By Amanda Duncan, President
It is no secret that the environmental insurance marketplace is as competitive as ever, with over 30 carriers offering various products targeting contractors, consultants, facilities, and products. Premiums are affordable and rate increases have diminished over the past year. Many people even consider environmental insurance as “mainstream.” Sure, environmental insurance is definitely enjoying increased exposure both in the insurance world and the consumer world. Recent disasters such as the BP Oil Spill and the EPA Mine Spill highlight the typical scenarios that pollution policies are meant to address and projects that are not related to environmental cleanup are requiring pollution coverages more often. But overall, environmental exposures continue to evolve as well as the policy forms offered in the marketplace, so we are still a long way from being an “off the shelf” product.
There may be 30 plus pollution policies in the marketplace, but no two policy forms are the same. You have some products that can be considered Cadillacs, and others that are more like Pintos. Some policies provide Sudden and Accidental coverage only, meaning there is a time limit to discover and report a pollution event. Others provide Gradual coverage which is a much broader form and does not enforce a time limit for reporting. And the definition of a pollutant? Well, every policy in the marketplace defines the term differently with some including contaminants such as low level radioactive waste, electromagnetic fields, medical waste, etc. while other policies choose not to address these items at all. And asbestos and lead may be excluded in certain forms as well as mold. Some carriers choose to include mold as part of their definition of a pollution condition, while others will only provide the coverage via endorsement. Transportation Pollution Liability and Non-Owned Disposal Site coverage are built into some insuring agreements, while many other carriers choose to endorse the coverage onto their form. Additional enhancements continue to be created by insurance carriers in response to many factors including current events, litigation decisions, and advances in technology. Mitigation Expense, Green Remediation, and Crisis Management coverages are examples and these offerings are appearing in newer, updated policy forms.
Another reason “one size fits all” does not apply to the environmental space is because every insured is different, as is their need for the coverage. A contractor who has never carried environmental insurance in the past may have a project that requires pollution coverage. This scenario is increasing all the time, as project owners protect their jobsites and investments. A one-time, one-year policy may suffice, but many contracts require multiple years, special enhancements, and extended completed operations coverage. Still other service providers have realized their day-to-day operations (or subsequent completed operations) could result in a pollution event, therefore they look to procure a practice policy that renews annually. Additionally, facility owners and operators may be asked to purchase a Pollution policy by the landlord, as banks apply that requirement to their mortgagees. Current events also play a part, since facility owners may only realize their exposures when they see the devastation caused by events such as the West Virginia tank spill or Texas fertilizer plant explosion. Turn on the evening news and you are likely to see a fire at a tire recycling facility, or a spill at a local wastewater treatment facility. Policies available for purchase may be as limited as Sudden and Accidental or as broad as full offsite, onsite, and historical coverage, again depending on the exposure, the insured’s needs, and the insurance carrier’s appetite. It is extremely common for two pollution quotes and policy forms to look completely different.
As you can see from just the brief examples above, environmental insurance comes in all shapes and sizes. So while capacity is plentiful and products are more accessible than ever, coverage options vary greatly from policy to policy as well as the insured’s need for the coverage. From the Pintos to the Cadillacs and every model in between, environmental coverage should be reviewed carefully to be sure the policy is the right fit for an insured. Given the catastrophes that can result from pollution incidents, these policies can be an imperative part of risk management solutions. Their complexities keep this market segment from becoming too “mainstream,” which is a benefit to us all.