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June 9, 2010
The purpose of a truly effective risk management program is to identify those exposures that your company faces and then utilize some form of risk transfer (avoidance, risk retention, insurance) to address that risk. The area of Pollution Legal Liability is one exposure that many property owners overlook when structuring a risk management program.
Pollution Legal Liability typically does not top the list of perceived exposures for most property owners when they are establishing a risk profile for the everyday operations of their business. Developers may periodically get involved in this area of liability when acquiring/developing a site that may have some pre-existing conditions. General contractors obviously keep a keen eye on this area of exposure as they are working with active sites where potential pollutants are being brought to that site in the form of materials, vehicles, and equipment. Property owners, however, have historically been focused primarily on protecting their assets from the threats of fire, earthquake, business interruption or slip & fall.
Most standard general liability policies have absolute pollution exclusions, with the exception being a coverage carveback for hostile fire only (smoke from a fire in your building damaging or injuring a third party.) Don’t look to your insurance policies to cover exposures such as:
Unless you want to get out of the business of owning properties and attracting tenants or you are prepared to mitigate all pollution risks yourself, you will want to craft an insurance policy tailored to address exposures. That insurance product is called Pollution Legal Liability and it comes in many different shapes and sizes. At its basic form, it is intended to fill the environmental gap left in most general liability policies and is simply an external financing mechanism for environmental losses that would otherwise be paid by the property owner. This insurance:
As a business owner, it is critical that you understand and address the key areas of pollution exposure that your company faces. There are plenty of “pollution” situations in your everyday operations that may give rise to a claim that would typically not be covered by a standard general liability policy. Pollution Legal Liability coverage is a nice tool to have in your risk management plan to prevent potentially catastrophic events from adversely affecting the financial strength of your business. Speak to your Broker or contact one of the professionals at Parker, Smith & Feek for additional information on how this coverage works.
By Dwight Jarvis, Principal
The views and opinions expressed within are those of the author(s) and do not necessarily reflect the official policy or position of Parker, Smith & Feek. While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it.