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Dear Insurance Leader,

Our company provides real estate management for commercially owned office buildings and condos. Occasionally we do some construction work. Do we really need pollution insurance coverage?

—Concerned Building Operator

Dear Operator,

Almost every company and industry needs environmental or pollution coverage. Contractors Pollution Liability (CPL) provides coverage to contractors for loss resulting from pollution conditions caused by covered operations including work performed by subcontractors.

Covered losses may include third-party claims for bodily injury, property damage, and environmental damage including third-party claims against the Insured alleging improper supervision of subcontractors. Coverage is also available for those emergency response costs incurred by the Insured in response to pollution conditions requiring immediate action. CPL is available on either a claims-made or occurrence basis.

For example a real estate company submitted a proposal for a $250,000 purchase and $2.5 million redevelopment of a city-owned site.

Formerly a brownfield property, the site had recently been designated “clean” by the EPA. The clean up was integral to a citywide plan for revitalization. After lengthy negotiations over a 12-month period, the company and city sealed the deal and construction began.

Shortly after breaking ground, a bulldozer uncovered several barrels of chemicals, probably buried during a past operation. While removing the barrels, one of them spilled. The chemicals flowed into an unprotected drainage pipe that dumped into a nearby river. A few days later, neighbors called local authorities and complained about unpleasant odors. Further investigation linked the odors to the chemical spill. Ten households alleged bodily injury and property damage and sued the company. The court ordered the company to clean up the river. Clean up and claim settlement cost the company $450,000. Thus, the need for them to purchase pollution coverage.

Laws in the US and even other countries are becoming more stringent related to environmental and pollution related incidents. Having the right insurance can be critical not only for coverage but for the reputation risk of your company.

Be sure to consult with your insurance agent/broker or your insurance carrier.

Instant Insights /

Why Pollution Insurance Matters

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