Contractors Pollution Insurance
Liabilities associated with environmental exposures can devastate a business. In the following case histories, the environmental exposures take a variety of forms. These examples demonstrate just some of the many ways in which contractors can incur environmental liabilities.
THE PROBLEMS:
- Three years after a mechanical contractor had installed a heating ventilation
and air conditioning system in a new office building, mold and mildew
growth in the duct work caused poor indoor air quality. Claims against
the contractor for bodily injury and property use loss exceeded $100,000.
- A general contractor dropped apiece of heavy equipment from a crane
onto the pipe of a hydrofluoric acid tank. Acid vapor emissions forced the evacuation of over 3,000 residents, many of whom were treated
for respiratory illnesses. To date 4,500 claims, totaling over
$10 million for bodily injury, property damage, and lost profits and emergency
response costs have been filed against the contractor.
- While working on a sewer project, a utility contractor excavated a trench
and hit a gas line with a backhoe bucket. The gas release forced
evacuation of the immediate area. Loss of business claims against
the contractor exceeded $75,000.
- While performing building renovations, a general contractor used gas
powered generators and equipment. The contractor failed to properly
vent or contain the emissions from the equipment during the operations. Employees
working in a nearby area of the building complained of headaches, nausea
and respiratory problems. The results of an air quality study
concluded that the increased carbon dioxide levels in the building resulted
from the construction equipment. The contractor was liable for causing
building-related illnesses that resulted in 30 bodily injury claims totaling
over $100,000.
- A street/road contractor was subcontracted to pave a parking lot for a new commercial structure. At the end of the day, the tack coat was sprayed onto the sub-base prior to paving. During the evening, a major thunder-storm caused the tack coat to wash off and flow into a nearby stream. The general contractor was responsible for cleanup costs which exceeded $200,000. To recoup these costs, the general contractor withheld the subcontractor's payment. In turn, the subcontractor filed a claim with its insurance company to recover lost revenue. The insurance company denied reimbursement based on the absolute pollution exclusion under the general liability policy.
These different contractors have one factor in common: They suffered extensive financial loss from unprotected environmental exposures. Their General Liability Insurers denied claims because of the absolute pollution exclusion.
THE SOLUTION:
Contractors should investigate environmental insurance at the same time they take steps to identify the numerous loss control techniques that can be applied with little out of pocket expense to reduce potential impact that exposures can have on a contractor's bottom line:
Education - this is the first and single most important step in any process. Contractors need to educate employees to identify exposures inherent in day-to-day operations. For example, an employee performing a site walkthrough may not realize the impact of oil-stained areas or stressed vegetation. An employee may be able to identify a vent pipe from an underground storage tank and understand that it will have to be removed. But will this person understand that a tank in the ground for any length of time may have leaked and caused contamination of both subsurface soil and groundwater?
Environmental Assessments - Even though every site does not require an environmental assessment, most owners perform such assessments when they believe there is problem. Surprisingly, many contractors do no ask site owners if such an assessment has been performed. Ask!
Contractual Transfer - Contractors can also reduce their environmental risks through contractual transfer. Many times a "Pre-Existing Contamination Clause" and "Change in Conditions Clause" is utilized. Consult your attorney.
Insurance - Unfortunately, no matter the precautions taken, nothing can prevent one party from suing another. That's why Contractors Pollution Liability Insurance makes sense in managing your environmental liability exposures.