November 25, 2020
If your client is skeptical about whether they need Premises Environmental Liability Insurance, this article contains some compelling reasons why they should. Many property owners don’t consider environmental pollution when they get insurance, and don’t realize their current policy excludes it. In addition, many who already have some kind of environmental policy don’t realize they should enhance it.
1. Regardless Of Fault, Responsibility Falls On The Current Occupier, And The Liability Is Unlimited
In most Canadian provinces, a clean-up order could be issued against anyone who owns/manages, or has owned/managed or occupied a premises. So, any present or previous owner or controller could be held liable, regardless of who is really at fault.
For instance, the directors and officers of a company could be held responsible for cleaning up and fixing a contamination at their site, despite being owned or occupied after the contamination occurred.
The potential costs of environmental clean-up are unlimited. According to an article in Canadian Underwriter, some insurance clients have been fined hundreds of thousands of dollars under different pieces of legislation - not including the millions of dollars in clean-up costs. (1)
Though the likelihood of a pollution event might be fairly low, the financial consequences of one could be severe. And so the question for clients becomes, is opting out on Environmental Liability insurance worth the risk?
2. Regulatory Frameworks Are Changing
Clean-up criteria changes often, and are getting more stringent. What wasn’t a liability 10 years ago could now be considered “historical contamination.” And so, when assessing a building’s risk of contamination, underwriters want to see the most up-to-date information about site conditions. In addition, property buyers are increasingly seeking indemnification from the sellers for historical contamination.
Another precaution is for owners to enhance their Environmental Pollution policy with retroactive cover.
3. Anything Could Be A “Pollutant”
It’s common to associate the words “pollution” and “contaminants” with petrochemicals and hazardous materials. In reality, environmental insurance is designed to cover a much broader scope of pollutants than that.
Asbestos-containing products, for example, were only officially banned in Canada in 2018. That means any building constructed prior to 2018 could have pipes containing the leading cause of occupational death in Canada, according to The Mesothelioma Center. (2)
Contrary to popular belief, any substance could be a pollutant if it’s in the wrong place at the wrong time. Waste water at a laundromat, for example, is a contaminant if it gets into the water system.
Unbeknownst to your client, common pollutants like asbestos and mould are not typically covered under a CGL policy.
4. It’s In The Air We Breathe
Particle pollution is a common hazard in enclosed spaces. Mould or Legionella can form in HVAC and plumbing systems, exposing the entire building and its occupants to health and safety risks. Likewise, buildings with swimming pools or any systems producing humid conditions can foster mould problems, and lead to extensive claims.
In one commercial property case, the owners of a multistory building containing both retail space and apartments settled a mould lawsuit by agreeing to remediate all contaminated apartments and retail spaces. They also agreed to pay for temporary housing and legal fees, reimburse all tenants for personal property damage, reimburse retail tenants for business interruption, rebate rents, and pay all medical expenses incurred. On top of that, they also agreed to pay a lump sum payment of several thousand dollars to each resident. The lawsuit, filed by current and former building tenants, alleged that improper maintenance of the building's HVAC system caused extensive mould growth throughout the building. In the end, the total cost to the building owners was more than $10 million. (3)
About SWG ENVIRO: Premises
South Western Group’s SWG ENVIRO policy covers a range of industries for the risk of sudden or gradual pollution events that could result in a lawsuit. The policy covers cleanup costs, on and off-premises third-party damages, bodily injury, property damage, and incurred legal expenses.
SWG ENVIRO: Premises is one of three specializations in the Environmental Pollution line. It covers the liability that a property owner has for pollution-related torts occurring on a specific premises. Coverage is provided on a claims-made and reported basis.
For more information, visit our product page.
Content is current as of the date of broadcast and is subject to change without notice.