Environmental liability has become a major concern for workers in the construction industry. Regardless of how strict your environmental management plans are, pollution, contamination or even hazardous material exposure can still occur.
These types of incidents can lead to bodily injury and property damage. Without a proper environmental liability policy, you could face significant financial and legal costs.
In this guide, we’ll explore the importance of having an environmental liability insurance policy, answering key questions like “What is environmental liability insurance?” and “What does environmental liability insurance cover?” We’ll also explore coverage options and a few real-life case studies that benefited from these policies.
What Is Environmental Liability Insurance?
Environmental liability insurance, also known as pollution liability insurance, covers the costs associated with damages caused by the business during its operations. It’s a type of liability insurance that shouldn’t be confused with commercial general liability insurance, which typically excludes pollution risks.
What does environmental liability insurance cover? It provides coverage for a variety of risks, including:
- Accidental spills or leaks of hazardous materials
- Contamination of air, soil or water
- Remediation and clean-up costs
- Third-party claims for bodily injury and property damage
- Legal defence costs in environmental/pollution lawsuits
Many contractors may think they’re immune to pollution incidents and don’t need pollution insurance. Numerous factors highlight the importance of this coverage.
Why Contractors Need Environmental Liability Insurance
Beyond bringing peace of mind, environmental liability insurance positions contractors as proactive and responsible, demonstrating strong risk management practices. Below are a few key reasons why a contractor might need a pollution liability policy.
Project/Contract Requirements
Most projects require environmental liability insurance from contractors. While it was once thought to be necessary only for government projects, its use has increasingly expanded into the private sector.
Protecting Against Financial Losses
Environmental incidents can be costly, from clean-up to medical claims and legal disputes. One accident could have a detrimental financial burden on a contractor's business.
Regulatory Compliance
Canada has strict environmental laws, including the Canadian Environmental Protection Act. These laws hold contractors responsible for ensuring projects comply with the relevant regulations. Contractors who fail to comply can be hit with large fines, legal action, and damage to their reputation.
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Environmental Liability Insurance Coverage Options
Pollution liability policies can be tailored to meet the specific needs of a contractor. The most common types of environmental insurance coverage options are listed below.
Contractors Pollution Liability Insurance
Contractors pollution coverage is for pollution-related claims that arise from a contractor's operations. This would include bodily injury, property damage, clean-up, and emergency response costs.
Premises Pollution Liability Insurance
The premises pollution liability coverage is important for contractors who own property or operate facilities with potential environmental risks. It protects against contamination-related expenses, including clean-up costs, legal fees, and any remediation efforts that may occur.
Transportation Pollution Liability Insurance
Transportation pollution liability insurance provides coverage for contractors who transport hazardous materials. It provides coverage for any spills, leaks or accidents that could occur during transportation of hazardous items.
Errors and Omissions
This coverage is tailored specifically for professionals in environmental consulting. Errors and Omissions coverage protects any contractors who participate in environment assessments, planning or risk management services.
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Environmental Liability Insurance in Action
While these instances may seem unlikely, there are real-life instances of environmental liability insurance saving contractors from significant damages and expenses. Here are some examples of these scenarios:
Case Study # 1 - Asbestos Exposure in Ontario
While renovating a heritage building, a contractor in Toronto unknowingly disturbed asbestos materials. The airborne particles led to several individuals suffering from health issues. The contractor's environmental liability policy covered their medical claims and clean-up costs. This allowed the business to continue operating without absorbing these costs themselves.
Case Study # 2 - Oil Spill in British Columbia
A construction company in BC accidentally ruptured an oil pipeline, causing a significant spill into a waterway. The cleanup costs exceeded $2.5 million and the company faced numerous lawsuits from businesses and individuals impacted by the spill. Their contractors pollution liability insurance policy covered clean-up expenses and legal fees.
These are just a few examples of how your environmental impairment liability insurance can protect you in the future. Remember, it’s sometimes the unexpected item that causes environmental damage. Ensure you have the right insurance coverage in place.
Choosing the Right Environmental Liability Insurance Policy
Keep these key factors in mind when selecting an environmental liability insurance policy:
- Assess your business risk—Determine if your operational policy provides sufficient coverage for your specific environmental risks.
- Review policy limits and exclusion—Understand what’s covered and ensure the policy limits provide adequate protection for your business.
- Understand the claims process—Familiarize yourself with how claims are handled to avoid surprises when you need coverage.
- Ensure flexibility for growth—Choose a policy that can adapt to your business’s evolving needs and expansion plans.
Work with KASE Insurance For Your Environmental Liability Insurance
Answering “What is environmental liability insurance and what does it cover?” scratches only the surface of this policy’s importance for contractors. It safeguards you against unexpected accidents, shielding you from hefty expenses while providing invaluable peace of mind.
Contractors have various needs and risk exposures. Working with a specialized insurance broker will help you find the most comprehensive coverage for your business. If you’re a contractor in Canada now, is the time to explore your options!
For expert advice on finding the right pollution policy for you, contact KASE Insurance today.