Contractors, no matter what sub-industry they are in, are faced with environmental nearly risks every day.
For most contractors, a single pollution incident or loss can cause serious damage to their reputations, operations and even balance sheets. Making matters worse, pollution incidents are unpredictable, occurring either suddenly or over time.
Many contractors assume that environmental claims will be covered under their commercial general liability, or CGL, policy. Unfortunately, most CGLs contain exclusions that leave contractors unprotected in the event of a pollution incident.
A general contractor and one of its trusted subcontractors recently learned of this first hand. Together they were planning to build a beautiful water feature in the lobby of a hospital. The job came off flawlessly and the hospital was very pleased with the work. But two years later, hospital guests, patients, and workers began to get flu-like symptoms that turned into a version of pneumonia. The cause, it was later discovered, was Legionnaires disease originating from the water feature.
When the hospital found itself the subject of lawsuits, it went to the general contractor for legal defense under its CGL policy. The general contractor then went to its sub-contractor for defense under its CGL policy.
Both were immediately denied coverage on all accounts, citing the exclusion of “pollutants.” Unfortunately, the lawsuits with the added bodily injury were more costly than either company could afford.
If the companies had bought a contractor’s pollution liability policy, they would have had the right coverage in place to remain secure and protected, since that type of coverage is designed explicitly to cover issues resulting from pollutants.
Contractor’s pollution liability, or CPL, policies provide contractors with insurance for bodily injuries, property damage, defense, and cleanup work resulting from a sudden or gradual pollution incident arising from contracting operations performed by or on behalf of a contractor. CPL insurance is intended to provide coverage to all types of contracting operations, including those that are involved in building construction and environmental firms that remediate polluted sites.
CPL policies are nonstandard, meaning that each policy is different from the others and can be modified to meet the needs of whatever contractor is purchasing the policy. In some instances, CPL policies can also be used to cover losses from civil fines, penalties and punitive damages.
To protect your bottom line, it is imperative that you don’t make the mistake of thinking your standard CGL will protect you in event of a pollution- or contaminate-related loss. Use this time to educate yourself, as this education may go a long way in preserving your financial health.
Eric Messer is a construction industry business and risk consultant for the Milwaukee office of Marsh & McLennan Agency LLC. He can be reached at 262-797-6281 or [email protected]