Here are a few of the questions we face regularly regarding environmental risk…
1) “We CLEAN UP pollution, why do we need pollution insurance?”
Great question! It comes down to a couple simple things: 1st: People can sue anytime, and your insurance defends against suits regardless of merit. All it takes is one allegation of inadequate remediation, or exacerbation of a known pollution condition to drag all parties who worked on a project into a legal proceeding. 2nd: Mistakes happen. Maybe an employee misidentifies a pile of contaminated soil and it ends up being used as backfill instead of being sent to a landfill, resulting in clean up costs. 3rd: Pollution policies will respond to government ordered cleanups, they can pay for fines and penalties, and they often have a 1st party triggers for emergency response costs – meaning you don’t need to be sued for them to respond in the event of an incident. Bottom line: if you’re dealing with pollution you need a pollution policy.
2) “Why do we need an Errors & Omissions (E&O) policy, won’t our Commercial General Liability (CGL) policy cover it?”
The easiest way to think about what your CGL covers is like this: Bodily Injury or Property Damage. Those are the 2 triggers for CGL coverage (subject to a whole other host of exclusions and clauses of course). Plus, CGL policies have a Professional Services exclusion loosely meaning advice/opinion related services are excluded from triggering coverage. So, if someone is paying your organization for professional consulting which they use to make business decisions you most likely need E&O. Your client faces a financial risk based on following your advice, but without facing a bodily injury or property damage risk, so your CGL would not respond if they sued you. E&O is intended to pick up this pure financial risk.
3) “Many Oil and Gas MSA’s call for Sudden and Accidental Pollution coverage, what is that?”
Unfortunately, these MSA requirements have not been accurately modified for the environmental services sector. What the Oil and Gas companies seemed to have missed is the fact that Sudden and Accidental Pollution coverage (which is an extension from the General Liability Policy) has EXCLUSIONS for any services related to assessment, neutralization, handling, treatment, or processing of contaminants. It also excludes services happening on sites which were ever used to store or handle waste (sumps and landfills are obvious issues). So, while a Sudden and Accidental Pollution policy may be perfectly suitable for many companies working on Oil and Gas sites like welders or electrical contractors, it is truly not the right policy for anyone in the environmental sector. Environmental companies require a Contractors Pollution Policy, a much broader form of environmental insurance.
4) “Can I provide primary coverage for my sub-contractors and sub-consultants on my policy?”
This is a good one, and it comes up more frequently all the time. There’s no perfect answer to this: some insurers would allow for this type of endorsement, providing primary coverage for subs if requested, while some will not. The key thing to ensure is that your organization is covered for work performed by your subs on your behalf (typically this is automatically covered). From there, you need to decide: do you want your subs to have claiming rights on your policy? What if they work on another project without insurance, assuming your policy cover them wherever they work? There’s a reason why your clients don’t add you to their policies…they want to be able to transfer liability to their subs. Honestly, we feel this should be our clients position as well (in the vast majority of cases). We can work with you and your subs to build a program for their insurance needs, and then leverage the implementation of that program to help your organization gain better terms from your insurer. Transfer risk and reduce costs. Win-Win!