Environmental Risk, Coverage, and Pollution Insurance

Q. What should brokers and agents know about environmental risk? Gina Jones, director of environmental programs, Burns & Wilcox responds:

Nearly every client has an environmental risk and most insureds are unaware their environmental exposures may have no coverage.

For example, a drilling contractor does not seem to present an environmental risk until it hits an underground sewer pipeline, causing raw sewage to release into the soil. Now several tons of impacted soil must be excavated while nearby businesses are forced to shut down for days when their basements fill with sewage. Claims for business interruption for the nearby businesses will be filed along with associated cleanup costs.

Insureds who own, lease or operate facilities also face a wide variety of environmental exposure and potential for risk. Common examples include a building owner who has an undetected water leak that results in mold or a warehouse fire spewing toxins and gases into the environment. An environmental impairment liability policy is specifically designed to address situations such as these.

As environmental regulations gain global reach, they are also becoming more restrictive, with larger penalties for non-compliance. Environmental policies today are designed to address the changing regulatory landscape. As such, more companies are seeking the protection of environmental products.

Q. How can brokers and agents help clients better understand their environmental coverage needs?

Jones: Environmental coverage is oftentimes not an easy sell. Many clients say they don’t have an environmental exposure and are not required to carry environmental insurance. They say they don’t need environmental coverage because they never have had a loss. They do not see the importance of environmental insurance until they have had a claim that is declined under their commercial general liability or property policy. In addition, most commercial general liability policies have an absolute pollution exclusion and will not provide defense in the event of an environmental claim.

The effects of an environmental pollution loss can be devastating and far-reaching enough to change a client’s business forever. It’s up to the retail broker/agent to help a client understand what’s at stake.

 Q. Is all pollution insurance the same?

The short answer is no. There are many types of insurance products and selection varies according to the client’s particular operations or services. The marketplace has become very competitive, with more than 15 carriers entering the arena during the past few years. With so many carriers vying for market share, capacity has increased while coverage has become broader and more affordable. Most carriers offer a flexible solution allowing customization of the insurance specific to your clients industry and unique needs. It is crucial to place coverage with a carrier whose products best fit your insured’s needs. The best environmental market is the one that offers the broadest coverage to best protect the insured and the carrier who can customize the policy to specifically meet your clients’ needs at an affordable premium