When you think of pollution exposures, what comes to mind? A toxic waste dump? People in hazmat suits and gas masks?
There is a common misconception in the insurance industry about pollution exposure. “If my client doesn’t deal with hazardous materials they don’t have an exposure.” Yes, I would agree anyone handling radioactive, explosive, toxic or bio hazardous material certainly have an exposure. But in reality, ALL contractors have an exposure to pollution.
As we all know, CGL policies, via exclusion “f”, exclude most claims arising from a “pollution condition”. A pollution condition is generally a release of “pollutants”. Here’s the tricky part; according to many CGL policies, a pollutant is any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste. We have heard many examples of carriers citing the pollution exclusion in denying a claim. Here are some examples:
Solid – An excavation/grading contractor unknowingly spread petroleum contaminated soil across a project site during fill operations for a project. The contractor was named in a lawsuit for exacerbating the extent of contamination. After lengthy deliberations, the contractor paid out of pocket $250,000 in clean up costs and defense.
Liquid – A street and road subcontractor paved a new parking lot for a commercial structure. At the end of the day, the tack coat was sprayed onto the sub-base prior to paving. That night a major thunderstorm caused the tack coat to wash off and flow into a nearby stream. The general contractor was responsible for cleanup cost which exceeded $200,000. To recoup these costs the General Contractor withheld payment to the subcontractor. In turn, the subcontractor filed a claim with its insurance company to recover lost revenue. The insurance company denied reimbursement based on the absolute pollution exclusion under the general liability policy.
Gaseous – While performing building renovations, a general contractor used gas powered generators and equipment. The contractor failed to properly vent or contain the emissions from the equipment during operations. Employees working in a nearby area of the building complained of headaches, nausea, and respiratory problems. The results of an air quality study concluded the increased carbon dioxide levels in the building resulted from the construction equipment. The contractor was liable for causing building related illnesses that resulted in 30 bodily injury claims, totaling over $200,000.
Smoke/Dust – A property neighboring a landfill filed a claim stating the traveling dust from the dirt road impeded on his property. A pollution claim was filed and paid in excess of $150,000.
Fumes – A residential contractor disposed of sealant and solvents containing toluene in a covered, enclosed dumpster after performing routine work. In the confined space of the trapped toluene fumes depleted the oxygen levels in the dumpster. After climbing into the dumpster of unknown reason, two 10 year old children were overcome by fumes and died. The contractor faced a claim in excess of $2 million dollars for improper disposal of toluene.
Waste – While installing new overhead electrical lines, a utility contractor had a subcontractor sinking the new utility poles. The subcontractor hit an underground sewer line with an auger while installing the new poles. Through contractual liability, the utility contractor was responsible for the actions of the subcontractor. Cleanup of spilled sewage and repair of the sewer lines amounted to $190,000.
Michael Tighe is a Senior Account Executive at Beacon Hill Associates, Inc., a wholesale insurance broker and program administrator, specializing in the placement of environmental insurance and other specialty coverages such as site specific pollution and packaged insurance coverages for agents nationwide. Beacon Hill Associates, Inc. can be found online at: B-H-A.com
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