Environmental Insurance and Pollution Liability

Perhaps you've seen the movie "Erin Brockovich"? It deals with the pollution caused by Pacific Gas & Electric, when hexavalent chromium and other toxic chemicals were stored in unlined ponds. That's really what environmental insurance addresses: the issue of businesses getting into trouble because of polluting by-products.

So, it would seem that this insurance is a product who's time has come. However, environmental liability insurance is really the creation of the insurance industry. It has become a separate product because general liability policies have begun to have significant limitations in them regarding pollution from a business - at least in part because of huge debacles like the PG&E scandal.

The exclusions in a general liability policy may include any pollution unless it is caused by a criminal action against a company. Therefore, if your company ends up polluting the environment because of a fire, you better hope it was set by an arsenist. Any pollution caused by a company's wastes are generally excluded. Also, even if accidental polluting is covered in a general liability policy, there may be time restrictions. For instance, if the pollution is not discovered within 120 hours of starting, it may not be covered. And even then, they may exclude cleanup costs as well as any pollution caused by the insured's wastes. As a result, companies can find themselves in trouble, as what is deemed "pollution" changes as society and science make new discoveries. 

This insurance is not just for big companies. If you run your own "mom and pop" drycleaning business, you might just need this coverage. Why? Because "perc" (used in drycleaning) is a potential problem if you have even a small "spill". You could have a similar problem with a simple hair dressing business, as many chemicals are used (from disinfectants to various hair processing concoctions) and again -- what happens if stored chemicals are part of a fire or are washed into the environment in unusual quantities because of a flood?

You can get policies that cover various aspects of the possibility of environmental damage, from cause to cleanup. Each insurer will have unique aspects to their coverage.

This is one kind of coverage where you don't want to ever have to make a claim; however, have a lawyer read the fine print before you sign, just in case you ever have to.


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