Residential construction sites can pose a variety of risks. With heavy construction equipment, building materials, excavation, and installation of utilities, these are active areas. In addition to the potential for work-related injuries, there’s also a chance for site pollution.
Site pollution can be anything from a chemical or fuel spill to the discovery of asbestos or lead paint contamination. It can be very expensive to stop work and manage a cleanup process, which is just one important reason why site pollution liability coverage is essential.
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What is site pollution liability coverage?
Site pollution liability coverage is additional coverage that is designed to protect a business from claims that may arise due to pollution on site. This insurance coverage is for both first-party and third-party claims, which means it protects both the business purchasing the policy and any claims made from third parties.
For example, let’s say your residential construction company is tearing down an old structure with the intention of developing the property to build new homes. During the demolition, you discover that the building has asbestos tiles throughout the structure. This will have to be cleaned up before the development can continue, and that work will not only cause delays, it will be expensive to remediate.
When you make a claim to cover the cost of the cleanup, it is an example of a first-party claim for site pollution.
Third-party coverage protects your business from claims by others for accidents for which your business may be responsible. For instance, if a piece of your excavation equipment leaks fluids into a stream, causing contamination that affects a neighboring property, that is a third-party claim.
As a builder, I have commercial general liability insurance—isn’t that enough?
Commercial general liability insurance policies typically do not cover pollution liability. In fact, most of these policies carry what is known as an “absolute” pollution exclusion, meaning virtually any claim for a pollution or environmental event is denied.
Because pollution and environmental events are almost always excluded, you should not count on your commercial general liability insurance to cover these types of claims.
This is true even if your commercial general liability coverage includes “sudden and accidental” events, so it’s very important to understand what is excluded. Insurance policies that cover accidental leaks might exclude cleanup costs and damages if the leak releases toxic chemicals into a stream, for example.
What is business environmental risk exposure?
Business environmental risk exposure is typically associated with properties that may be contaminated due to the conditions of their prior use.
These are sometimes known as “brownfields” sites. Brownfields sites are defined as abandoned or underutilized properties where redevelopment efforts may be complicated by the presence or suspected presence of pollutants or environmental contaminants.
Residential construction developers may encounter brownfields sites when redeveloping former manufacturing facilities into housing, like turning old mill buildings into condominiums.
Another property classification is that of a Recognized Environmental Condition (REC). While a property with environmental risk exposure indicates that there might be contamination, a recognized environmental condition means a risk is present.
These designations may have an impact on the types of policies available to a developer and premium costs.
Why should residential builders carry contractors’ pollution liability insurance?
There are several important reasons that residential builders should carry pollution liability insurance.
First, accidents can and do happen. Job sites are full of potential hazards, and even a small pollution event could lead to expensive lawsuits, injuries, and damages.
Second, you never know what you might encounter on a job site, especially if you are redeveloping or excavating a property that hasn’t been used for years. Lead paint and asbestos are common in older buildings, but there can also be problems with buried fuel tanks, leaky storage containers, or even the illegal dumping or burying of trash in years past. A field that looks perfect for development can hide a lot of potential concerns.
Finally, environmental remediation can be very expensive. If you don’t have site pollution coverage and either have an accident or discover pollutants on your residential construction site, you could be looking at very costly cleanup expenses.
For many developers, the expense of cleaning up an environmental problem could mean a building project is no longer profitable. And, when issues like this are discovered, they must be disclosed to buyers, making it hard to sell the property.
What is contractors’ pollution legal liability insurance?
This policy is designed to cover contractors, providing third-party protection for property damage, cleanup or remediation costs, and bodily injuries that result from a covered pollution event that happens at a job site.
A residential construction site will have many contractors on the property with potential pollution exposure, as many materials used in building are considered safe when used as intended, but are hazardous if spilled, burned, or otherwise released into the environment improperly.
Contractors working at a residential construction site should carry Contractors Pollution Liability (CPL) coverage.
What else should a residential construction company know about site pollution coverage?
Environmental cleanup costs continue to rise, and this can affect the types of coverage offered, premium costs, and more. Additionally, there isn’t a standard policy, so exclusions can vary from one company to the next.
Some important questions to ask about coverage include:
- What types of pollutants are covered/what types are excluded?
- Are all cleanup costs covered?
- Is business interruption coverage part of the policy?
- Does coverage include premises pollution liability (which covers unknown environmental problems that may already exist on a property)?
Site pollution coverage can be complex and vary dramatically from one residential construction site to the next.
If you have questions about the types of coverage available, contact the experts at Rate Insurance. With access to a wide range of commercial insurance providers, they can help developers find the right protection that meets your project’s unique needs.
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All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Rate Insurance does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Rate Insurance. Rate Insurance, its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.
