Until the mid-1980s, pollution liability was covered under the standard commercial general liability (CGL) policy. However, insurers began excluding pollution liability under the CGL policy, creating the need to purchase separate coverage for pollution liability. Contractors now must purchase Contractor Pollution Liability (CPL) coverage to ensure protection.
For many contractors, environmental risk has traditionally fallen on the lower end of the liability importance scale. This focus is changing, however, and the growing market for Contractor Pollution Liability (CPL) coverage is helping contractors stay ahead of pollution risks associated with their scope of work. Whether you’re a general contractor, HVAC, or electrical contractor, this primer on CPL will get you up to speed on why you may need CPL and what it covers.
What is CPL Coverage?
Contractor Pollution Liability (CPL) coverage protects against environmental threats or pollution that might occur as a result of a contractor’s involvement in a project. Unfortunately for contractors, however, pollutants aren’t always the substances one might expect. A pollutant is anything that is introduced into an environment that is not natural to the habitat. Even a substance or material that isn’t harmful to humans can still be considered a pollutant.
CPL directly addresses environmental pollution and the impact these hazards have on the environment. While most people might think of oil and coal as environmental hazards, there are plenty of other substances out there that can be at-risk. A recent article by Parker, Smith & Feek, Inc details several, including:
- Jobsite pollution liability
- Natural resource damage
- Mold, fungi, Legionella
- Non-owned disposal site
- First party emergency remediation or cleanup costs
- First party protective pollution liability
- Sudden and accidental coverage for client’s owned, leased, or rented locations.
What does it cover?
While all contractors should carry Commercial General Liability, CGL won’t fully cover pollution or environmental safety claims, if at all. Most general CGL policies contain a total pollution exclusion for third-party injury, property damage, defense, and cleanup costs. Some property policies may provide limited pollution coverage. However, this coverage applies to first-party claims and will almost never provide any coverage for third parties. If an oil tank bursts, for example, a CGL policy might cover the cost of the tank and the oil. However, it won’t cover the financial consequences of the environmental issues the oil spill caused. In many cases, environmental pollution claims are the results of unconscious accidents and contractors don’t even realize that they can be held responsible.
Let’s walk through a real-world example. If an electrician is drilling a hole for a wire and unknowingly disturbs asbestos that then pollutes the job site and other areas around the site, the electrician could be liable for a pollution claim. It’s not uncommon for claims to pile up around environmental accidents, either. Bodily injury, cleanup costs, long-term health coverage, and more can all result from a CPL claim.
Who needs Contractor Pollution Liability Coverage?
As environmental sustainability becomes a subject of focus and as potential risks to the environment continue to grow, contractors and vendors need to know their risks are covered in case of an incident.
For example, below is a list of possible pollutant exposures certain contractors and firms need to be aware of, according to Parker, Smith & Feek, Inc:
- Excavation Contractors – Impacting groundwater from drilling and excavation work (dewatering operations, etc.).
- Concrete firms – Residual contamination from improper control of oil and lubricants used for the concrete forms.
- Demolition Contractors – Inadvertent disturbance and airborne release of pre-existing contamination or products (i.e. naturally occurring asbestos in subsurface soils/geology, contaminated soils, surface or groundwater, etc.).
- Drilling Contractor – Cross-contaminating aquifers by drilling through contaminated soil and into the groundwater.
- Electrical Contractor – Responsibility for damages and/or pollution releases arising from power cut off on client’s facility pollution control equipment, fire sprinkler systems, electronic monitoring devices, etc.
- Interior Renovation Contractors – Fumes, emissions, and spills from chemicals (volatile organic compounds) applied during construction (finishers, sealants, curing compounds, floor coatings, adhesives, etc.), and from equipment exhaust, causing respiratory hazards.
- Roofing Contractors – Toxic mold exposure caused by water entering a building’s roofing system or substructure due to improper installation of the roofing system.
- Steel Erectors – Fumes from welding operations causing adverse health effects on workers. This is primarily a third party over action expense; nonetheless, it can expose the organization to environmental liability.
- All Construction Trades – Various exposures from subcontractors who perform work onsite or transport and dispose of waste materials or soils.
Know your risk
The bottom line: if your team uses hazardous materials on a regular basis, Contractor Pollution Liability coverage should already be top-of-mind for you. You simply cannot rely on your commercial general liability coverage to provide any protection against third party claims related to pollution.
Even if you’re simply transporting materials or providing third party services without involving any sort of pollutants, accidents do occur and all it takes is one incident to open up a wave of legal and financial ramifications. That’s why staying on top of insurance coverage is so critical. But we know – pollution exposures can be tricky.
If you’re a contractor or broker and want to know if you, your clients, your contractors or subcontractors are covered with CPL insurance, myCOI’s team of experts are here to help! You can contact a myCOI insurance compliance specialist here to learn more.