Environmental Impairment Liability (EIL) insurance was first introduced in 1978 and has since transformed to fill gaps in coverage created by exclusions to the standard general liability policy, updated environmental laws, and evolving operational complexities. Environmental insurance (also known as pollution liability insurance) provides coverage for loss or damages resulting from unexpected releases of pollutants, which are typically excluded in general liability and property insurance policies. The policies can also provide coverage for business interruption, clean-up costs, and other expenses related to pollution events. This exposure is evident for businesses involved in industrial settings, however, for most businesses, pollution liability insurance is an important coverage due to the many scenarios that a loss can occur, here are just a few examples:
- A contractor excavating a site struck a natural gas pipeline causing an explosion: $2.5M in Claims
- A remedial contractor crushed several drums improperly classified as empty causing localized soil contamination: Penalties exceeded $6.1M
- Mechanical contractor repairing leaks on fuel lines accidentally opened the valve separating inactive from active lines releasing 3,500 gallons of gasoline: Clean-up costs over $500,000
- A hospital had a petroleum storage tank for their backup generators which developed a slow leak. The leak lead to excavation of the basement and cleanup costs exceeding $400k.
- A golf course had a petroleum tank that was overfilled and flowed onto an adjacent property, resulting in both on-site and off-site cleanup costs of hundreds of thousands of dollars.
- During excavation for expansion, oily soils with a petroleum odor were discovered. Investigation uncovered an old undocumented sludge drying pit from the 1940’s. Clean-up costs exceeded $400k
- After a neighboring site was excavated, waste from a prior dry-cleaning operation was found to flow onto an insured’s site. Since the historic operation was closed, the EPA forced the landowner to remediate the contamination costing over $600k.
- A piece of machinery was moved from the shop floor at a manufacturing plant as part of a process line re-organization. Once moved, a leak was discovered emanating from the equipment into an unsealed trench pit. The remediation costs over $300k.
- An unused warehouse was closed during the summer months. Upon needing the extra space in the winter, the owner discovered a leaky pipe led to mold growth. The remediation was over $250k
- A retirement community had legionella bacteria in their water system. The resulting clean-up and a class action suit resulted in millions of dollars paid.
It is important to note that pollution insurance is not a substitute for proper safety and prevention measures. Proper steps must be taken to prevent pollution incidents from occurring in the first place. However, in the event an incident does occur, pollution insurance can provide a financial safety net and help to minimize the impact on your business. Contact your VFCA Account Executive to discuss your risk and options for this important coverage.