Why Your Business May Need Pollution Coverage

Almost all businesses have some risk of being cited for pollution, even the most benign, such as a property owner.

Pollution exposures for many businesses are obvious - like dry cleaners from the chemicals they use, to printing companies from the ink they use. And any manufacturer would face some type of pollution exposure as well, in addition to warehouse operators and contractors.

Think you're not exposed? Say you own a business property, even an office building for example, you could have pollution exposure such as:

• The existence of lead (paint and pipes) or asbestos.
• Releases of pollutants by tenants from improper or inadequate storage or disposal of lubricant oils, primer or lab waste material.
• Inadequate containment in loading areas that could lead to the release of pollutants.

 
However, as the risks have grown for pollution liability, most commercial general liability policies now exclude pollution coverage. It's something to be aware of for most any business, particularly as the list of what is considered to be a pollutant has grown dramatically.
 
The exclusion
The easiest way to think of a pollution exclusion is that it can apply to a contaminant. Virtually every commercial general liability policy includes a pollution exclusion.

These policies used to cover pollution but as the risk for being sued for pollution has grown, so then has the exclusion.

The standard policy has two pollution liability coverage forms. It also has a special form for underground storage tanks.

The current version of the Insurance Services Office (ISO) commercial general liability form has pollution coverage narrowed down to a few covered occurrences, typically including:

• Certain off-premises exposures
• Certain product-completed operations
• Smoke, fumes, soot, vapors from your heating equipment or from a fire in your building
• Gas or fumes from materials you bring into a work site.

 
The broad definition of pollution
Consider these examples:

• A food company in Wisconsin recalled a batch of listeria bacteria-contaminated sandwiches and filed a product recall claim with its insurer. However, the insurer denied coverage based on the policy's pollution exclusion. The court sided with the insurer, concluding that bacteria were an excluded ISO form pollutant.
• A hospital in California was sued after an outbreak of legionnaire's disease was traced back to a drinking fountain in the hospital lobby. The insurer rejected coverage for the lawsuits, citing a fungus and bacteria exclusion in their general liability policies.

 
The solution
What are the solution options when it comes to the pollution insurance question? You can have a specific commercial liability form or a separate pollution liability policy.

Pollution liability insurance is designed to address claims and suits involving pollution losses in which it is alleged that the insured is responsible, as well as property losses related to pollution on owned or occupied property.

Typically a pollution liability policy covers three risks:

Premises pollution liability - Covers first-party claims associated with pollution on the premises of the insured. (Example: It is discovered that instead of clean soil, contaminated soil was used to fill a space formerly occupied by an underground storage tank that leaked. The cost of remediation would be covered.)

It would also cover third-party claims associated with the pollution (like when a person falls sick due to the pollution).

Contractors pollution liability - Covers bodily injury, property damage and remediation costs for which a contractor who causes pollution is liable.

Errors and omissions liability - Covers losses that result from wrongful acts performed in conducting professional services, such as a soil engineer erroneously rendering an opinion that there is no soil pollution, when in fact, there is.