As I meet with clients and we discuss coverages that are available and recommended, we always get to pollution coverage and the question always arises, “What are my exposures to pollution as a fill in the blank contractor?” As you will see below, these scenarios in real-life settings are not unbelievable situations, but rather real life happenings that are common within each trade’s routine scope of work. Pollution coverage should be considered to protect your business. In addition to your need, we are starting to see the requirement for pollution coverage in more contracts, specifically trade contractors such as HVAC and masonry. There are options available for job-specific policies when a need arises contractually, but with minimum premiums required by the carriers issuing these policies, this could be a costly way to meet those requirements. It is typically advantageous to have a policy that covers all your work, especially when contracts are calling for coverage to be maintained for ongoing and completed operations, which extends the coverage period required.
The best way for this type of coverage to be seriously considered by my clients is to give examples of what type of risks/results could occur to their business: There are a lot of examples below, but scroll down to the appropriate section:
Developer – Petroleum Soil Contamination
Developer – Contaminated Soil – New Construction commenced on a previously undeveloped parcel of land. During construction activities, contaminated groundwater was discovered. The developer was required by state regulatory authorities to collect, test and treat groundwater pumped out during the dewatering process. All treated and disposal expenses totaling 500k were incurred by the developer. The cause of the groundwater contamination was a nearby gas station that had gone bankrupt several years prior.
A painting contractor was removing lead based paint from a bridge. Local residents allege that paint removal work caused lead-based paint chips to fall into river below causing extensive damages to river and river wildlife. Shortly, a lawsuit was filed by environmental conservation group claiming property damage including natural resource damage well in excess of $500,000.
A roofing contractor begins work removing existing roofing material. Employees in the building become aware that the materials being removed may contain asbestos. They were especially upset, since no one provided prior notice. Employees of the building filed a lawsuit against building owner and contractor.
A roofing contractor is working on a hot tar roof. Fumes generated from tar kettles and treated roofing surfaces cause irritation to employees within the building. Since coal tar is a potential carcinogen, employees feared injury and filed a lawsuit.
An electrical sub-contractor was updating a wiring in an office building for a general contractor when an oily substance, which was identified as polychlorinated biphenyl’s (PCB), was discovered. Several workers were splashed by the substance. Subsequently, the workers were advised to dispose of all items they came in contact with that day including articles in home and car. Claims were brought against the general contractor for property damage and bodily injury (including mental anguish from fear of cancer) in excess of $350,000.
An electrical contractor is installing new overhead transformers. A subcontractor is sinking the new utility poles. The subcontractor hits an underground sewer line with their auger while installing the new poles. The electrical contractor is held responsible for the actions of the subcontractor through contractual liability. The electrical contractor pays $90,000 for the cleanup of spilled sewage and repair of the sewer line.
An electrical contractor disposed of project material at a C & D landfill approximately ten years earlier. The contractor was notified by the EPA that he was considered a de minimum potentially responsible party (PRP) and his settlement portion was $180,000.
At the jobsite, a ready-mix contractor washed out the chute from his truck into a nearby creek. Vegetation and aquatic life were damages as a result of the wash out. Natural resource damages totaled over $200,000.
A concrete contractor was driving rebar stakes into the ground at a gas station when setting up concrete forms and he punctured a fuel line. The station did not detect the leak until later in the day. The contractor filed a claim that his insurance denied due to the pollution exclusion.
A concrete contractor was hired to pour concrete for a parking lot. The re-bar that was installed prior to pouring the concrete struck a petroleum line causing a leak. The leak was not detected immediately. Remediation and restoration expenses included the cost to remediate the contaminated site and to re-pour the concrete which totaled nearly $100,000.
A concrete contractor applying epoxy sealant in a building released fumes to other portions of the building. Evacuation and business interruption costs totaled $190,100.
A utility contractor damaged a switching gear that resulted in a mercury spill. Unfortunately, as the contractor waited for assistance, the material volatilized and migrated into an HVAC system. The contractor was responsible for cleanup costs including disposal of mercury as well as decontaminating the HVAC system in the entire building, with costs exceeding $250,000.
A utility contractor was working on a sewer rehabilitation project. During excavation, the bucket of a backhoe hit a natural gas line. This forced evacuation of the immediate area, including a small hospital. Hospital filled loss of business claims against the contractor that exceeded $100,000. The contractor’s general liability insurance carrier denied the claims based on their policy’s absolute pollution exclusion.
During sewage installation, a subcontractor improperly tied in a piping causing raw sewage to migrate onto the community property. The utility contractor became responsible for property damage, bodily injury, and associated legal defense due to lawsuit from a residential community.
Street and Road
Oil spills on highway from a mobile asphalt plant that is being transported to a job site. The spill causes multiple car damage and shuts down the highway for several hours. The paving contractor’s clean up cost and property damage exceed $100,000.
An asphalt paving contractor sprayed the tack coat on a drive way prior to paving. During the evening, a thunderstorm caused the tack coat to wash off and flow into a nearby stream. The general contractor was responsible for cleanup costs, which exceed $200,000. To recoup these cost, the general contractor withheld the subcontractor’s payment. In turn, the subcontractor filed a claim with its insurance company to recover lost revenue. But the insurance company denied reimbursement based on the absolute pollution exclusion under the general liability policy.
A mechanical contractor was performing work at a hospital and was storing fuel oil in a generator room. While the tank was being filled, the tank’s plug failed resulting in 375 gallons of diesel fuel released which was in close proximity to the emergency room. As a result of the spill, the emergency room was closed for several hours. The contractor was held liable for clean up of the spill as well as business interruption in excess of $200,000.
A HVAC contractor was performing routine maintenance on a rooftop mounted system. Bees began to swarm in the vicinity of his work so he sprayed an insecticide, which flowed into the HVAC system. A building employee who was asthmatic had an allergic reaction to the insecticide. The employee was hospitalized for a week. The claimed total including medical bills cost $150,000. The accepted price to complete the original job was $10000.
A mechanical contractor installed a heating, ventilation, and air conditioning system in a new commercial office building. Shortly thereafter, mold and mildew growth caused by the release of airborne bacteria throughout the entire building resulting in poor indoor air quality. Claims against the mechanical contractor for clean-up cost, bodily injury and loss of property use exceeded $100,000.
HVAC contractor failed to properly fix an existing HVAC system. The system caused people to complain about varying building temperatures, leading to complaints about respiratory problems. The HVAC contractor was found liable for resulting indoor air quality issues that totaled in the thousands.
A general contractor added a floor curing agent to a concrete trench in order to improve dry time. The curing agent released vapors containing volatile organic compound. An employee at the facility was overcome by the smell of hazardous vapors and needed to be taken to the hospital.
A general contractor replaced and installs new carpeting in an office building. Shortly after installation, after various complaints from tenants, the building owner contacts the contractor to let them know tenants are complaining of dizziness. The general contractor refuses to replace the carpet but can’t identify if the manufacturer of the carpet or the carpet adhesive is responsible. Thus, a lawsuit between building owner, tenants, and contractor ensues.
Claim scenarios provided by Beacon Hill and Berkley Environmental
Information about the Author: Dan joined Insurance Associates, a Marsh & McLennan Agency LLC Company in 2002 and has been a top producer during his 15 year career. Dan is Vice President and maintains a large and profitable book of business. In addition to handling insurance accounts, Dan also handles bonding programs for his clients. Dan began his career as a commercial banker with a local banking institution and has a unique perspective on the market and in his role with Insurance Associates, a Marsh & McLennan Agency LLC Company.