SWG ENVIRO: Should Contractors Carry Environmental Liability Coverage?

June 10, 2020

In 2018, more than 1.4 million Canadians were employed in construction trades and professions and their combined work was worth $241 billion a year, according to BuildForce Canada (1). In this diverse industry, contract workers may be involved in construction, renovation, maintenance, plumbing, or landscaping - or a combination of those jobs, depending on the project and type of contractor. In each case, contractors are often required to remediate and haul hazardous materials.

All contractors are required to carry a Commercial General Liability (CGL) policy, which will not fully cover pollution or environmental claims, if at all. And unfortunately, many contractors assume environmental pollution liability will not benefit them unless they work directly with toxic chemicals, when in fact, they are likely to come into contact with a wide range of hazardous materials (including solvents, fuel oils, asbestos and/or mold abatement, and more) intentionally or otherwise. Some pollution events are sudden, while others are gradual and can occur over many months, years or even decades.

This is why contractors need knowledgeable brokers on their side, who understand the legal risks and can help them avoid the pitfalls inherent in the industry.

Market Overview

The contractors market comprises three classes:

  1. General contractors
  2. Trade contractors
  3. Artisans or specialty trades

Each class has its own tolerance for higher risk activity, such as residential, underground, or environmental work.

Work considered at high risk of creating environmental liability includes demolition, drilling or any subsurface work, asbestos and mold abatement, moisture protection work such as roofing or sealing, environmental services, and mechanical and electrical work.

Medium-risk work includes working with drywall, concrete, doors and windows (including frames, hardware, glass, and glazing), and curtain wall.

Work that is generally low-risk for creating environmental liability includes carpentry and millwork, structural steel, flooring, painting, masonry, furnishings, and conveying systems (2).

Common Environmental Contaminants

Construction work involves potentially coming into contact with a wide range of contaminants which could be released during the course of a project. Asbestos, for example, is a cancer causing substance which accounted for an estimated 1,900 lung cancer cases and 430 mesothelioma cases in 2011 (1). Other common environmental hazards for construction include mold and dust.

City bylaws require contractors to take certain measures to contain pollutants. However, even with preventative measures put in place, there is still the risk of pollution events resulting in Emergency Response Costs, Third Party Property Damage, Third Party Bodily Injury, Clean-Up, Natural Resource Damage etc.

A renovations contractor might, for instance, accidentally cut a pipe containing asbestos and spread pollution throughout the building, forcing a costly project to a halt to clean the building’s ventilation system or may spill fuel oil from a bowser to the soil at a work site.

These kinds of pollution-related losses are typically not covered under a CGL policy, and many contractors are unaware of environmental liabilities inherent in their work and the significant costs to clean up pollution events.

The Advantage of SWG ENVIRO for Contractors

SWG’s Contractors’ Environmental Insurance (CEI) policy is designed to address the risk of pollution arising from the work performed by contractors. We provide Annual and Project Specific cover on a claims-made and reported basis.

Contractors’ environmental liability provides Third-Party coverage for Bodily Injury, Property Damage, Clean-Up, Natural Resources Damages, Emergency Response Costs and related Defense Costs as a result of sudden or gradual pollution that arise from contracting operations performed by or on behalf of the contractor.

Coverage Highlights

Contractors Environmental Liability:

Sudden and gradual pollution events

Broad definition of pollutant including asbestos & mould

Clean-up costs

Restoration costs

Emergency response costs

Natural resource damages

Compensation for third party bodily injury and property

Damage

Civil fines and penalties

Punitive damages, where insurable by law

Legal defense costs

Completed operations

Automatic coverage for contractors’ clients, if cover is required by contract

Optional Coverage Enhancements:

Retroactive cover for historic work

Transported cargo

Waste disposal / Non-owned disposal sites

Separate project-specific limits

Common Industries Covered:

Our coverage includes but is not limited to the following industries. Contact us if you don’t see the one you are looking for.

Asbestos & mould abatement

Construction management

Demolition

Dredging

Drilling

Electrical and Mechanical

Environmental, including remediation

Haulage

Landscaping

Oil and gas

Plumbing

Restoration

Septic tank installation and maintenance

Utility operation and maintenance

Waste collection, transportation, and treatment

Visit our website for more details.

Content is current as of the date of broadcast and is subject to change without notice.


Sources:

  1. https://www.canadianunderwriter.ca/features/pollution-protection/
  2. https://www.irmi.com/articles/expert-commentary/contractors-pollution-liability-update