Pollution Liability Insurance: Do I Need it?

You think you are doing everything in your power to protect your business from the unexpected. Otherwise, you wouldn’t be able to sleep at night, right?

But have you considered pollution insurance?

Before you think “I don’t need pollution insurance, I don’t deal with polluting materials” … think again. 

The list of substances that are considered pollutants is expansive, and nearly every business works with a pollutant in one way or another.

We know firsthand. At Berry Insurance, we’ve issued pollution policies for various companies, from small, seemingly-harmless companies, to environmental companies who remove mold and asbestos all day every day. 

So could your company actually need a pollution liability policy?

We’ll tell you everything you need to know about the insurance, and you can decide for yourself.

What is pollution liability insurance?

Pollution liability insurance protects businesses against liability from damages or injury caused by pollutants they work with or produce or exacerbate.

So what is considered a pollutant? A lot of things can be. Pollutants are any materials or substances that end up somewhere they weren’t intended to be used. Even things like fresh water, fruit juice, and cheese have been considered pollutants in certain instances.

Pollution liability used to be included in commercial general liability policies until the 1980s, when insurance companies started excluding it.

Today it is a stand-alone policy that some companies opt to get, and others decline.

What does pollution liability insurance cover?

For the most part, a standard pollution liability insurance policy generally covers claims for bodily injury, property damage, business interruption, crisis management, transportation liability, as well as clean-up costs associated with the toxic materials. 

This means if any hazardous waste materials you work with, store, or produce caused any injuries or damage to a third party (or land/wildlife), the insurance policy would pay for the damages, medical bills, and associated legal fees.

Some of the pollutants covered include: oil, gas, asbestos, pesticides, PFAS chemicals, weed killers, ammonia, lead paint, sewage, mold, Legionella, petroleum, Category 3 water, radon, garden chemicals, cleaning chemicals, pool chemicals  -- the list is endless.  

And the list of ways they can cause damage or injury is even more expansive. Consider some of these claim scenarios:

• A tank storing oil leaks damages land and kills local wildlife
• Pesticides or weed killers a landscaping company use runs off into a local stream, making it inhabitable to wildlife
• During the demolition of a building, a contractor disturbs asbestos, causing illness and requiring cleanup
• A concrete contractor got into an accident and caused the materials to enter a nearby stream
• A car wash company’s water bay piping system released cleaning solvents into soil and groundwater
• A contractor finds mold in the walls and is found liable for cleanup and third-party claims
• A contractor drills into a sewage line, causing significant damage to the environment and nearby businesses
• A contractor digs and punctures a petroleum line leading to significant contamination
• While preparing  a build site, a contractor unknowingly spreads contaminated soil
• Renovation of a building exposes lead paint to its occupants
• A plumber incorrectly stalls water system, causing several people to get sick from the water
• An oil company delivers to a to a home and spills oil on the property
• A school groundsperson sprays herbicide chemicals and students get sick

These are only a few of the many ways contaminants can cause injury or damage, so you can imagine why certain companies could benefit from pollution insurance. 

But keep in mind, pollution insurance policies aren’t always standard, and may have coverages and exclusions that vary from carrier to carrier.

Types of pollution liability insurance:

Depending on your company's risks, needs, and operations, there are several types of pollution insurance you might need. These can be purchased as standalone policies, or bundled together into a comprehensive pollution insurance policy.

Some of the main types include:

Pollution Legal Liability: These policies cover legal liability for both on- and off-site pollution claims for bodily injury, property damage, or clean-up costs.

Professional and Contractor Environmental Liability: This type of pollution insurance covers what the pollution legal liability policy we discussed above does, but for individual contractors rather than whole companies.

Transporter Insurance: Transporter insurance extends coverage to hazardous materials while being transported from one location to another. This coverage is usually rolled into a pollution liability policy or contractor environmental policy.

Storage Tank Pollution Liability: This type of pollution policy covers property damage and injury claims, as well as cleanup, but specifically for business that own tanks storing hazardous materials 

Other less common types of pollution insurance include cleanup cost cap or stop loss, brownfields restoration and development, secured creditor, and closure and post-closure.

Who needs pollution liability insurance?

In some instances, the answer is obvious. If you are in an industry where you directly deal with hazardous waste, such as a waste disposal company, an oil company, a construction company, an HVAC company, or a landscaping company, then yes, you definitely need pollution insurance.

If you are an independent contractor who deals with waste, you may actually be required to have pollution insurance and may need to show proof of coverage before obtaining jobs. (Plus, you’ll want it regardless, because who wants to be stuck with a significant lawsuit without insurance?)

Other situations are less obvious. Even if your company doesn’t overtly deal with waste as part of daily operations, you could benefit from a pollution insurance policy because every company is capable of causing damage or injury with contaminants. Whether you choose to get one depends on how much risk you want to take.

If you’re a small business who doesn’t work with pollutants often, will you get sued for causing damage with hazardous materials? Probably not. But could you? Absolutely.

Environmental clean-up projects can cost millions of dollars, and environmental laws are always changing, so you don’t want to find yourself unexpectedly liable for a large cost.

How much does pollution liability insurance cost?

Unfortunately, we can’t give you a very clear answer here.

That’s because the cost varies significantly depending on factors such as company size, risk, the amount of coverage needed, deductibles, and discount eligibility.

However, we usually see annual premiums fall somewhere between $1,000 and $100,000. 

Usually, insurance carriers require you pay the entire premium for pollution policies before coverage is initiated.

Protect your pollution liability and more

We know, we know -- you really don’t want to buy yet another business insurance policy if you have the option not to. But do you really want to be stuck with a debilitating property, injury, or environmental claim due to a simple accident?

If you think your business has a risk or hazardous waste exposure, it might be a good idea to get a pollution insurance policy.

If you’re still on the fence, reach out to an insurance agent who can help you figure out what is right for your business.

And chances are, if you need a pollution insurance policy, you probably also want to bundle it with a comprehensive business insurance policy.

If you’re interested in obtaining a business insurance quote, check out this article What Information Do I Need for a Business Insurance Quote?