Environmental insurance is a basic requirement for businesses that use hazardous materials in their operations, but companies in a surprisingly large number of industries can benefit from this valuable protection.
Relatively routine events, such as a delivery accident that results in products or materials being spilled or the improper disposal of company waste, can trigger environmentally related regulatory actions or lawsuits, and can cause a costly expense that a small business may be unprepared for.
Even if a company is innocent of environment problems itself, it can be held liable if the previous owner of a company-owned facility dealt with hazardous materials or buried industrial waste improperly. This type of indirect contamination, which a company may not have caused, can result in cleanup costs or environmental claims from neighboring property owners.
As its name suggests, environmental insurance is designed to protect a business from pollution claims resulting from injury, property damage and cleanup costs associated with the accidental escape or release of pollutants or hazardous materials.
Because the potential costs of environmental incidents are so high, those types of incidents aren't covered by commercial property or liability insurance - creating the need for specialized policies dedicated to protecting businesses against environmental risks.
Environmental insurance comes in two basic forms. First-party pollution coverage protects your business against the cost of cleaning up spills or damage resulting from environmental contamination. This coverage may be necessary if your business uses chemicals in its operation, or if your property was contaminated in the past.
Third-party coverage protects your business against allegations that the release of material from your site has affected others, or if your product causes pollution while it is being transported or delivered.
Depending on your industry, other specialized forms of environmental insurance may be appropriate. Customized environmental insurance is available for contractors involved in abatement projects, or who encounter materials during general construction projects. Environmental consultants can also purchase coverage related to their services.
Other types of companies, such as chemical plants, food processors, healthcare facilities, and others, or businesses with storage tanks, should also consider site-specific environmental impairment liability insurance.
Even if environmental exposures rank low on your risk management concerns, a conversation with your agent or broker about environmental insurance may be a good idea.