Environmental pollution insurance policies are not just for oil industry giants and radioactive depositories anymore. Further examples are airports, apartment complexes, pig farms and prisons.
According to Dan Persha, founder and director of Environmental Services Group (ESG), a division of Insurance Concepts “ the market for pollution insurance is fluid and ever-changing”.
The market is fluctuating especially premiums. In some areas, the market is firming. In other areas, it’s not. There is not a lot of consistency in pollution insurance right now. The division is expecting upward growth and increasing volumes.
Transaction insurance environmental policies that provide coverage where a property is changing hands usually consists of pollution legal liability and cost cap coverage.
Real estate transactions are driving the market. No one will buy a property unless it has had a Phase One or Phase Two inspection. As those inspections are heavy, they tend to find problems. Term lengths for transaction insurance are almost always more one year. Three, five, seven and 10 year pollution policies are common for a “clean” site.
Although normally premiums run between $3,500 and $7,500 per year, some run less than that. For a site with a known problem or a buyer or seller that needs pollution legal liability the premiums can start around $50 000.
According to Sheila Hailey, dry cleaners pollution policies “are a hot ticket right now”. Although she also writes pollution coverage for USTs, Hailey said she gets an average of five calls per week for dry cleaning insurance and writes policies for about 95% of those calls. The average bill for cleaning a spill from a dry cleaners is $50, 000 while the average clean-up from a gasoline station UST is $10,000.
Not only is Texas one of the largest states in terms of land mass, it also ranks highest in the nation for on-and-off site releases for toxic materials . These include traditionally heavy-polluting industries like oil and gas and chemical refineries.
Generally, environmental policies offered are:
Pollution Legal Liability
Insured are claims from unknown pollution conditions at covered locations specified in the policy. Generally these policies cover both on-and off-site pollution conditions. Furthermore they include claims for bodily injury, property damage and cleanup costs. Pollution legal liability policies are modifiable to fit individual circumstances and many terms and coverages are negotiable.
Similar to pollution legal liability policies, property transfer policies cover claims generating from a covered location for pre-existing, unknown contamination and known contamination below reportable levels. In some cases it covers known contamination that may be at levels above regulatory limits but permitted by a governmental body and with a cap in place. Like pollution legal liability insurance, these policies cover bodily injury, property damage and cleanup costs. Limits, deductibles and exclusions are also similar to those found in pollution liability policies.
Cleanup Cost Cap or Stop Loss
Very specific policies that protect against cost overruns for remediation of individual projects. Covered overruns may result from the discovery of additional amounts or newly discovered contaminants, or from charges in regulating requirements at a site.
Coverage is limited to cleanup costs, and claims for bodily injury; property damage or other liability are not covered. Also, commonly excluded are the costs of legal defense and governmental negotiations. Other exclusions may include radioactive matter, asbestos, contractual liability, unknown conditions not disclosed to the insurance companies, and regulatory fines and penalties.
Other policies that may be obtained are:
- Brownfields Restoration and Development
- Secured Creditor
- Professional and Contractor Environmental Liability
- Transporter Insurance
- Storage Tank Pollution Liability
- Closure and Post Closure
- Finite Risk
The cost for a pollution liability insurance policy will differ significantly from one business to the next. A business that uses a lot of hazardous chemicals will have higher premiums than one that uses only a few. Some factors that influence costs include:
The type of business being insured
The type of chemicals and hazardous materials used
The disposal method of hazardous waste
The proximity of the business to residential neighbourhoods