(Costs, Coverages & Options)
Information on environmental insurance including costs, coverages & options. Environmental insurance coverage fills the gaps that pollution exclusions create in commercial liability and business property policies.
Environmental Insurance Information
Our environmental insurance section is designed to provide useful information about commercial pollution insurance.
"According to the International Risk Management Institute, Inc. (IRMI), "Environmental impairment liability (EIL) insurance was first introduced in 1978 and has been in constant evolution since. AIG insurance company introduced its private label version of environmental impairment liability insurance under their brand name "Pollution Legal Liability" in 1980. Contractors environmental liability was first introduced by AIG under the brand name "Contractors Pollution Liability" in 1986."
Environmental Insurance Coverage
According to WikipediA, "Pollution insurance is a type of insurance that covers costs related to pollution. This can include the costs of brownfield restoration and cleanup, liability for injuries and deaths caused by pollution. Most businesses will purchase broad commercial general insurance or property insurance policies but these usually contain and an "absolute pollution exclusion" and thus rarely cover pollution, although there may be limited pollution coverage.
Pollution insurance usually takes the form of first-party coverage for contamination of insured property either by external or on-site sources. Coverage is also afforded for liability to third parties arising from contamination of air, water, or land due to the sudden and accidental release of hazardous materials from the insured site. The policy usually covers the costs of cleanup and may include coverage for releases from underground storage tanks. Intentional acts are specifically excluded."
Types of Environmental Insurance Policies
In general, environmental insurance policies can be categorized as follows:
- Policies For Site Owners And Operators: also known as Premises Pollution Policies, Environmental Impairment Liability Policies, Products Pollution Liability and Pollution Legal Liability Policies.
- Policies For Contractors And Professionals: including Contractors Pollution Liability & Transportation Pollution Liability.
- Policies For Storage Tanks
Environmental insurance must have specific coverage for losses arising from the release or escape of pollutants. A basic pollution policy should offer coverage for:
- Bodily injury: Should have same liability language commercial general liability policy definition and sometimes offer broader coverage.
- Property damage: Should have same property damage language commercial general liability policy definition and sometimes offer broader coverage.
- Cleanup expenses: Is usually as required by local, state and federal environmental laws, often with options to broaden protection.
- Defenses costs: Is usually included within the limit of liability.
Common endorsements for additional environmental insurance coverages include:
- Amended definitions of cleanup costs for contaminants that are not regulated as hazardous materials, such as fungi/bacteria
- Business interruption
- Coverage for fungi/bacteria as defined pollutants
- Extra expense
- Loss of rents
- Midnight dumping on insured locations
- Non-owned waste disposal sites
- Reputational damage
- Transportation of pollutants as cargo
Environmental Regulations That Have Environmental Liability Provisions
There are numerous environmental regulations that businesses operating in the USA must to comply with. Non-compliance with these regulations can result in fines, penalties, and legal action by environmental regulators (like the EPA) or third parties. The following laws and EOs help to protect human health and the environment. Notable ones that include environmental liability provisions are:
The Clean Air Act (CAA): is the comprehensive federal law that regulates air emissions from stationary and mobile sources. Among other things, this law authorizes EPA to establish National Ambient Air Quality Standards (NAAQS) to protect public health and public welfare and to regulate emissions of hazardous air pollutants.
The Clean Water Act (CWA): establishes the basic structure for regulating discharges of pollutants into the waters of the United States and regulating quality standards for surface waters. Under the CWA, EPA has implemented pollution control programs such as setting wastewater standards for industry. We have also set water quality standards for all contaminants in surface waters.
The Resource Conservation and Recovery Act (RCRA): gives EPA the authority to control hazardous waste from the "cradle-to-grave." This includes the generation, transportation, treatment, storage, and disposal of hazardous waste. RCRA also set forth a framework for the management of non-hazardous solid wastes. The 1986 amendments to RCRA enabled EPA to address environmental problems that could result from underground tanks storing petroleum and other hazardous substances.
The Comprehensive Environmental Response, Compensation and Liability Act (CERCLA aka Superfund): provides a Federal "Superfund" to clean up uncontrolled or abandoned hazardous-waste sites as well as accidents, spills, and other emergency releases of pollutants and contaminants into the environment. Through CERCLA, EPA was given power to seek out those parties responsible for any release and assure their cooperation in the cleanup. Following is a list of the some of the pollution types regulated under the Superfund:
- Air Contamination
- Groundwater Contamination
- Sediments Contamination
- Soil Contamination
- Building Contamination
- Mining Operations
- Wood Treating Facilities
Court Cases Involving Environmental Insurance
ENVIRONMENTAL CLEANUP COSTS HELD NOT COVERED BY CGL INSURANCE
Fluids containing creosote, penta and other chemicals were generated in the normal course of business operations during more than twenty years of operations of a wood treatment facility. Fence posts and other lumber products were treated by the company. Weed and dust control were achieved by pumping the waste or excess fluid onto the ground and spreading it around the plant area. The facility consisted of about twenty acres of land.
The Arkansas Department of Pollution Control and Ecology filed a complaint and sought a permanent injunction against the owners "to cease and abate pollution of Arkansas waters and to remove or contain wastes . . . .that were likely to cause pollution." Shortly thereafter, the United States Environmental Protection Agency directed the owners to "undertake specific remedial actions with respect to the release or threat of release of hazardous substances" from the site.
The owners sought recovery of moneys expended by them, pursuant to the governmental actions, from various insurers that provided general liability insurance for them over the decade involved. All of the policies included a provision to the effect that ". . . .the company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of the bodily injury or property damage to which this insurance applies." It was also stipulated that ". . . .the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage."
The insureds brought an action against one of their insurers seeking a declaration of entitlement to defense and indemnification. The insurer filed a declaratory judgment action against the insured seeking a declaration that the insurance did not cover the expenditures in question.
The trial court concluded that "cleanup costs are not encompassed within the meaning of the word 'damages' in the standard form policies at issue." Accordingly, it entered judgments in favor of the insurance companies and against the insureds.
The appeal court found that "the district court's interpretation of Arkansas law is not wanting for reasoned analysis nor lacking in reasoned authority." The judgments of the trial court were affirmed in favor of the insurance companies and against the insureds.
(GRISHAM ET AL., Appellants v. COMMERCIAL UNION INS. CO. ET AL., Appellees. U.S. Court of Appeals for the Eighth Circuit. No. 89- 1481. March 8, 1991. CCH 1991 Fire and Casualty Cases, Paragraph 3016.)
HAZARDOUS WASTE DISPOSAL NOT "ACCIDENTAL"
Ribi Immunochem Research, Inc. (Ribi) developed biopharmaceutical products at its Hamilton, Montana facility. From 1981 to 1985, they used toxic solvents in their processing and, monthly, poured the waste into an open, unlined pit at a sanitary landfill. Ribi hoped that most waste would evaporate before it migrated into the shallow groundwater table but later tests revealed the hazardous contaminants migrated into the groundwater within 30 minutes after disposal.
The Environmental Protection Agency (EPA) discovered the contamination in 1987. Shortly afterwards, the National Institute of Health (NIH) excavated and cleaned the site. Between 1993 and 1998, Ribi was sued by neighboring property owners, by the State and by the Federal government for damages and remediation costs. Ribi settled the EPA, NIH and State claims. On December 6, 1993, Ribi filed claims with its insurance company, Travelers Casualty And Surety Company (Travelers).
Travelers wrote the commercial general liability (CGL) policy for Ribi from 1982 through 1985. After Ribi filed the claim, Travelers issued reservation of rights letters for the property owners’ suits, stating it had no duty to either indemnify or defend Ribi. Ribi never raised an objection. Travelers, after years of repeatedly denying Ribi's claims, sought a declaration that it had no duty to provide coverage or defense costs. Ribi counter-claimed on several issues. A district court granted summary judgment in favor of Travelers and allowed Travelers to recoup all its defense costs in both the government and neighboring property owners' suits. Ribi appealed.
The appellate court agreed that the pollution exclusion in the CGL policy barred coverage for cleanup costs and that Travelers owed no duty to defend Ribi against third-party lawsuits for cleanup costs. Travelers was entitled to recover defense costs expended on behalf of Ribi for underlying claims outside the policy pollution exclusion provision. Travelers explicitly reserved its right to recoup those costs when it notified Ribi of the reservation in a timely manner and also provided specific and adequate notice of the possibility of reimbursement. Since Ribi did not object to those letters, they implicitly accepted Travelers' defense under a reservation of rights. For these reasons, the district court decisions were affirmed.
Travelers Casualty And Surety Company, a foreign corporation, Plaintiff, Respondent and Cross-Appellant, v. Ribi Immunochem Research, Inc., a Delaware corporation, Defendant and Appellant. Montana Supreme Court. No. 04-228. Filed March 1, 2005. . Affirmed. 2005 CCH Personal and Commercial Liability Cases. Paragraph 16,017.
Environmental Insurance Articles From EK Insurance
Our goal at EK Insurance is to inform business and contractors about what pollution insurance is available through these environmental insurance articles, so they can make an informed decision when they are buying polices to protect their businesses and projects from massive financial losses and government fines.
Read through helpful environmental insurance to help you better understand the pollution polices you own or are buying. Also browse our downloadable library here: Insurance Documents - PDF's, Whitepapers & Downloadable Information.