Environmental insurance covers claims that stem from the release of pollutants into the environment, which the standard CGL loss policy excludes. That exclusion defines ‘pollutant’ broadly enough to include smoke, waste, chemicals, and other irritants or contaminants, not just hazardous substances, so most commercial accounts carry this exposure whether or not anyone’s flagged it. Environmental insurance exists specifically to close that gap.
What is Considered a Pollutant?
A pollutant, under standard insurance policy language, is any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste (waste includes materials to be recycled, reconditioned, or reclaimed). This is the Insurance Services Office’s (ISO) definition: standard CGL policies may exclude anything that falls under it, regardless of industry.
The exclusionary language includes the following triggering actions...
“Bodily injury” or “property damage” arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of “pollutants”. The important takeaway from this is that insurance policies exclude, as pollutants, many things that are not inherently hazardous or toxic. This exclusion applies to “irritants” and “contaminants” and excludes bodily injury and property damage for the release, or threatened release, of these substances.
Case law in different jurisdictions has interpreted this language in a variety of ways, with some being broader and others more narrow. There are notable cases of milk being spilled into streams from an overturned tanker truck, leading to claims denied as pollution losses, as well as dust from job sites. When evaluating environmental risk, we need to keep this broad language in mind.
Who Needs Environmental Insurance?
Virtually every business has a pollution exposure, but the implications are greatest for contractors, environmental consultants, facility owners and operators, storage tank owners, and manufacturers or distributors whose products could cause a pollution event.
See how coverage breaks down by target risk.
What Is The History of Environmental Insurance?
1970s: The birth of environmental regulation. Clean Air Act, Clean Water Act, The Endangered Species Act, etc.
1980s: Birth of environmental insurance industry.
1990s: Beacon Hill Associates (now SPG Environmental) opens its doors as one of the first environmental insurance wholesale brokers.
2000s: Coverage developed to respond to wide range of needs, including water contamination, air pollution, and natural resources damage.
2010s: Environmental liability claims spike. Coverage available and affordable for all classes of business.
2020s: Environmental insurance claims continue to grow, with social inflation and the frequency & severity of pollution lawsuits at an all time high.
What Is The State of The Environmental Insurance Market?
Environmental insurance, or Pollution Liability, is a billion-dollar industry with many opportunities—every account has a pollution exposure. By discussing environmental products that can effectively address these exposures, you will provide broader coverage for your client, highlight your agency’s professionalism, help secure future renewals, and generate more revenue on your accounts.
As we see the economy roar to life, the environmental insurance marketplace has never been stronger. We have seen a huge uptick in accounts related to manufacturing, recycling, construction, waste disposal, and renewable energy. With disruptions in the U.S. supply chain & labor force, and more awareness of environmental events and their impacts, insurance professionals are gaining a new perspective on coverage.
There are currently approximately sixty insurance companies offering environmental insurance products. These products have been designed for several broad business segments including: site owners/operators, contractors & consultants, storage tanks, property transfer and lender liability, transportation waste and materials, products pollution, and manufacturing risks.
Examples of sector-specific policies include policies for healthcare facilities, educational facilities, real estate entities, and many others. Policies designed to respond to specific situations can include environmental policies over indemnifications, policies that facilitate transactions, policies that are excess over other environmental carrier forms in order to obtain additional limits, and policies that consist of combined General Liability and environmental forms with the goal of reducing coverage gaps, overlaps, and coverage disputes.
Job site/project policies include specific types of project policies such as restoration or green projects, and practice policies that can provide coverage for any project a contractor or professional works on during the year
What Are Your Types of Environmental Insurance Products?
Environmental coverage breaks down into several product types, each built for a specific point of exposure.
What Are The Significant Environmental Regulations That Have Environmental Liability Provisions?
There are numerous environmental regulations with which companies must comply. Not complying with these regulations could result in fines, penalties, and legal actions by environmental regulators or third parties. Some of the most 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.
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 Comprehensive Environmental Response, Compensation, and Liability Act—otherwise known as CERCLA or 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.
All definitions obtained from epa.gov.
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