Environmental & Pollution Liability Insurance

Any business that works with potentially toxic or harmful chemicals, substances, or by-products needs protection against incidents of harm to the environment and individuals.

Written by Christine Lacagnina

Christine Lacagnina has written thousands of insurance-based articles for TrustedChoice.com by authoring consumable, understandable content.

Reviewed by Cara Carlone

Cara Carlone is a licensed P&C agent with 20 years of experience. She has her P&C license in RI and TX and holds CPCU, API, and AINS designations.

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Environmental liability insurance was first made available in the 1970s in response to the government cracking down on companies that were polluting the ground and air with hazardous waste. For the first time, corporations were being forced to clean up their damages, and the costs were astronomical. Today, companies are more careful about how they store and dispose of toxic waste, but accidents and polluting disasters still happen. Environmental and pollution liability insurance can help your business recover from any financial ramifications related to these incidents.

A local independent insurance agent can help you get equipped with the right environmental and pollution liability insurance. They'll consider your unique business's risks and find the ideal amount of coverage. Until then, here's a closer look at environmental and pollution liability insurance, what it covers, and more.

What Is Environmental & Pollution Liability Insurance?

Environmental liability insurance, also sometimes called pollution liability insurance or simply "pollution insurance," is an insurance policy created specifically for companies and contractors who engage in jobs or production that have toxic by-products.

This hazardous waste is carefully contained but sometimes seeps through containment vessels and pollutes the groundwater, air, or vegetation surrounding it. When this happens, companies can be fined and ordered to clean up the mess, which can also be costly. Environmental and pollution liability insurance can cover many associated costs with these incidents.

Environmental and pollution liability coverage used to be included in most business insurance policies but that changed in the 1970s with the emergence of many expensive asbestos claims. Now, this coverage is largely excluded and must be purchased separately.

Pollution claims are not limited to large manufacturers and can be filed by state and local governments, other businesses, landlords, and third parties who live near your business.

Environmental and pollution liability insurance can help reimburse businesses for many types of damage caused by pollution, including to the environment, other properties, and people. This coverage can pay for medical treatments for injured or ill individuals who were affected by the pollution, as well as for defense and settlement costs in a lawsuit if your business gets sued for the incident. Having this coverage can help your business avoid hefty financial losses and even bankruptcy.

Who Needs Environmental & Pollution Liability Insurance?

Environmental and pollution liability insurance was created because related liability claims were bankrupting companies, which meant victims were not properly compensated. These policies cover small-scale pollution that causes contamination of soil, groundwater, or property.

They also provide coverage for air-borne contaminants like smoke and emissions. Many policies also cover pollution that occurred in the past, before the harmful effects of waste products were known.

If your business works with hazardous materials that could be harmful to the public, environment, or third-party property, it might need environmental and pollution liability insurance. Some common examples of businesses and professionals that often need this coverage include:

• Construction businesses
• Contractors and general contractors
• Manufacturing businesses
• Distribution businesses
• Hospitals, doctors offices, and other healthcare facilities

• Hair salons
• Dry-cleaning businesses
• Garages
• Junkyards

Any business that uses environmentally unsafe chemicals runs the risk of a pollution lawsuit. Even contractors who construct buildings need pollution insurance if their work can affect long-term air or environmental quality. A specialized form of pollution insurance called contractors pollution liability insurance can meet the needs of the construction industry.

If you're unsure of whether your business needs environmental and pollution liability insurance, work together with a local independent insurance agent. They'll ensure your business gets equipped with all the necessary protection.

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The Most Common Air Pollutants in the U.S.

The U.S. Environmental Protection Agency monitors the air for pollutant levels. Currently, the top six most common and heavily-monitored air pollutants include the following:

1. Carbon monoxide: Levels of carbon monoxide in the air have dropped about 73% since 1990 and about 15% since 2000.
2. Lead: Levels of lead in the air have dropped about 99% since 1980.
3. Ground-level ozone: In recent years, ground-level ozone pollutants have dropped about 50% globally and 15% in the U.S.
4. Particulate matter: Levels of various types of particulate matter in the air have dropped 26%, 41%, and 30% since 1990.
5. Nitrogen dioxide: Levels of nitrogen dioxide in the air have dropped 61% since 1990.
6. Sulfur dioxide: Levels of sulfur dioxide in the air have dropped 91% since 1990.

The American Lung Society credits the Clean Air Act with the decline in air pollutants. In one recent year, it was reported that the act prevents about 370,000 premature deaths annually.

If your company is required to make major changes or perform a pollution clean-up to remain compliant with changes to the law, environmental and pollution insurance coverage can assist you with associated costs.

Why Do I Need Environmental & Pollution Liability Insurance?

Environmental and pollution liability insurance can help your business financially recover after incidents of polluting the environment or causing harm to third parties and their property. This coverage can help protect your business against claims related to the following:

• Mold
• Air and water pollution
• Noxious gases, substances, and odors
• Lead paint and water lines
• Biological and viral risks

• Chemical and oil spills
• Brownfields
• Toxic disposal sites
• Legionnaires' disease

If your business is at risk of any of these types of claims, it can likely benefit from having an environmental and pollution liability insurance policy.

What Does Environmental & Pollution Liability Insurance Cover?

Environmental and pollution liability insurance can protect your business in several ways. These policies can provide reimbursement for the following:

• Legal defense fees: Pollution insurance companies can reimburse your company for an attorney specializing in pollution claims to defend you in a related lawsuit. Your policy can also cover the costs of other related legal fees and court costs, including settlements or judgments.
• Injuries to third parties: This coverage can pay for medical treatments for injured or ill individuals who were harmed by pollutants from your business, as well as lawsuit costs if they press charges against you.
• Property damage to third parties: This coverage can also pay for repairs or rebuilding to third-party property that gets damaged by pollutants from your business and cover possible resulting lawsuit expenses if you are sued.
• Business interruptions: This insurance typically includes business interruption coverage, which can continue paying your business's ongoing operating expenses and employee wages and compensate for lost income during temporary closures due to related incidents.
• Pollution cleanups: This coverage can pay for your business's mandatory pollution cleanups and remediation costs if you're found to have violated federal or state environmental protection laws in the incident.
• Operations: If your business uses chemicals or hazardous materials in its operations, you need coverage for accidents or oversights that may cause pollution. There are two types of coverage available:
  • Catastrophic coverage: This covers your business if there is a sudden, pollution-inducing event such as a fire or explosion.
  • Non-catastrophic coverage: This covers your business if pollution occurs over a long period of time and affects neighboring businesses or residents.

  An independent insurance agent can further explain how environmental and pollution liability insurance can help protect your business against losses.

  What's Not Covered by Environmental & Pollution Liability Insurance?

  Environmental and pollution liability insurance has some limitations to be aware of. Policies usually exclude coverage for the following:

  • Damage that was intended or should have been reasonably expected by the insured
  • Damage to the insured’s own property, whether rented or owned
  • Damages resulting from willful non-compliance with the law
  • Fire and smoke damage
  • Toxic products sold to third parties
  • Bodily injury or illness to employees

  For worker injuries and illnesses caused by your business's operations or environment, you'll need a workers' compensation insurance policy. For products your business sells that cause harm, you'll need product liability insurance.

  What Is Contractors Pollution Liability Insurance?

  Contractors work on other people’s property. If their work uses materials that are later found to be hazardous, the contractors are liable for damages and clean-up. Many contractors went bankrupt in the '70s when they were forced to clean up asbestos-filled insulation from buildings they had worked on.

  Contractors pollution liability insurance is designed to protect contractors from these unmanageable losses. This coverage protects contractors against expenses associated with claims of bodily harm or injuries to third parties and can reimburse them for related court costs and legal fees.

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  Examples of Major U.S. Environmental Disasters

  Over time, there have been many costly environmental disasters in the U.S. Without environmental and pollution liability insurance, these businesses could have easily faced bankruptcy. Here are just a few major examples of some of the most costly environmental and pollution liability incidents in U.S. history:

  • The Three Mile Island nuclear meltdown in 1979 forced the utility companies General Public Utility and Metropolitan Edison to pay out millions of dollars in settlements to area residents.
  • Love Canal in Niagara Falls, NY made headlines in 1978 when it was discovered that the toxic waste dump had sickened hundreds of residents.
  • The Libby asbestos contamination in Montana sickened thousands and bankrupted the company when it was found that the W.R. Grace plant had been spewing asbestos over the town for decades.
  • The Exxon Valdez oil spill in 1989 dumped 10.8 million gallons of crude oil and contaminated 11,000 miles of ocean.
  • The 2010 Gulf oil spill leaked 206 million gallons of oil into the Gulf of Mexico. BP paid over $20 billion in a civil settlement.

  Knowing just how expensive pollution incidents can be can further illustrate the need for businesses that work with harmful substances to have environmental and pollution liability coverage.

  How Much Does Environmental & Pollution Liability Insurance Cost?

  Like many other types of coverage, the cost of environmental and pollution liability insurance can vary. Some of the major factors that can impact coverage costs are:

  • The business's industry and operations
  • The business's size and location
  • The number of employees the business has
  • The business's annual revenue and payroll
  • Coverage options, limits, and deductibles chosen
  • The type of chemicals and hazardous materials used
  • The disposal method of hazardous waste
  • The proximity of the business to residential neighborhoods

  On average, many businesses pay about $223 monthly or $2,675 per year for environmental and pollution liability insurance. An independent insurance agent can help you find the most affordable coverage near you.

  Independent Insurance Agents Can Help You Get Environmental & Pollution Liability Insurance

  Independent insurance agents have access to multiple business insurance companies and can help you find the right environmental and pollution liability insurance for your company. They'll assess your business's unique risks and find the policy with the perfect amount of coverage.

  Your agent can shop and compare policies and quotes for you to save your business both time and effort. And down the road, your agent will still be there to help you update your coverage as your business's needs evolve.