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Posts|February 21, 2021

The Basics, Part 5: Pollution Legal Liability

By Preston Cavignac
Principal CPCU, CIC, CRM

In this series we look at specific insurance policies and concisely explain how they work.

Pollution Legal Liability

Who does it protect?

  • The policyholder, also known as the first named insured. The policyholder could own, develop or operate a site or property. It applies to many industries – real estate, warehousing, hospitality, healthcare, manufacturing, etc.

What coverages does it offer?

  • It covers damage arising out of a pollution condition. This could include covering damages (defense and indemnity) for, first party cleanup costs, third party cleanup costs, third party bodily injury or property damage, third party non-owned disposal sites, third party contingent transportation costs.

Who could bring a claim?

  • Any third party could bring a claim for bodily injury or property damage. In terms of first party coverage, the insured (generally speaking) must be “legally obligated to pay” for cleanup costs arising out of the pollution condition.

Why would they bring a claim?

  • Any third party could bring a claim if they feel they have suffered bodily injury or property damage arising out of a pollution event. In terms of first party cleanup costs, the insured must be legally obligated to pay by a regulatory authority (like the EPA, among others).

When should you submit a claim?

  • The insured must submit a claim as soon as possible after the insured becomes aware of a pollution condition which may result in cleanup costs, a claim or any other regulatory or legal action or obligation against the insured.

What are some claims examples?

  • A manufacturer began building out their production facility. They discovered polluted soils during the project. Turns out there was an undocumented sludge drying pit from the previous owner. Cleanup costs exceeded $350k.
  • Tenants of an apartment started to complain about mold in bathrooms. Turns out there was construction defect tied to the showers and HVAC system which caused mold to grow. The insured suffered third party bodily injury claims, cleanup costs and loss of rent.

Any specifics to be aware of?

  • Triggering these policies are very important. If you have any questions about a pollution condition at your property or site, please reach out to you broker.

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