Contractors Pollution Liability Insurance comprises approximately 20-25 percent of environmental insurance purchased worldwide1. However, market penetration of those who need environmental insurance is only around 10 percent2, leaving 90 percent uninsured.
Gina Jones, Vice President and Director, Environmental Programs, Burns & Wilcox, discusses the low level of penetration, saying “More than a billion dollars in uninsured claims for environmental exposures prove that many clients think coverage is not needed or is too expensive, therefore they decline.”
“Across the industry, many brokers and agents are inclined to shy away from offering Contractors Pollution Liability, as they do not work with environmental coverage on a daily basis,” said Marc Adler, Managing Director, Burns & Wilcox Brokerage. “A large contributor to this issue is the reactionary nature that brokers’ clients take to environmental insurance.”
Reacting to contract needs
Many large contracts require companies to attain Contractors Pollution Liability Insurance to cover any exposures on a job site. Jones pointed out that this is often the first time that contractors realize they need the insurance.
The fact is, a true pollution claim for a small business owner has the potential to bankrupt the company.
“Oftentimes, clients request coverage on a project basis,” said Jones. “What we try to explain is if another project comes down the road that also requires the insurance, a separate policy is needed. Two separate project-specific insurance policies for small-to-mid-sized risks often cost more than a yearly policy covering all jobs.”
“Many times, contractors try to negotiate it out of the contract for a job—leaving them underinsured,” said Adler. “With more and more contracts requiring this insurance, brokers and agents need to make it an integral component of the normal quote process for all contractors.”
Why an insurance package is necessary for the true environmental contractor
“Any time there are two separate policies – especially with two different insurers – there are gray areas of how to coordinate claims,” said Adler. “General Liability (GL) and Contractors Pollution Liability should be written together as one package for continuity of claims.”
Without this, claims are less likely to be clear in a pollution situation.
The insurance industry as a whole needs to increase the level of conversations had on environmental insurance to ensure that all contractors are properly covered.
Jones added, “Clients should understand that anything outside of its natural environment is an exposure. Continual education is key, and a broker’s Errors and Omissions policy is at risk for a claim if they do not tell clients that coverage is available.”
In speaking with Jones and Adler, they presented a few case studies that brokers can use with clients on unexpected circumstances that required Contractors Pollution Liability.
Case study: street and road contractor
A street and road contractor was hired to re-pave a 25-mile section of highway. During the project, one of the contractor’s trucks accidentally backed into, and ruptured, a mobile refueling tank. Approximately 300 gallons of diesel fuel was released onto the surface and migrated into a nearby storm drain, requiring immediate cleanup.
Case study: drywall contractor
A drywall contractor was hanging new drywall at a construction project when an employee accidentally drilled through a small water pipe located behind the wall. The contractor did not realize the water leak occurred, and a substantial amount of toxic mold grew between the walls before anyone noticed. The drywall contractor was held liable for cleanup of the mold, as well as defense of third-party bodily injury claims.
“The fact is, a true pollution claim for a small business owner has the potential to bankrupt the company,” said Adler.
What brokers should do for every contractor client
- Ask a wholesale partner for tools and supporting information
- Talk to all contractor clients as to what their potential exposures are
- Set-up a conference call with underwriters and/or carriers if needed
- Present claims examples to clients with similar exposures to help them make an informed decision
- Get in the mindset of being proactive, and build an insurance package first
With contamination being increasingly included in exclusionary language on GL policy forms2, education on environmental insurance like Contractors Pollution Liability is essential. Pollution is a much more widely used term than it once was, expanding far beyond, lead, asbestos, and oil. Retail brokers and agents that service contractors can grow their book of business by proactively marketing Contractors Pollution Liability Insurance.
Jones sums it up best, saying “The insurance industry as a whole needs to increase the level of conversations had on environmental insurance to ensure that all contractors are properly covered.”