By Allison McGreal, Assistant Vice President
One of the more difficult tasks for an insurance agent or broker is finding the right carrier partners to place coverage. One approach is to send an application to every carrier you know and see which is willing to give you a quote. A more efficient method is to do your research and outline which carriers accept the type of business you target and who provides the coverages you need.
When seeking General Liability, Contractors Pollution Liability and Professional Liability coverages, one typical question raised is “Is this account environmental?” Many environmental insurers have parameters as to what constitutes an environmental risk and what coverages they will consider offering based on those services. For the layperson, that can be confusing. One may recycle cans and plastic bottles, making them a good environmentalist, but not necessarily an environmental operation from an insurance perspective. So how do carriers define “environmental” and what’s the difference between being an environmental operation and having a pollution exposure?
It’s important to understand in the insurance industry how we typically define environmental risks. Environmental underwriters are primarily concerned with factors of, relating to, or associated with the environment; relating to or being concerned with the ecological impact of altering the environment; and, relating to potentially harmful factors originating in the environment .*
Generally speaking, “pollution” is defined as a substance or condition that contaminates air, water, or soil. Pollutants can be artificial substances, such as pesticides and PCBs, or naturally occurring substances, like oil or carbon dioxide. **
A risk must be considered environmental to qualify for a combination Commercial General Liability/Contractors Pollution Liability/Professional Liability policy (CGL/CPL/PL). The definition of what fits will depend upon the carrier. Some carriers have a certain ratio of environmental to non-environmental operations in order to offer the GL or PL. Others may include some of the oil and gas industry accounts while others may consider some green energy risks. It often depends on the reason the operations are being performed. For example, a firm performing core sampling to determine soil stability for a construction projection would typically not be a fit, whereas a driller installing a monitoring well to track contamination would be eligible. A consultant who does airborne contaminant testing would fit while a similar consultant testing the structural integrity of pipes or construction materials would not.
Some accounts are obviously more “environmental” than others. For example, asbestos/lead/mold abatement, soil and groundwater remediation, underground storage tank installation or removal, industrial cleaners, air quality testing, waste brokers, environmental site assessment consultants, etc. are clearly a fit for an environmental carrier and are therefore eligible for CGL/CPL/PL coverage. Some of the more unclear risks are oil and gas consultants or roustabout contractors, energy efficiency consultants, solar energy installation or consultants and erosion control contractors. Risks that are often thought of as being environmental, but are typically not a good fit for an environmental program, are geotechnical or civil engineers, infrastructure design or consulting, drainage design, oil and gas contractors working over the hole, oil or gas exploration, and mining. There are carriers better suited to write these non-environmental risks including A&E or Oil and Gas programs. Non-environmental General Liability can typically be written in a standard market.
Many environmental insurers will offer Pollution coverage for a non-environmental contractor. For example, a plumber has a clear mold exposure. If a pipe isn’t installed properly leading to leakage and subsequently a water damage loss, there is a pollution exposure for mold. However, a plumber isn’t usually considered an “environmental” contractor. The same holds true for soil excavation and grading contractors. While they certainly may have a pollution exposure if they damage underground pipes or tanks during an excavation project, most carriers wouldn’t consider this an environmental risk. In each of these cases, the CPL would be offered but not the CGL.
It is helpful to have discussions with the underwriters to understand how they and the carrier define environmental accounts and to determine which coverages they are willing to offer. It will help you be a more efficient broker when you are only approaching carrier partners who are able to offer what you need.
*Environmental-The American Heritage Dictionary of the English Language, fourth edition copyright 2000.