Contractor’s pollution liability (CPL) is a type of insurance policy that provides third-party coverage for bodily injury, property damage, defense, and cleanup arising from contracting operations performed on or behalf of a contractor. We are currently seeing a rise in clients’ contractual requirements to provide proof of pollution liability insurance for contractors of all types. Fortunately, in today’s marketplace, the coverage is widely available and relatively affordable. However, there are no standard ISO policy forms for pollution liability like there are for other lines of business, such as commercial general liability.
Environmental insurance companies offer bespoke CPL policy forms, making it important to understand the differences in coverage between different insurers. There are estimated to be over 30 insurance companies providing CPL in the current insurance marketplace. Coverage forms can be customized and tailored to meet the needs of your client.
Below are some of the things to look out for.
CPL policy forms can either be offered on an occurrence basis or a claims-made basis. Today, occurrence forms are widely available, but some classes of business warrant the use of a claims-made policy form. Some contractors who have carried CPL coverage for years may have originally been on a claims-made form. The old claims made form can often be converted to occurrence coverage in today’s market with the addition of “nose coverage.”
CPL policies can either be offered as a practice policy, a project-specific policy, or as a wrap-up policy. Discuss with your broker the differences of each policy and which will be best suited for your client and their scope of work.
Mold coverage can be included, excluded, or offered as a separate sublimit. If mold is included, it can either be offered on a claims-made or occurrence basis. If you are changing insurance companies, be sure to review how mold coverage is treated on your policy and discuss with your broker the implications.
For example, if you are moving from a policy where mold is offered on a claims-made basis to a policy where mold is offered on an occurrence basis, you may need to purchase nose coverage to avoid gaps in coverage or claims reporting. Carriers also vary in how they define mold. The broadest definitions of mold will include mold, fungi, mildew, and bacterial and viral matter such as legionella pneumophila.
Defense costs can either be inside or outside the policy limits. If defense is offered inside the policy limit, it will erode the general aggregate limit. Check with your broker if the insurance company can provide defense outside as a separate limit (they may be able to for an additional premium).
Minimum premiums typically begin around $2,500 and deductibles typically begin around $2,500 for small contractors. CPL coverage can help fill the gaps in an insurance program where pollution is excluded in a general liability policy form. Single carriers have CPL capacity ranging from $5M in limits to $25M in limits, but higher limits can be achieved by layering.
These are two add-on coverages that many carriers automatically include on their CPL policies. “NODS” is coverage for Non-Owned Disposal Sites and “TPL” or Transportation Pollution Liability is an extension to cover liability arising out of the transportation of pollutants.
Many commercial general liability carriers are implementing communicable disease and COVID-related exclusions to their liability programs. Worldwide Facilities has access to environmental markets that will consider providing CPL coverage for insureds performing COVID-related work without exclusions for communicable disease.