly disposed.
Plumbing Contractor – Contaminated Water
A plumbing contractor installing a lawn sprinkler system did not install adequate vacuum breakers on the discharge side of the water supply valves. When pressure in a drinking water system fed by the same water main fell below atmospheric pressure, a vacuum was created which caused back-siphonage of stagnant water from the lawn sprinkler system into the drinking water supply. Several people drank from the water supply and contracted dysentery. Costs were incurred to investigate the issue, purge the system and to provide temporary clean water. Suits followed, alleging bodily injury.
Roofing Contractor – Coatings
A roofing contractor applied polyurethane foam along with layers of elastomeric protective coatings to the roof of a commercial building. After completion of the building, workers in the building began to suffer respiratory problems caused by irritants in the coatings. Suits for bodily injury and business interruption were filed against the general contractor and roofing subcontractor.
Sandblasting Contractor – Lead
A subcontractor working for a street and road contractor performed abrasive sandblasting on a bridge located near a residential area. Lead paint chips and dust from the sandblasting became airborne and drifted onto residential properties, requiring clean-up. The residents filed property damage claims against the street and road contractor and the subcontractor for the dust generated by the subcontractor.
Steel Erection Contractor – Diesel Fuel
A steel erection contractor accidently caused a release of diesel fuel at a construction site when a crane operator dropped a steel beam. The beam landed on a small tanker truck that was brought onto the site to refuel other construction equipment. The cost of the emergency clean-up was in excess of $55,000.
Street and Road Contractor – Hydraulic Fluid
During construction activities, a crane that was used to lift concrete barriers overturned. The accident ruptured the crane’s hydraulic hoses, spilling all its fluid onto the ground. The contractor was required to pay clean-up costs from the spill.
Street and Road Contractor – Petroleum-Impacted Sediment
Inadequate erosion-control measures implemented during construction of a highway overpass abutment resulted in the deposit of petroleum-impacted sediment into a pristine waterway. The street and road contractor was required to pay for clean-up costs and natural resource damages.
Street and Road Contractor – Diesel Fuel
A street and road contractor was hired to repave a 25-mile section of highway. During the project, one of the contractor’s dump trucks accidentally backed into and ruptured a mobile refueling tank and 300 gallons of diesel fuel were released onto the surface and into a nearby storm drain.
Utility Contractor – Sediment
A utility contractor left an unfinished concrete vault open over the weekend. Heavy rains washed away sediment controls, allowing sand and silt to be released from the unfinished vault into the adjacent bay. The contractor was subsequently fined by a regulatory agency for natural resource damage resulting from the release of sediments into the bay.
Utility Contractor – Fuel Release
A utility contractor was subjected to clean-up costs after vandals opened an on-site mobile refueling tank, causing diesel fuel to be released onto virgin soil.
It’s often difficult to know when an environmental policy is necessary. Next month’s edition of The Edge will feature a list of leading questions that will help your client consider their environmental exposure. Please contact your AmWINS environmental broker if you have questions or need assistance.
Are you going naked in into the world? You might be if you don't carry Pollution coverage. Here's Why.
We offer an Expanded Product Line with four Specialty Pollution Markets Available.
Fertilizer, Herbicide, Pesticide, Insecticide
Fuel Additives (Ethanol & Biodiesel)
Lubricants & Oils
Equipment used to Cleanup, Treat, Monitor, Control or Measure Pollution
Waste Treatment, Storage or Disposal Facilities
(landfill / recycling / incineration / transfer stations)
A.M. Best “A” Rated Carriers
Low Minimum Premiums
Occurrence or Claims Made Form
Prior Acts Available
Option to have Defense Costs inside or outside the Limit of Liability
Non-environmental businesses face multiple environmental risks stemming from their daily operations. Whether these actions create a pollution condition or aggravate an existing one, the non-environmental contractor can be held liable in the event of a claim, which their standard CGL coverage typically would not cover. There are many different types of pollution conditions that may be encountered. Proper coverage can be easily purchased to address the issues of job site pollution, in-transit spills, aggravation of an existing pollution condition, water damage leading to a mold condition, and potential restoration costs for surface water or soil, to name just a few.
We understand that pollution coverage is not usually an easy sell. Most non-environmental contractors do not believe they have an exposure and are not required to carry this type of coverage. They often don’t see the importance of making it part of their insurance program until they have a claim denied under their GL policy. Additionally, most GL policy forms include the absolute pollution condition exclusion, so no coverage or defense is provided.
To address this gap, two common coverage approaches are presented below:
Annual Practice Policy: This option is based upon the applicant’s total gross revenue for the year and covers all projects performed during the policy term.
Project Specific Policy: This option is available when a specific project the contractor is bidding for requires pollution liability coverage. Rating is based upon the gross revenue generated from that specific project, as well as the scope of work and anticipated project duration.
About Non-Environmental Contractors Pollution Coverage
Contractors Pollution Liability (CPL) insurance provides coverage for pollution conditions arising from the insured’s operations at a jobsite, whether those operations have created a new condition, exacerbated an existing condition, or is otherwise created liability for the condition. Coverage can include work performed by or on your behalf, defense expenses, completed operations and many other enhancements.
Some examples of non-environmental companies include mechanical contractors, utility contractors, painters, plumbers, general construction, excavation and graders, HVAC contractors, sewer and septic contractors, roofers, and others. In addition to their job site exposure, non-environmental contractors have environmental exposures stemming from their owned premises/contractors yards. Non environmental contractors also have over the road pollution exposures, non-owned disposal site exposures, and professional liability exposures, all of which can be addressed by environmental policies.
Environmental liability can arise from any of the following:
Retro fits of aging electrical systems that require proper disposal of PCB’s
Property damage or bodily injury caused by mold growth from water damage Interruption of electrical power while servicing emissions equipment may lead to airborne toxins being released
Installation, retrofitting or repair of equipment may lead to disturbance of asbestos-containing materials or to damage of utility lines, causing a release of pollutants
Bodily injury from toxic fumes caused by a fire in commercial property
Faulty contractor work could lead to waste water leaks, mold, and contamination of soils and groundwater
Management and negligence of subcontractors
Storage of excavated soils that may contain pollutants which contaminate soils and groundwater
Disposal of tanks, piping and old equipment scraps and cleanup of toxic adhesives and chemical coatings
Damage to underground utilities including natural gas, fuel oil and trunk lines during excavation.
Hazardous waste management on and off the job site for spills and safety handling
Asbestos insulated piping removal and disposal
Pollution condition from storm water or groundwater collection during excavations
In-transit exposure during transport of manure to proper application site.
Negligent handling of pumping/applicator equipment causing soil or groundwater contamination.
Recommended Coverage Enhancements:
Blanket Additional Insured
1st Party -Transportation Pollution Liability
3rd Party – Contingent Pollution Liability
Non-Owned Disposal Site Coverage
Site pollution for owned premises
Project-Specific Increased Limits
Blanket Waiver of Subrogation
Emergency Cleanup Costs
Microbial substance Coverage
Incidental Professional Liability
Extended Completed Operations Coverage
Limitation of Coverage for Designated Project
A carpentry contractor installed new carpeting in an office building. One week after the installation, the owner of the office building informed the contractor that employees were complaining of headaches and dizziness. The contractor could not prove that the manufacturers of the carpet or the carpet adhesive were responsible. The contractor filed a claim with their general liability carrier. The claim was denied because the contractor brought the hazardous materials, such as formaldehyde and volatile organic compounds, onto the site.
While a mechanical contractor was repairing leaks on fuel lines at a shipyard, an unknown party opened the valve that separated the inactive lines under repair from the active lines. Fuel began to flow through the lines under repair, releasing 3,500 gallons of gasoline. The cost to clean up soils and groundwater contaminated by petroleum hydrocarbons was $500,000.
A street & road contractor was subject to cleanup costs and business interruption expenses in excess of $500,000 when they ruptured an unmarked petroleum pipeline. The contents were released into the subsurface soil and groundwater because of the contractor’s inadequate response to the rupture.
An excavation contractor was responsible for overseeing a sewer rehabilitation project. During excavation of a trench, the bucket of a backhoe hit a natural gas line. This forced evacuation of the immediate area, including a small strip mall. Store owners filed loss of business claims against the contractor, exceeding $75,000.
An underground storage tank leaks petroleum into a neighbor’s drinking water well. The well must be shut down and drinking water must be provided to neighboring properties by installing a pipeline to the municipal water supply, all at the tank installation contractors’ expense.
A sewer and septic contractor is responsible for overseeing a sewer rehabilitation project. During excavation of a trench, the bucket of a backhoe hit a natural gas line. This forced evacuation of the immediate area, including a small strip mall. Store owners filed business interruption claims against the contractor, exceeding $75,000.
An HVAC contractor was responsible for overseeing the renovation of a hospital wing. When two patients died in the intensive care unit adjacent to the construction zone, the contractor was sued for inadequate monitoring and containment of the work area. The patients’ cause of death was determined to be an organic fungus found in the ventilation system, and traced back to dusts generated during demolition. The general contractor was responsible for $10 million in damages.
Overcoming Hurdles When Discussing Coverage Options
Having trouble responding to challenging questions relating to Environmental coverage? We have put together some of the most common disputes pertaining to this coverage, and our suggestions for how to handle them.
My General Liability policy will cover everything. This isn’t always the case. Many GL policies have specific absolute or total pollution exclusions that limit how that policy would respond. CPL coverage could fill in important gaps the GL policy may have.
I don’t think I have a pollution exposure. It may be a small exposure but what typically happens is a little exposure that can lead to a large claim. Something as simple as spilling fuel while on the job can lead to a cleanup mandate or a lawsuit. Unfortunately, General Liability won’t even come into play for defense costs, so the contractor will have to foot the bill.
I don’t deal with hazardous materials. Insurance companies consider most liquids, gasses, smoke, and dust in large quantities as pollutants. Accidental release of fuel and chemicals from broken pipelines, tanks, and utilities are only some of the reasons many contractors decide to purchase coverage.
I’ve never had a claim before. Environmental claims tend to be less frequent but large problems when they happen. On average, clean up costs tend to run in the hundreds of thousands. When an environmental problem becomes apparent, it will be too late to purchase coverage!
I’m not required to carry it. The requirements for environmental coverage are rapidly increasing. Chances are, by having this type of policy in place before bidding on a contract that requires it, your insured's will already be ahead of the competition.
But I sub out most of my work. Contractors Pollution Liability polices typically cover work performed by or on behalf of the insured. So if subcontractors cause a pollution condition to occur and they aren’t carrying the coverage themselves, it’s going to come back to your insured to handle.
It’s probably too expensive. Premiums for CPL policies typically start around $2,500 for a one million dollar limit of liability. Pricing is based on projected revenues, scope of work, and any required enhancements, like mold coverage for example. Mold continues to be a hot topic from a legal standpoint—having coverage for defense costs alone may be worth buying a pollution policy.
The chances of something happening with my company are so slim. I don’t think it’s worth the money. Coverage could also include work performed by subcontractors, cost of defense in the event of a lawsuit, and third party bodily injury and property damage. Also, jobs that are already completed could be covered. When considering the low cost of a CPL policy, the price is small compared to the potentially costly problems faced by those who choose to self-insure.
Please review carefully!
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