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Contractors Pollution Liability Insurance - November 2017
Contractors, no matter what industry they work in, face
environmental risks stemming from operations on a daily basis. For most
contractors, a single pollution incident or loss can seriously damage their
reputation, operations and even their balance sheet. Making matters worse,
pollution incidents can be sudden or occur gradually over time.
While many contractors assume that environmental claims will
be covered under their commercial general liability (CGL) policy, the
unfortunate reality is that most CGLs contain pollution exclusions that leave
contractors uninsured in the event of a pollution incident.
Thankfully, contractors are increasingly turning to
contractors pollution liability (CPL) insurance to ensure they have the right
coverage in place to remain secure and profitable.
CPL Coverage Basics
CPL policies provide contractor-based insurance for
third-party coverage for bodily injury, property damage, defense, and cleanup
as a result of sudden and gradual pollution incidents arising from contracting
operations performed by or on behalf of the contractor. CPL insurance is
intended to provide coverage to all types of contracting operations, including
contractors who are involved in building construction and environmental firms
that remediate polluted sites.
CPL policies are offered on either a claims-made or
occurrence basis. What’s more, CPL policies are nonstandard, meaning each
policy is different and can be modified to cover the various needs of the
contractor purchasing the policy. Policies can be offered on a project or
blanket program basis.
In some instances, CPL policies can also be used to cover
losses from civil fines, penalties and punitive damages.
Covered Pollution Incidents
Contractors should keep in mind
that CPL insurance policies differ in regard to the types of pollution
incidents that are covered. Two important considerations when evaluating CPL
insurance policies are:
- Whether or not the policy will
respond to gradual releases of pollutants, as opposed to sudden and accidental
- The types of substances that are
considered “pollutants” under the terms of the policy
Generally, policies that cover both gradual and sudden
releases of pollutants provide contractors with a broader scope of coverage. In
addition, policies that provide a broad definition of pollutants are considered
superior to those that contain a narrow definition. Accordingly, it is
important that contractors work with their broker to find a CPL policy that is
tailored to their needs.
CGL Pollution Exclusions
A primary reason why contractors obtain a CPL policy is due
to the various pollution exclusions contained in most CGL policies. The
pollution exclusions found in most CGL policies take one of two forms, either
“absolute” or “total.”
CGL policies with an absolute pollution exclusion remove
coverage for most pollution events that would occur in the course of an
insured's business operations. However, despite its name, an absolute pollution
exclusion may preserve coverage for certain incidental pollution damages,
products and completed operations liability, and certain off-premises work.
However, more commonly, CGL policies include a more
restrictive “total pollution exclusion.” This type of exclusion effectively
removes coverage for any event the insurer characterizes as a pollution
Contractual requirements serve as
another motivating factor that lead many contractors to obtain a CPL policy. In
many instances, project owners and general contractors will require contractors
to obtain pollution insurance that meets certain, predetermined standards.
From this perspective, having a CPL insurance policy in
place can serve as an upfront sales tool during the bidding process that
enables contractors to qualify for opportunities when such coverage is
Finding the Right Policy
Regardless of specialty, all
contractors should be mindful of the pollution risks associated with their
work. A CPL insurance policy can provide much-needed security in the event of a
pollution incident, even in the most unlikely of circumstances.
Let CMR Risk & Insurance Services, Inc. work with your
organization to find the CPL coverage that is right for you.