If you’re a commercial services contractor working in construction, restoration, or demolition, you know that accidents can happen. What you might not know is that your commercial general liability (CGL) insurance won’t necessarily cover you for any environmental pollution resulting from an accident.
If your work causes pollution-related health risks to a client, or to the community at large, the costs could be high — even if it’s an accident. Those costs could be related to clean-up, legal action, and/or reputational damage.
For example, if internal corrosion of a fuel tank results in leaking fuel into the surrounding environment, you could be held responsible for soil and groundwater remediation, as well as any property damage. At the same time, you’d have to halt operations, which could lead to loss of income.
Without appropriate insurance, these expenses would have to be covered out-of-pocket. However, many CGL policies contain an exclusion for pollution clean-up. That’s why investing in pollution liability insurance — also known as environmental impairment liability insurance — is so important.
What is pollution liability insurance?
Pollution liability insurance protects contractors against first-party exposures and third-party claims resulting from pollution conditions. These must be caused by covered operations performed by or on behalf of the contractor. These claims could be related to bodily injury, property damage, or environmental damage, including defence costs.
Pollution insurance goes above and beyond your standard CGL and property policies, which usually exclude coverage for any environmental damage. Some pollution policies also offer emergency response reimbursement and access to qualified experts in case of an incident. This is an important consideration, because oftentimes quick action is needed to contain and mitigate the impact of pollutants released into the environment.
If you’re a general, electrical, plumbing, mechanical, pipeline, excavation, infrastructure, or landscaping contractor — or a carpenter, drywaller, or painter — it’s important to ensure you have the appropriate insurance for pollution-related incidents.
Why do contractors need this coverage?
For one thing, it’s a requirement. In December 2020, the Canadian Construction Documents Committee (CCDC) updated the CCDC 41 document, making it a requirement that contractors “have limits of not less than $5,000,000 per occurrence for bodily injury, death, and damage to property.”
It also makes good business sense. The release of pollutants — hazardous or otherwise — can happen gradually over time before anyone notices, or can happen suddenly during an accident. It’s important to consider how pollution could occur, and how that could impact the community and environment.
Environmental impairment isn’t just restricted to your property or jobsite. Whenever supplies, equipment, or waste are moved, pollution could be released into the environment. If your business transports equipment or waste (or contracts others for equipment or waste removal), consider transportation pollution insurance, which is often offered as optional coverage.
What does pollution liability coverage protect contractors against?
Pollution insurance covers a wide range of scenarios. For example, say you’re removing chemical waste from a construction site and your truck is involved in an accident while in transit, causing the drums — containing chemical waste — to break open and seep into the surrounding soil and waterway. Even though it was an accident, you’re responsible for soil and groundwater remediation.
In these situations, clean-up costs aren’t likely covered under a CGL policy. Nor are costs related to lawsuits or fines from environmental regulators. That’s where pollution liability insurance could help.
What are the different types of pollution liability insurance?
Premises pollution liability: This coverage is designed to help protect you from pollution releases at, on, under, or migrating from a location you own or lease. It provides first-party coverage for business interruption, clean-up, and emergency response costs, as well as third-party coverage for clean-up costs, property damage, and bodily injury. Depending on the policy, it could also include reimbursement of emergency response and clean-up costs.
Contracting pollution liability: This provides coverage for work done by or on behalf of a contractor resulting in the release of a pollutant into the environment. It provides protection for both ongoing projects, and includes coverage for property damage, bodily injury, clean-up, legal defence, and regulatory fines.
Transportation pollution liability: If products or materials are being transported, shipped, or delivered by your business or a carrier on your behalf, and pollution is released, this coverage could provide protection. It’s typically available as an optional coverage with both premises pollution liability and contracting pollution liability policies.
If you’re a contractor working with potential pollutants, don’t rely solely on your CGL policy. Make sure you’re covered with pollution liability insurance, so you can remediate any issues and get back to business as soon as possible.
Protect yourself and your business
Unfortunately, you can’t always control what happens to your business. You can, however, control how prepared you are. Having the right protection in place can make a huge difference. To learn more about protecting yourself and your business, visit our pollution liability insurance page today.
