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Environmental Liability

What Every Underwriter Needs to Know

Posted in Brokerage

Author: Cathy Baldwin

In 2001, I became a proud CIC (Certified Insurance Counselor) designee. Woohoo!  With that designation comes the opportunity to keep up on what is going on in the industry through Graduate Seminars provided by the National Alliance.  This past March I attended a Graduate seminar and attended the class for Environmental Risk Management, taught by Chris Bunbury of Environmental Risk Managers Inc.   It really opened my eyes to just how many environmental exposures surround us all and how environmental mishaps can affect anyone.

There are  three main benefits that environmental liability insurance covers:

Defense Costs

Environmental liabilities are relatively new and very litigious. Even if you do nothing wrong you can still get named in a suit and have to expense defense costs i.e. legal fees, environmental investigations.

Claims management

All policies come with specialists to assist you in handling a claim. Who is in charge of communications, public relations, emergency response, government compliance, financial management, third-party claims for bodily injury, property damage and natural resource damages

Third party liability

The majority of the time the cost to clean up the environmental problem is far less than the associated claims that come in from third parties for bodily injury, property damage, and business interruption. You need to look at your client’s and neighbors that can be impacted if you or a subcontractor/vendor cause an environmental loss.

What I found so interesting about environmental risks is that more of your clients might be subject to risks than you would think. Just to give you an idea, here are some examples Chris mentioned during the seminar:

  • Environmental Loss Examples: releasing dangerous fumes into the neighboring community. Area residents and businesses were evacuated and several people were treated at the local hospital for fume inhalation. Claims for bodily injury and business interruption topped $94,000.
  • An unknown party illegally placed a container of hazardous liquid waste into a dumpster at a small manufacturing facility. The container leaked and contaminated the contents of the load which in turn contaminated the waste on the tipping floor of the transfer facility. Cleanup costs and legal fees exceeded $150,000.
  • A manufacturer began expansion of the production line area. During excavation, oily soils with a petroleum odor were discovered. Further investigation uncovered an old, undocumented sludge-drying pit, which the previous owner used back in the 1940s. The manufacturer had to remove and remediate the soils at his expense. Cleanup costs exceeded $400,000.
Next time you are talking with a client, consider if environmental liability coverage is right for them. Still, have questions or have a risk in mind? Contact one of our Brokerage Underwriters today!

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