Suppose a drywall contractor unknowingly drills through a water pipe located behind a wall. The hole in the pipe causes a leak and a substantial amount of mold grows before anyone notices. The mold causes allergic reactions and respiratory problems for some residents of the building. Who is responsible for the building cleanup and the defense of the third-party injury claims? The contractor.
Or, what happens when an electrical contractor drills through a wall and causes asbestos fibers to be released throughout a commercial building? Who is responsible for cleanup costs? The contractor.
What if a drilling contractor hits a sewage line and releases raw sewage into both soil and groundwater? Who is responsible for the cleanup and the business interruption losses of nearby businesses? The contractor.
Pollution risks come in many forms and protecting one’s business from exposure is essential. Unbeknownst to some contractors, Commercial General Liability (CGL) policies do not protect against pollution due to the Total Pollution Exclusion Endorsement. Coverage is excluded in the event of "Bodily injury or property damage which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants at any time.” - CG 21 49 09 99 – Insurance Services Office, Inc., 1998
Given the CGL pollution exclusion and the rise in environmental awareness over the last decade, contractor pollution liability requirements have been included in many construction contracts and remain a primary driver for the purchase of insurance.
|“Pollutants mean any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.”
- CG 00 01 04 13 – Insurance
Services Office, Inc., 2012
Contractors Pollution Liability (CPL) provides third-party bodily injury, property damage and cleanup coverage for unintentional pollution caused by covered operations performed at job sites that are not owned or occupied by the named insured. CPL may be written on either a claims made or occurrence form, depending on the exposures. According to IRMI, over 40 markets offer CPL which can be written in combination with a General Liability policy or as standalone coverage.
Sample classes include:
- General trade contractors and subcontractors (including mold)
- Emergency response
- Energy, oil & gas services
- Environmental consultants
- Fire, water and disaster recovery/restoration
- Medical & infectious waste disposal
- Pipeline, construction & maintenance
- Polychlorinated Biphenyl (PCB) remediation
- Service station construction
- Soil remediation
- Underground storage tank (UST)/Aboveground storage tank (AST) contractors