Most construction contractors are acutely aware of their need for General Liability, Workers' Compensation, and Inland Marine insurance. Rarely will a construction contractor even consider that their company may be tied up in court for performing work that damaged the environment, but it happens, and it happens more frequently than you would imagine.
The U.S. Environmental Protection Agency has determined that contractors working in the construction industry have a significantly high potential for contributing to environmental damages. The EPA considers general contractors, subcontractors, engineers, and architects as the group of usual suspects when it comes to environmental pollution and the resulting damages pollution causes.
Unfortunately, only a small percentage of active contractors recognize the significant risk of environmental claims that can result from their activities because claim activity is something they pay little attention to until if affects their livelihood.
XYZ Grading Services was hired to excavate some trenches on the perimeter of a residential construction project. The soil that was excavated was temporarily piled up on a nearby vacant industrial property. When the excavated trenches were backfilled by the contractor, the excess soil was spread across the construction site and used for grading purposes.
Not long following the completion of the construction project, dioxin was found in other soil at the industrial site where the excavated soil was temporarily stored. After further testing, dioxin was also found in the soil that was spread around the residential construction project. After EPA testing had been completed, it was determined that the contamination had also seeped from the surface into a water supply.
A number of parties to the project were found liable for the pollution which included the XYZ Grading Services and became responsible for a multimillion-dollar cleanup. XYZ Grading Services, a family owned business that had survived for three generations, no longer exists.
Important Reasons for Consideration
Certainly, a typical environmental pollution case should motivate contractors to consider environmental insurance, but if not, consider the following reasons below:
1. Most General Liability and Professional Liability policies exclude coverage for pollution claims.
2. Spills of toxic chemicals that are stored and used at job sites such as solvents, finishers, and fuel can lead to a pollution claim.
3. Exposure resulting from hazardous materials such as fiberglass, asbestos, lead paint, and mercury that is not properly disposed of.
4. Storm water run-off from project sites due to lack of a safe drainage strategy.
5. Inadvertently puncturing an underground pipeline or storage tank that causes the release of hazardous materials.
All of the episodes listed above can affect General Contractors and subcontractors as well. Any contractor or subcontractor that becomes a party to a project can be held directly or indirectly responsible for a pollution claim and the significant costs of remediation.
Environmental Insurance Coverage
Fortunately for construction-related contractors, there is a stand-alone Environmental Insurance product that can provide financial protection for defense costs, settlement agreements, and judgments awarded by the court.
Typically, Environmental Insurance Coverage will provide several coverage options:
- Can be purchased on a claims-made or occurrence basis.
- Will provide coverage for third-party claims of bodily injury or property damage and environmental damage that results in remediation costs.
- Can be site-specific for properties owned by the contractor.
- Coverage for storage and staging of equipment used at a covered job site.
- Ability to expand the definition of pollution conditions.
Knowing that your contracting business is operating in a highly regulated and litigious industry, it is incumbent upon each general contractor and subcontractor to transfer the very present risk of polluting the environment and the costs associated with cleaning up the mess you caused.
To better under your pollution risk and the most effective way to transfer your risk, contact the insurance professionals at Skyline Risk Management, Inc. (718) 267-6600.