Environmental & Pollution Liability Insurance

Environmental liability insurance was first made available in the 1970s in response to the government cracking down on companies that were polluting the ground and air with hazardous waste. For the first time, corporations were being forced to clean up their damages, and the costs were astronomical. 

Today, companies are more careful about how they store and dispose of toxic waste, but accidents and polluting disasters still happen, especially to businesses in high-risk industries. Environmental and pollution liability insurance can help your business recover from any financial ramifications related to these incidents.

A local independent insurance agent can help you get equipped with the right environmental and pollution liability insurance. They'll consider your unique business's risks and find the ideal amount of coverage. Until then, here's a closer look at environmental and pollution liability insurance, what it covers, and more.

What Is Environmental & Pollution Liability Insurance?

Environmental liability insurance, also sometimes called pollution liability insurance, contractors pollution insurance, or simply "pollution insurance," is an insurance policy created specifically for companies and contractors who engage in jobs or production that have toxic by-products. 

This hazardous waste is carefully contained, but sometimes seeps through containment vessels and pollutes the groundwater, air, or surrounding vegetation. When this happens, companies can be fined and ordered to clean up the mess, which can also be costly. Environmental insurance for businesses can cover many associated costs with these incidents.

Environmental and pollution liability coverage used to be included in most business insurance policies, but that changed in the 1970s with the emergence of many expensive asbestos claims. Now, this coverage is largely excluded and must be purchased separately. 

Pollution claims are not limited to large manufacturers and can be filed by state and local governments, other businesses, landlords, and third parties who live near your business. 

Environmental insurance coverage can help reimburse businesses for many types of damage caused by pollution, including to the environment, other properties, and people. This coverage can pay for medical treatments for injured or ill individuals who were affected by the pollution, as well as for defense and settlement costs in a lawsuit if your business is sued for the incident. Having this coverage can help your business avoid hefty financial losses and even bankruptcy.

Who Needs Environmental & Pollution Liability Insurance?

The industries most at risk of environmental and pollution claims are those in construction, manufacturing, waste management, and chemical plants. A business's environmental risks determine its need for this coverage. Environmental and pollution liability insurance was created because related liability claims were bankrupting companies, which meant victims were not properly compensated. These policies cover small-scale pollution that causes contamination of soil, groundwater, or property. 

They also provide coverage for airborne contaminants like smoke and emissions. Many policies also cover pollution that occurred in the past, before the harmful effects of waste products were known. 

If your business works with hazardous materials that could be harmful to the public, the environment, or third-party property, it might need environmental and pollution liability insurance. Some common examples of businesses and professionals that often need this coverage include:

Any business that uses environmentally unsafe chemicals runs the risk of a pollution lawsuit. Even contractors who construct buildings need pollution insurance if their work can affect long-term air or environmental quality. A specialized form of pollution insurance called contractors pollution liability insurance can meet the needs of the construction industry.

If you're unsure whether your business needs environmental and pollution liability insurance, work together with a local independent insurance agent. Your agent can review local regulatory environmental liability insurance requirements and ensure your business gets equipped with all the necessary protection.

Types of Environmental Liability Coverage

When purchasing environmental insurance for businesses, there are three types of policies to consider:

• Third-party liability: This covers claims of property damage or bodily injury to others.
• First-party liability: This covers cleanup costs for contamination on your business's own property.
• Contractors pollution liability: This covers contractors in the construction field and other high-risk industries against related claims.

An independent insurance agent can help you determine the right kind of environmental insurance coverage for your unique business.

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Why Do I Need Environmental & Pollution Liability Insurance?

Environmental and pollution liability insurance can help your business financially recover after incidents of polluting the environment or causing harm to third parties and their property. This coverage can help protect your business against claims related to the following:

If your business is at risk of any of these types of claims, it can likely benefit from having an environmental and pollution liability insurance policy.

What Does Environmental & Pollution Liability Insurance Cover?

Environmental and pollution liability insurance can protect your business in several ways, such as by covering cleanup costs and remediation after a chemical spill or other pollutant incident. These policies can provide reimbursement for the following:

• Legal defense fees: Pollution insurance companies can reimburse your company for an attorney specializing in pollution claims to defend you in a related lawsuit. Your policy can also cover the costs of other related legal fees and court costs, including settlements or judgments.
• Fines and penalties: This coverage can help your business pay for fines and penalties issued by the state for incidents of pollution, chemical spills, etc.
• Injuries to third parties: This coverage can pay for medical treatments for injured or ill individuals who were harmed by pollutants from your business, as well as lawsuit costs if they press charges against you.
• Property damage to third parties: This coverage can also pay for repairs or rebuilding to third-party property that gets damaged by pollutants from your business and cover possible resulting lawsuit expenses if you are sued.
• Business interruptions: This insurance typically includes business interruption coverage, which can continue paying your business's ongoing operating expenses and employee wages and compensate for lost income during temporary closures due to related incidents.
• Pollution cleanups: This coverage can pay for your business's mandatory pollution cleanups and remediation costs if you're found to have violated federal or state environmental protection laws in the incident.
• Operations: If your business uses chemicals or hazardous materials in its operations, you need coverage for accidents or oversights that may cause pollution. There are two types of coverage available:
  • Catastrophic coverage: This covers your business if there is a sudden, pollution-inducing event such as a fire or explosion.
  • Non-catastrophic coverage: This covers your business if pollution occurs over a long period of time and affects neighboring businesses or residents.
• Property transfer: This protects property owners if they purchase a parcel of land or a building that was contaminated or otherwise polluted by a previous owner. If you have this coverage, your insurer can reimburse you for necessary clean-up costs.
• Errors and omissions: This coverage is specifically designed for clean-up companies and environmental consultants. It covers them for liability if they should wrongly declare a property free of pollutants or if the work they do causes further contamination.

An independent insurance agent can further explain how environmental risk management insurance can help protect your business against losses.

What Environmental & Pollution Liability Insurance Does Not Cover

Environmental and pollution liability insurance has some limitations to be aware of, such as pollution incidents that were not accidental. Policies usually exclude coverage for the following:

• Damage that was intended or should have been reasonably expected by the insured
• Damage to the insured’s personal property, whether rented or owned
• Damages resulting from willful non-compliance with the law
• Fire and smoke damage
• Toxic products sold to third parties
• Bodily injury or illness to employees
• Pre-existing contamination
• Nuclear contamination

For worker injuries and illnesses caused by your business's operations or environment, you'll need a workers' compensation insurance policy. For products your business sells that cause harm, you'll need product liability insurance. An independent insurance agent can help you find your policy's specific environmental liability insurance exclusions. 

What Is Contractors Pollution Liability Insurance?

Contractors pollution liability insurance can protect these workers against the costs of pollution incidents. Contractors work on other people’s property, and if their work uses materials that are later found to be hazardous, they can be held liable for damages and clean-up. Many contractors went bankrupt in the 1970s when they were forced to clean up asbestos-filled insulation from buildings they had worked on.

Contractors pollution liability insurance is designed to protect contractors from these unmanageable losses. This coverage protects contractors against expenses associated with claims of bodily harm or injuries to third parties and can reimburse them for related court costs and legal fees.

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Examples of Major U.S. Environmental Disasters

Over time, there have been many costly environmental disasters in the U.S. Without environmental and pollution liability insurance, these businesses could have easily faced bankruptcy. Here are just a few major examples of some of the most costly environmental and pollution liability incidents in U.S. history:

• The Three Mile Island nuclear meltdown in 1979 forced the utility companies General Public Utility and Metropolitan Edison to pay out millions of dollars in settlements to area residents.
• Love Canal in Niagara Falls, NY, made headlines in 1978 when it was discovered that the toxic waste dump had sickened hundreds of residents.
• The Libby asbestos contamination in Montana sickened thousands and bankrupted the company when it was found that the W.R. Grace plant had been spewing asbestos over the town for decades.
• The Exxon Valdez oil spill in 1989 dumped 10.8 million gallons of crude oil and contaminated 11,000 miles of ocean.
• The 2010 Gulf oil spill leaked 206 million gallons of oil into the Gulf of Mexico. BP paid over $20 billion in a civil settlement.

Knowing just how expensive pollution incidents can be can further illustrate the need for businesses that work with harmful substances to have environmental and pollution liability coverage.

How Much Does Environmental & Pollution Liability Insurance Cost?

Environmental liability insurance costs an average of $223 per month, or about $2,675 per year for small businesses. But like many other types of coverage, the cost of environmental and pollution liability insurance can vary. 

Some of the major factors that can impact coverage costs are:

• The business's industry and operations
• The business's size and location
• The number of employees the business has
• The business's annual revenue and payroll
• Coverage options, limits, and deductibles chosen
• The type of chemicals and hazardous materials used
• The disposal method of hazardous waste
• The proximity of the business to residential neighborhoods
• Any prior claims filed by the business

An independent insurance agent can help you find the most affordable environmental liability insurance coverage near you.

The Benefits of Environmental & Pollution Liability Insurance

Having insurance for environmental risks can protect your business in several ways. This coverage can protect your business against costly pollution claims and expenses that arise from having to defend yourself in a lawsuit. It may also be critical to obtain a policy to comply with local coverage regulations for your business's industry. 

Further, having environmental and pollution liability insurance can enhance your business's credibility and aid its reputation. An independent insurance agent can provide even more examples of environmental insurance benefits. 

How to Get Environmental & Pollution Liability Insurance

First, you'll need to assess your business's unique risk of pollution claims to determine the appropriate amount of coverage. Next, it's critical to find a reputable insurer to underwrite your business's policy and gather any necessary documentation needed to apply for coverage. 

An independent insurance agent can assist you with this entire process and find the ideal environmental insurance policy for your business from a top-rated insurance company in your area.

Independent Insurance Agents Can Help You Get Environmental & Pollution Liability Insurance

Independent insurance agents have access to multiple business insurance companies and can help you find the right environmental and pollution liability insurance for your company. They'll assess your business's unique risks and find the policy with the perfect amount of coverage. 

Your agent can shop and compare policies and quotes for you to save your business both time and effort. And down the road, your agent will still be there to help you update your coverage as your business's needs evolve.

FAQs About Environmental & Pollution Liability Insurance