Why is Pollution / Environmental Liability insurance important?

You may recall, during the mid-1980s, a news frenzy covering underground storage tanks rusting and releasing harmful fuel oils. This led to the development of new environmental regulations and the reduction of these occurrences. Understanding your organization's unique environmental exposures is fundamental to reducing financial risk. It's also important not to underestimate the power of consumer awareness and how that can increase the likelihood of being named in a formal allegation or a lawsuit claiming bodily injury caused by harmful substances.

 

99.9% of General Liability policies do not provide coverage for third-party liability arising from or caused by: fumes, vapors, smoke, mold, microbial matter, fungi, bacteria, chlorine, carbon monoxide, etc.

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This exposure significantly increases for any company involved in owning, servicing and/or maintaining real property. Contractor clients frequently face both pollution and professional liability exposures, creating challenges in determining the root cause of a loss. To address this grey area—where a pollution event may stem from a professional error, act, or omission—the insurance industry developed hybrid policies that combine both coverages into a single solution. This streamlined approach helps eliminate coverage gaps and simplifies claims handling. 

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Claims Example:

An apartment owner was sued by their tenant who allegedly experienced bodily injury and mental anguish caused by high levels of airborne mold. They sued the landlord for medical bills, pain and suffering, and relocation costs totaling $75,000. Since the apartment owner did not have an Environmental Liability Insurance policy, the lawsuit did not trigger coverage under his General Liability policy. Overall, the cost to hire a professional inspector to test the units air quality and legal counsel to defend him in court totaled over $50,000.