For years, environmental liability associated with naturally occurring substances such as silica, mercury, arsenic, radon, and asbestos has played a significant role in the risk profiles of many construction firms. Nearly all are recognized as hazardous waste or substances by the Environmental Protection Agency (EPA) and therefore present unusual exposure to many property owners, developers, and contractors.
As a result, many owners undertaking construction projects have begun to educate themselves about the impact of environmental issues as well as the associated liabilities. This includes the performance of environmental assessments before buying the property or the onset of development projects as well as the purchase of some form of environmental coverage such as Contractors Pollution Liability (CPL) insurance.
However, according to Jeff Slivka, executive vice president of New Day Underwriting Managers LLC, contractors and construction firm owners must be wary of the naturally occurring substance and pollutant exclusions that can be included in Contractors Pollution Liability (CPL) policies. “Some offer fairly recognizable and straight forward exclusions, while others can be far more cryptic,” says Slivka. “Either way, such policy conditions and exclusions can have a significant impact on the coverage. Although CPL policies can provide prudent alternatives for financing environmental loss, the pitfalls can prove devastating for the uninformed.”
For those that do purchase CPL insurance, the trick is to understand coverage benefits thoroughly, while securing the optimal coverage afforded in the marketplace. Even though CPL insurance has become a bit more “standardized” over the past five years, CPL purchases can still be fairly difficult, since all 20 plus carriers offer coverages with varying terms, conditions, exclusions, definitions, and agreements.
In addition, construction company and property owners looking to protect themselves from environmental liabilities properly should also note that CPL coverage is only one half of the equation. Optimal environmental liability insurance programs ideally should include Pollution Legal Liability or PLL insurance to cover pollution conditions or events that emanate from designated locations or project sites. This can also include coverage for third-party bodily injury, property damage, clean up costs, and defense costs resulting from the existence of environmental conditions.
In addition to the careful review of CPL and PLL terms and coverages, Slivka also recommends the following to contractors, property owners, and construction companies that would like to protect their operations from costly and litigious pollution liabilities:
· Identify your environmental risk: There is an abundance of information available from the Internet and other sources to help owners and contractors fully understand their companies’ exposure to environmental liability.
· Consider environmental insurance as one risk financing alternative: There are many alternatives. But companies who do not purchase environmental insurance seldom have a risk financing plan in place. If you belong to one of those companies, the next question should be, “How are we prepared to finance potential environmental losses?” The answer will say a great deal about the organization’s preparedness philosophy.
· When buying environmental insurance, be sure to cover the four major exposure areas: jobsite operations, transportation, disposal, and owned premises.
