The Evolution of Pollution Liability Insurance
Pollution and environmental conditions are growing exposures for many businesses, exposures that are not covered under standard insurance policies. A steadily increasing focus on the environment paired with an expanding list of known pollution sources have led to many recent costly law suits that companies never saw coming. Due to the unknown nature of many environmental conditions, a pollution claim can arise at any time, for nearly any type of company, and the cost could prove devastating.
Luckily, pollution insurance is available as a separate policy to protect companies from the risk of environmental conditions and cover the many potential costs of those exposures.
History of Pollution Insurance
Environmental insurance products date back to the mid- to late-1980s, and have evolved since then to keep pace with changing trends, new exposures and greater coverage needs. The first policies, known as pollution legal liability insurance, covered third-party bodily injury, property damage and cleanup cost claims that resulted from the offsite release of environmental contaminants from the insured’s property. These policies, though better than nothing, had obvious shortcomings: they didn’t cover any claims resulting in on-site contamination, and they didn’t cover any first-party cleanup costs.
The early 1990s brought expansions to pollution policies as they began to cover claims for on-site contaminant releases and claims for first-party cleanup costs due to a newly discovered environmental condition. Most carriers did limit this first-party coverage to cleanup costs that the site owner was legally obligated to pay, such as staying in compliance with local, provincial or federal standards.
In addition, newer pollution policies cover site owners for the entire lifespan of a property—from “cradle to grave” (as long as the owner has coverage throughout this entire period). This lifespan begins when the property is acquired, lasts throughout its useful purpose and ends when the property is abandoned or sold—because the property owner could be liable for environmental exposures during any phase of the property’s lifespan.
Many of the recent pollution policies also include previously known exposures, such as asbestos, lead-based paint or specific contaminant levels that were previously below legal standards. Such known exposures used to be widely excluded.
Pollution Policies Today
Currently, there are several types of pollution coverage available, and most policies are customizable to fit a company’s unique risks and exposures. They often offer ancillary coverage options too, such as contamination during the transportation of goods.
The risk of pollution may seem obscure, but it is one that could arise at any time. New forms of pollution and contamination are frequently being discovered.
To discuss your company’s possible pollution liability insurance exposures contact an ALIGNED Advocate today.