Do you operate on an industrial site?
Do you have on-site storage tanks?
Do you handle any material that could potentially harm the environment?
If you answered yes to any of these questions, your insurance program should include pollution insurance coverage as an essential component of your corporate insurance program.
You might be thinking, “Doesn’t my General Liability policy cover any pollutants escaping onto my premises or even from them?”
The short answer is no.
There is no pollution insurance cover in your General Liability policy.
Fix this: The Easy Way
General liability policies specifically exclude losses arising out of the escape or release of pollutants from premises owned or occupied by you. A limited form of coverage for this type of pollution event can be added onto the general liability policy via a ‘Sudden and Accidental Pollution Endorsement.’ You should know, however, that this limited form of coverage DOES NOT give you complete protection and that is why Premises Pollution Policies were created.
Fix this: The RIGHT Way
Premises Pollution Policies provide a number of coverage benefits that are not provided by a sudden and accidental pollution endorsement. This coverage can be the difference between your business continuing after a pollution event or going out of business.
No, Never mind – I’ll Just Get The ‘Easy’ Pollution Endorsement
(For Sudden & Accidental Pollution)
When pollution insurance coverage is brought back into a General Liability policy with the Sudden and Accidental Pollution Endorsement, it does just that: it only provides coverage for a pollution event that occurs suddenly and one that is accidental. The event cannot be gradual in nature and so therefore it does not cover a slow leak from a tank or seepage that occurs over any amount of time.
The pollution coverage provided by a Sudden and Accidental Pollution Endorsement usually only applies if the pollution event is discovered by you and then reported to your broker within a certain time frame. This time frame varies from insurer to insurer though, usually:
- The pollution event must be discovered within 120 hours (5 days) and;
- The pollution event must be reported to the insurance company within 120 hours of discovery
Be Warned: The Hiccup
Unfortunately, this time frame requirement on the Sudden and Accidental Pollution Endorsement negates coverage for any type of gradual leak that is difficult to detect or any event that does not come to your attention right away. Sadly, these are the types of pollution events that often cause the most damage and are the most expensive to repair.
A Premises Pollution Policy does not limit coverage to pollution events that are discovered and reported within a short time frame. The intent of a this type of commercial insurance policy is to broaden coverage to include gradual pollution events so that you are better protected against the majority of pollution events, not just the ones that you happen to be aware of right away.
Clean Up Costs are NOT Included
Also, another warning: the coverage provided by the Sudden and Accidental Pollution Endorsement provides protection for bodily injury and property damage to a third party only. You might think that this is the only coverage you need, but that couldn’t be farther from the truth.
Claim statistics show that over 85% of pollution event related payouts are a result of on-site clean up costs and this includes the cost of controlling, remediating, and removing pollutants from your premises. These costs tend to grow exponentially and you will find no financial relief under a Sudden and Accidental Pollution Endorsement. Only a premises pollution policy can provide coverage for on-site clean up costs.
A premises pollution policy will also respond to a demand by a government authority that a pollution event occurring off your premises be remediated, monitored and cleaned up. There is no requirement that a third party has to claim bodily injury or property damage to trigger the clean up coverage. When relying on the Sudden and Accidental Pollution Endorsement to cover pollutant clean up and monitoring away from your premises, a third party must claim bodily injury or property damage for the policy to trigger your coverage. And remember, when the endorsement does cover some amount of clean up, the coverage for off-site repair is not as broad or protective when issued as an endorsement instead of its own policy.
Coverage for Civil Fines and Penalties
Federal and provincial statutes and regulations are in place to protect our environment from pollutants and to dictate what steps you must take after a pollution event occurs. These statutes include the Canadian Environmental Protection Act, the Fisheries Act, and the Environmental Protection and Enhancement Act to name a few. If you inadvertently breach a condition of these statutes and regulations, a civil fine or penalty can be assessed against you. Destroying wildlife’s natural habitat or failing to report a pollution event are examples of some of the things that would be considered a breach of these statutes. The fines and penalties can also be of considerable cost and be upwards of $100,000, all depending on the severity of the situation.
Most premises pollution policies provide coverage to protect you from the risk of civil fines and penalties. This protection cannot be found under the Sudden and Accidental Pollution Endorsement.
Despite the significant and costly exposure, many organizations choose to forgo a Premises Pollution Policy. Sometimes it is a result of their broker not educating them on the coverage available while others sees a client’s own fears around cost.
Whatever the reason might be, as the legislation and legal precedents surrounding pollution events become more and more severe, the importance of exploring a pollution policy that will properly protect you becomes all the more important.
If you just want to chat about this or anything else, please connect with me.