KEY ISSUES ON ENVIRONMENTAL INSURANCE (ICM005)

Speakers: Ken Burrell, Managing Partner, Synapse Services

Steve Lawrence, Partner & Vice President, Insurance Office of America

Learning Objectives

At the end of this session, you will learn : •  The importance of environmental insurance

–  Source of Claims

•  Dissect different environmental coverages to determine what they include

–  Site Pollution, Contractors Pollution, Transportation Pollution

•  Prepare for issues such as legionella, mold, contaminated properties, natural resource damages and waste

Potential Source of Claims

•  Substance Specific –  Regulated, Hazardous, Non-Listed

•  Operational –  Site Conditions –  Remedial & Abatement Activities –  Waste Management & Disposal –  Transportation

•  Regulatory –  Torts, Contractual Liability & Environmental Statutes

•  CERCLA “Superfund” •  RCRA “Cradle to Grave”

Evaluate  Exposure  based  on  the:  •  Past  •  Present  •  Future  

Source: International Institute Environmental Risk Management and EPA.GOV

Why Environmental Insurance? •  Products Liability Claims

–  Bodily Injury, property damage, and environmental damages •  Transportation Claims

–  Claims involving spills at ports, railcars, pipelines, aircraft, watercraft, and vehicles

•  Site Contamination & Remediation Claims –  Known contamination, ponds, lagoons

•  Non-Owned Location Claims –  Drum recycling service involving abandonment –  Tank wash facilities –  Waste disposal sites –  Third party warehouses

•  Contractor Pollution Claims –  Completed operations –  Job site

Managing Environmental Risk •  Contractual Liability

–  Reviewing agreements with environmental indemnities –  Use of contractual agreement with 3rd party vendors

•  Post Claim Resources –  Using the insurance company relationships with spill response and public

relations vendors

•  Site Contamination & Remediation Issues –  Scheduling sites on the policy with as much retroactive coverage as possible –  Negotiating manuscript policy language

•  Non-Owned Location Due Diligence –  Obtain pre-approval from insurance company on any third party site –  Schedule the site onto the insurance policy –  Use contractual agreements to manage this risk

Environmental  Insurance  Markets  

Insurance Program Structure

 

General Liability

(GL) - Products

Pollution Transported

Cargo

Excess Liability

Pollution Legal

Liability (PLL)

Contractors Pollution Liability

(CPL)

Pros •  Same insurance

company •  Financial savings •  Seamless coverage •  Higher limits •  Tailored program Cons •  Shared limit •  No multi-year policies

Why combining environmental coverage may make sense?

Types of Pollution Coverage

SITE

What you need to cover third party

bodily injury, property damage or cleanup cost arising from a

pollution condition at an owned, operated

or non-owned location.

CONTRACTORS

What you need to cover a pollution

condition from your operations at a job

site.

TRANSIT

This provides coverage arising from a pollution condition involving your cargo

on a watercraft, vehicle, railcar or

aircraft.

PRODUCTS

This provides coverage for third party bodily injury,

property damage and possibly clean up

costs arising from a product that is defined as a “pollutant”.

Site Exposure Pathways

Site Pollution Coverage

Acronyms: PLL, EIL, PPL, SPILLS, PEL, SP, ELL, PARLL

•  Coverage for fixed facilities providing protection related to: –  Escape or release of new pollutants at a facility –  Unknown or pre-existing contamination at a facility –  Waste disposal (historic and operational) –  Legal defense –  Illegal dumping –  Business interruption –  On and off-site cleanup –  Third party bodily injury and/or property damage –  Natural resource damages

Key Issues Site Pollution

•  Dealing with known conditions •  Disclosed documents •  Sudden or gradual releases of pollutants •  On-site cleanup coverage triggers

–  Discovery –  Third party –  Government mandated trigger

•  Mold & Legionella –  Definition of a pollution incident –  Restoration costs –  Definition of cleanup costs

•  Natural resource damages •  Non-owned locations

–  Blanket versus scheduled

Contractors Pollution Coverage

•  Coverage for protection related to: –  Disturbance and release of unknown hazardous building materials (lead based paint,

asbestos) –  Silt and sedimentation –  Severing unmarked or mismarked utility lines and causing a release –  Indoor air quality issues (vapor intrusion, mold, carbon monoxide, legionnaire’s

disease) –  Leaks/releases of hazardous materials caused by construction defects or improper

installation –  Spills from transporting construction materials or hazardous materials used in

contracting equipment –  Disposal of construction materials

Key Issues Contractor Pollution •  Definition of “Covered Operations”

–  Broad or specific operations

•  Sudden or gradual releases of pollutants •  Completed operations versus operations

–  General Liability has a total pollution exclusion

•  Subcontractor performing work on your behalf •  Contractual liability •  Diminution in property value •  Pollutants definition

–  Lead, Asbestos, Microbial Matter, Legionella, Silt & Sediment –  Natural Resource Damages

Transit Pollution Coverage •  Coverage for protection related to:

–  Release or spills of substance specific material while in transit via a conveyance (railcar, barge, vehicle, aircraft)

–  Third party bodily injury and/or property damage including cleanup/remediation costs –  Defense costs

Key Issues Transit Pollution •  Definition of transportation

–  Broad or narrow

•  Contractual Liability •  Definition of conveyance

–  Railcar –  Vehicles –  Aircraft –  Watercraft

•  Commercial Auto CA 9948 Broadened Pollution versus Transported Cargo Pollution

–  Occurrence versus Aggregate –  MCS-90 and Broadened Pollution Coverage

Key Issues Products Pollution •  Most General Liability policies have a total pollution exclusion

–  Definition of “pollution” is extremely broad –  Most pollution exclusion endorsements eliminate the products pollution coverage

•  Absent a total pollution exclusion, cleanup costs are ly ocovered as property damage provided the obligation to remediate the property exists outside of any statute, regulation or government order.

–  Majority of liability payments are from those statutes, regulations or government orders

•  Coverage for third party bodily injury/property damage and environmental damages

–  Natural Resource Damages –  Medical Monitoring

Questions & Answers