Contractor Pollution Liability Insurance: Do You Need It?
We have all heard the stories of individual contractors, mid-sized businesses, and large corporations getting in trouble for environmental damages. These stories damage the names of well-known industry leaders or shut down operations of smaller competitors.
Pollution liability used to be part of commercial general liability (CGL) policies. Today these policies stand–alone. Contractors who are unaware of this suffer from expensive lawsuits and damage repairs.
Because of the increasing importance of environmental protection and the fact that contractor pollution liability (CPL) coverage is no longer part of general liability policies, the market for CPL coverage is growing. But what is contractor pollution liability?
Definition of Contractor Pollution Liability Coverage
Contractor pollution liability coverage is a policy purchased by contractors. These policies protect against lawsuits and damages from environmental threats or pollutants resulting from their projects. Here are some things covered in these policies:
- Third-party injury.
- Property damage.
- Clean up costs.
CPL policies also cover the contractor from accidents caused by third-parties.
To better understand what a CPL policy covers, it is important to know what a pollutant is.
What is a Pollutant?
According to IRMI, a pollutant is “an irritant or contaminant, whether in solid, liquid, or gaseous form, including – when they can be regarded as an irritant or contaminant – smoke, vapor, soot, fumes, alkalis, chemicals, and waste.”
A pollutant does not have to be harmful to the environment. Pollutants are something foreign to the environment and cause irritation.
Because of the broad definition of what a pollutant is, contractors need to make sure they have contractor pollution liability coverage for the duration of all their projects.
Contractor pollution liability coverage is a policy for contractors that protects them against lawsuits and damages resulting from environmental threats or pollutants because of their projects.
What Options Do I Have for CPL Policies?
Citizens General explains “pollution liability coverage can be offered on a project basis or as a blanket program.” These options are not the same. It is important to understand the difference. Let us take a brief look at each one.
- Project Basis: These policies provide coverage for pollutants and accidents that harm the environment during the project period. These policies can include tail coverage.
- Blanket Coverage: This coverage provides coverage for everything defined in the policy during the policy active dates.
There is no obvious answer to which type of policy is best, this is something each business must decide on their own.
Understanding Risks & When You Need CPL Coverage
If you find yourself in situations where you are using dangerous materials on project sites, you need contractor pollution liability coverage. For contractors who do not already have CPL coverage in place, remember general liability insurance policies will not ensure this type of coverage.
If you are a contractor or insurance broker and you are unsure of whether third-parties you are working with have coverage, contact us to learn more about the importance of certificate of insurance (COI) collection and management.