When you start counting the many different policy forms utilized by the approximately
22 insurers offering environmental or pollution insurance, the number of forms
and endorsements quickly get into the triple figures. What compounds the issue
is the fact that every one of these forms differ from insurer to insurer. In
one form, "pollution conditions" means something very different than in another
form. One may exclude naturally occurring substances, the other may not.
Identifying these issues and understanding the impact they have on coverage
is paramount when purchasing environmental insurance; however, there is not
enough time to explain the many differences in this column or in this format.
This article is provided to offer a broad overview of the coverage available
for the many different risk/exposures and the many different industry types.
Even though there are many different forms available to finance environmental
loss, they can be grouped into the six categories described below.
1. Contractors Pollution Liability (CPL)
Coverage Application
Contractor's Pollution Legal Liability (CPL) is intended to provide pollution
liability coverage for any type of contracting operations. Whether for environmental
companies performing environmental or remedial contracting or nonenvironmental
contractors, such as general contractors and artisan contractors performing
typical construction, CPL is a viable and cost-effective alternative to help
finance a company's environmental liability losses. All contractors face environmental
liability in four major areas: job site operations, transportation of waste/materials,
disposal activities and owned/leased properties. CPL can be structured to address
each of these areas of environmental risk.
Policy Forms
The typical CPL policy provides coverage for third-party bodily injury, property
damage, cleanup costs, and defense costs which arise from covered operations
performed by or on behalf of the contractor or named insured. Furthermore, CPL
provides coverage to the named insured for vicarious pollution liability from
subcontractors. CPL is offered with both occurrence and claims-made "triggers";
however, certain types of operations may restrict the use of the occurrence
trigger. For example, when mold coverage is requested on high hazard operations,
such as residential construction, CPL can be structured with an occurrence trigger
on all pollution liability except mold. The mold liability coverage will be
provided with a claims-made trigger. This allows a contractor currently insured
with CPL to retain the occurrence trigger on all other pollution liability except
mold. CPL can be written on both practice/blanket and project-specific policies.
A derivative of the CPL is the "combined form." Whether it be combined with
professional liability (PL) for general contractors, construction managers,
or specialty trades, or combined with Commercial General Liability (CGL) and
PL for environmental firms, the combined approach is a cost-effective way to
roll all three coverages into one program—not sacrificing one for the other
because of price. The downside is the dilution of limits, especially when CGL
is included.
2. Pollution Legal Liability (PLL)
Coverage Application
Pollution Legal Liability (PLL) is intended to provide pollution liability
coverage for environmental risks associated with the ownership/lease of property
or operating a facility or site. PLL has applicability to virtually every industry
that owns, leases, acquires or divests real estate. Where PLL was once used
solely as an alternative for federally regulated facilities to post financial
assurance under the various federal statutes, today its applicability is far
more widespread. In addition to treators/storers/disposers/generators of hazardous
waste/materials, industries such as the following are purchasing PLL coverage
to finance environmental loss.
| Agriculture | Energy | Manufacturing |
| Biotechnology | Financial Institutions | Mining |
| Brownfields | Fuel Distribution | Pharmaceuticals |
| Commercial Real Estate | Habitational Real Estate | Property Development |
| Construction | Healthcare | Almost any organization that owns
or rents real estate |
| Education | Hotel/casino | Sports/Entertainment Transportation |
| | Warehousing |
Policy Forms
PLL provides coverage for pollution conditions or events on, at, under, or
emanating from a covered location(s). Coverage is afforded for third-party bodily
injury, property damage, cleanup costs and defense costs. A unique feature of
many PLL policies is their ability to offer various and different coverage parts
under one policy. Such coverage parts include, but are not limited to:
- New pollution conditions
- Existing pollution conditions
- On-site clean up coverage
- Transportation coverage
- Non Owned Disposal Site (NODS) coverage
- Business interruption
- Builders soft cost
- Mold liability coverage
- Products—pollution liability
Another important aspect of coverage offered under PLL that should be understood
is, if a known environmental condition exists at a site, the policy may be structured
to provide some type of environmental coverage for that existing contamination.
Coverage is based on the type and extent of the site's existing contamination.
A derivative of the PLL is the combined PLL and commercial general liability
(CGL). This combined form is offered mostly to all types of manufacturers, warehousing,
foundries, quarries, paper/pulp operations, wood preserving, and the like. This
is a cost effective way to add PLL coverage to an organization overall portfolio
of insurance coverages.
3. Storage Tanks USTs/ASTs
Coverage Application
Tank—Pollution Liability (TPL) provides coverage for pollution liability
resulting from storage tanks specifically scheduled to the policy. TPL is available
to any organization that owns or operates storage tanks.
Policy Forms
TPL provides coverage for third party bodily injury and property damage,
as well as corrective action and clean up costs required by applicable federal
and state regulations resulting from pollution conditions emanating from scheduled
storage tanks. Both above or underground storage tanks can be covered. TPL policies
are offered with claims-made triggers.
4. Lender Liability—Pollution Programs
Coverage Application
Lender Liability Pollution (LLP) is intended to provide collateral value
protection from loan defaults resulting from pollution events or conditions.
LLP is designed to provide pollution coverage for the unique exposures associated
with financial institutions, commercial banks and lenders, investors or mortgage
bankers.
Policy Forms
LLP will indemnify the lender for financial loss arising from the default
of a loan on a covered location caused by a pollution condition or event. It
can be structured to pay either the outstanding loan balance or the cost to
remediate the contamination, whichever is less. In addition, LLP provides coverage
for third party bodily injury, property damage and clean up costs resulting
from pollution events or conditions at, on or under the covered location.
5. Products—Pollution Liability
Coverage Application
Products—Pollution Liability (PPL) provides coverage for pollution arising
out of products of the named insured. PPL can be used for "hard products," those
products that harbor material or waste, such as:
- Containers
- Drums Oil/water separators
- Tanks
- Hoses
- Pumps
- Remediation equipment
- Valves
- Pollution control equipment
- Closed loop dry cleaning systems
In addition, PPL can provide coverage for products which themselves are the
pollutants, such as silica, asbestos, fertilizers, insecticides, and pesticides,
although the markets interested in such coverage continues to shrink.
Policy Forms
Products—Pollution liability may be written on either a claims-made or occurrence
basis. PPL will provide coverage for any goods or products (including containers,
materials, parts, or equipment furnished in connection with such goods or products)
that are manufactured, sold, handled, distributed or disposed of by the named
insured or others trading under the named insured's name. Coverage is provided
for the resulting third-party bodily injury, property damage, and remediation
expense from pollution as a result of the failure of the product. PPL coverage
is offered under three different forms:
- Monoline PPL policy
- PPL endorsement to a commercial general liability policy
- PPL endorsement to pollution legal liability policy when coverage for
the insured's locations is provided
PPL can be written on a project-specific basis or blanket/annual basis.
6. Remediation Cost Cap
Coverage Application
Remediation Cost Cap (RCC) is intended to provide coverage for the increased
costs of remediation associated with environmental projects. From a commercial
property owner to a remediation firm or redevelopment authority, the RCC program
can assist by reducing the uncertainty associated with costs to remediate contaminated
properties. The cost of remediation or cleanup must be greater than $2 million.
Policy Forms
RCC provides coverage for cost overruns, excess of a self insured retention,
associated with the implementation of a Remedial Action Plan (RAP) on a covered
project or projects. Coverage is structured upon the scope of work in the RAP
and provides protection resulting from:
- Contamination that is greater than expected
- Discovery of "new" contamination that was not identified in the RAP
- Regulatory "re-openers"
- Regulatory changes in scope-of-work during the policy term
The policy requires reporting of cleanup costs during the policy term within
agreed upon time intervals.