What is Environmental Insurance?

Environmental insurance, often known as pollution insurance or pollution coverage, protects against financial loss or damage brought on by unanticipated releases of pollutants that are typically not covered by ordinary liability and property insurance policies. Typically, claims for bodily injury, property damage, cleanup expenses, and business interruption result in the losses or damages covered by environmental insurance.

With a few rare exceptions, such as smoke from an uncontrolled fire or fumes from a malfunctioning heating or air conditioning system, most pollution losses are not covered by standard general liability and property insurance policies.

What does Environmental Insurance cover?

Genuine environmental insurance must contain an insuring agreement that specifies coverage for damages caused by the release or escape of contaminants. At a minimum, the insurance coverage will apply to losses arising from:

• Bodily injury (mirrors and sometimes enhances the definition used in the general liability (GL) policy)
• Property damage (mirrors and sometimes enhances the definition used in the GL policy)
• Cleanup expenses (usually as required by environmental laws with available enhancements by class of business)
• Defenses costs (traditionally included within the limit of liability)

Common optional coverages include:

• Non-owned waste disposal sites
• Transportation of pollutants as cargo
• Business interruption
• Loss of rents
• Extra expense
• Reputational damage
• Midnight dumping on insured locations
• Coverage for fungi/bacteria as defined pollutants
• Amended definitions of cleanup costs for contaminants that are not regulated as hazardous materials (fungi/bacteria)
• Reputational damages

Why a business needs Environmental Insurance

Most businesses have general liability that protects them against claims of slander, libel, bodily injury, and property damage. What general liability does not protect your business from is a scenario where it accidentally exposes customers or the environment to pollutants. The costs of pollution as a negative externality can be high for a business. There is the ethical cost of endangering people’s lives, but this also comes with legal and monetary expenses. Environmental liability can protect your company from the high fees of cleanups, lawsuits, and other costs that pollution-related accidents have.

Shifting coverage for pollution losses from the standard GL policy to the environmental liability policy has marked a significant change in commercial insurance over the past forty years. The difference is attributable to America’s growing sensitivity to environmental concerns and insurers’ growing understanding of the potential exposure. Talk to us to know more about Environmental Insurance.