When Assumptions Are Costly: Know and Insure Your Company’s Environmental Risks
Corporate decision makers know it’s important to protect their most valuable assets—their employees and property. Most also recognize the need for other protective coverage such as cybersecurity insurance. However, many organizations simply overlook environmental perils or assume they’re covered.
In fact, fewer than 20% of insurance buyers purchase specialized environmental risk policies. This is significant because the frequency and severity of environmental claims continues to grow. The rising incidence of natural disasters such as floods and earthquakes leads to infrastructure damage and resulting environmental exposures. In today’s world, how a company addresses—or ignores—its environmental exposures could significantly impact its bottom line.
What’s Covered? What’s Not?
Many businesses incorrectly believe that a General Liability and/or Property policy will protect them against environmental liabilities. Yet, standard General Liability and Property policies usually include restrictive pollution exclusions. This leaves many uninformed policyholders exposed to potentially expensive risks. Many agents and brokers do not fully explain coverage restrictions, giving their clients a false sense of security. Unless a policy specifically addresses losses caused by pollutants, it will not extend protection to these common results of an unexpected release of pollutants.
Who Needs Pollution Liability Insurance?
If the answer to any of the following questions is “Yes,” the company may be at risk, regardless of its size or nature.
- Do you use or store chemicals on or off-site?
- Do you transport goods, waste or debris?
- Do you dispose of pollutants?
- Do you operate near a body of water?
In addition to these exposures, Environmental Insurance also protects insureds against risks related to the presence of mold, lead paint, asbestos, Legionella or poor indoor air quality. Exposures like these certainly aren’t limited to any one business sector and may be of special concern to those in real estate.
If it’s Not Supposed to be There, it’s a Pollutant
Pollutants come in many forms and can be solids, liquids or gases. Thermal irritants or contaminants include smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste (recycled, reconditioned, reclaimed). Pollutants can contaminate the soil, air and water supply. As the presence of perfluoroalkyl and poly-fluoroalkyl substances (PFAS) increases in our groundwater supply, the threat of exposure risks increases. Pollutants can lead to a variety of illnesses and even cause premature death, significantly enhancing your company’s risk.
The EPA and other regulatory and government agencies are conducting investigations and overseeing cleanup efforts to mitigate the impact of PFAS. In June 2023, manufacturer 3M agreed to pay a whopping $10.3 billion settlement to multiple towns and cities across the U.S. for contaminating drinking water with PFAS.
The EPA continues to actively address pollution risks and events related to PFAS. The agency has taken enforcement actions against companies for violations related to chemical releases, improper waste disposal and non-compliance with environmental regulations.
With appropriate insurance coverage, a proactive organization can mitigate the effects of environmental exposures. The advisors at Oswald can help determine your environmental risk, explain your existing policy restrictions and customize a plan to better protect your company.
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Note: This communication is for informational purposes only, and is not intended to offer legal, tax, or client-specific risk management advice. Information in this communication is not meant to describe specific coverages that may be advisable or available to you or your company, or to interpret specific coverages that may already be in place. General insurance descriptions in this communication do not include complete insurance policy definitions, terms, and/or conditions, and should not be relied on for coverage interpretation. Actual insurance policies must always be consulted for full coverage details and analysis. View our privacy notice.