Limited Pollution Coverage vs Pollution Liability Insurance
No matter what the project is, there will always be a responsibility to minimize pollution levels. However, precautionary measures can’t prevent damage 100% of the time—and that’s where reliable insurance policies step in.
Some contractors have commercial general liability insurance that includes limited pollution coverage. As the name suggests, this coverage has a number of limitations that contracting businesses need to be fully aware of. If a business relies on limited pollution coverage too much, the biggest risk here is a false sense of security.
Is your limited pollution coverage enough? Or do you need the added protection of contractor’s pollution liability insurance (or CPL insurance)?
This article covers the common limitations of limited pollution coverage or “sudden and accidental pollution coverage.” From here, you will be a step closer to determining if your business needs contractor’s pollution liability insurance.
Is Pollution Covered Under CGL?
Before anything else, let’s discuss this common question about pollution and commercial general liability insurance.
Commercial general liability insurance is designed to protect businesses from a wide range of third-party liabilities, including those related to bodily injuries, property damage, and so on. Though pollution can cause injuries or illness to third-party individuals, it is usually excluded from CGL policies. In fact, CGL policies can have a “Total Pollution Exclusion.”
Total Pollution Exclusion in CGL policies means that the insurer will not give payouts for bodily injuries, illness, or property damage arising from an incident of pollution (e.g. spills, leaks, seepage, and other ways of releasing harmful pollutants).
However, not all CGL policies are the same. Some CGL policies for contractors have an endorsement known as “limited pollution coverage” or “sudden and accidental pollution coverage.”
What Does Limited Pollution Coverage (in CGL) Mean?
Limited pollution coverage is an endorsement found in some CGL policies. It is not a stand-alone policy. As an endorsement, it provides a degree of protection, typically resulting in a higher premium for the CGL policy that it’s a part of.
Limited pollution coverage is also known as “sudden and accidental pollution coverage.” It is designed to cover incidents of sudden pollution that occur within insured premises. These need to be detected within 120 to 240 hours (and reported immediately) for coverage to be valid. In some cases, the timeframe is as little as 72 hours.
In addition to the time frame limitations, this endorsement usually does not cover clean-up costs for incidents of pollution.
What is Pollution Liability Insurance or CPL Insurance?
Contactor’s Pollution liability insurance (or CPL insurance) is a specialized type of insurance that covers liabilities from sudden and gradual incidents of pollution. This type of insurance can also cover mould introduction/proliferation and legionella contamination.
When an incident of pollution occurs and lawsuits arise, pollution liability insurance covers the following:
- Legal fees and settlements
- Clean-up costs
- Emergency response costs
CPL insurance is typically recommended for contractors who do the following:
- Repairs, construction, and renovation inside a third-party property.
- Installation or repairing fixtures/appliances that come in contact with water.
- Services that will affect the air quality of a structure or space.
- Soil excavation or directly handling old storage tanks.
- Construction, roadwork, or landscaping near a body of water.
- Handling toxic substances or potential pollutants.
CPL Insurance vs. Limited Pollution Coverage: A Side-By-Side Comparison
From the above definition of CPL insurance, it’s clear that it’s far more comprehensive than a limited pollution coverage endorsement in a CGL policy. But just how big is the difference between these two?
Here is a side-by-side comparison:
|Coverage Points:||Limited Pollution Coverage
(Sudden and Accidental Pollution Coverage)
|Pollution Liability Insurance|
|1. Coverage for sudden incidents of pollution||Yes (limited)||Yes|
|2. Coverage for gradual incidents of pollution (e.g. slower spills, mould, legionella)||No||Yes|
|3. Coverage for sudden pollution that is only detected approx. 240+ hours after||No||Yes|
|4. Coverage for clean-up costs and emergency response costs||Typically excluded||Yes|
|5. Coverage for pollution that happens within the job site||Yes (limited)||Yes|
|6. Coverage for pollution that occurs outside of the job site or business premises||Typically excluded||Yes|
|7. Coverage for damages due to pollution (injuries and property damage)||Yes (limited)||Yes|
In the above table, you will notice that the entire scope of limited pollution coverage is marked as “yes (limited).” This is to emphasize that although some incidents are covered, the coverage can be further limited based on the following:
- When pollution occurs;
- Where pollution occurs; and
- The source of pollution (e.g. underground storage tank leaks can be excluded.)
All in all, limited pollution coverage only accounts for a fraction of what pollution liability insurance can. This can also extend to the coverage limit itself. While most pollution liability insurance plans have coverage of up to $1 to $2 million, the endorsement for limited pollution coverage can be capped by the insurer at only a “reasonable cost.” Usually, when this kind of limiting statement is used in a CGL policy’s endorsement, the insurer has more control over how much the payout will be. The payout may or may not fully cover the incident, depending on their assessment of costs.
Can I Have Both Pollution Liability Insurance & Limited Pollution Coverage Endorsement?
Though it’s possible to have both limited pollution coverage (under CGL insurance) and a full contractor’s pollution liability insurance coverage, this setup is usually not recommended. An endorsement for limited pollution coverage will raise the premium of your CGL policy.
By having both, you will have costly redundancies in your insurance.
If you’re looking for a complete way to manage pollution liability risks, we recommend doing the following, instead:
- Employ strategies for reducing or avoiding pollution (including the often-overlooked mould and legionella contamination).
- Get CPL insurance that is tailor-fit for your contracting business.
Protect Your Business with Personalized CPL Insurance
Contractors Insurance is an insurance brokerage firm based in Ontario that is known for providing award-winning service. Through the years, we have provided numerous contractors with personalized insurance that they can count on.
Our contractor’s pollution liability insurance covers sudden pollution, gradual pollution, mould, and legionella. We can also personalize your CPL insurance so that you get exemplary coverage without unnecessary (and costly) riders.
Get peace of mind and take the first step to a secure future for your business. Contact our team today!BACK TO ALL ARTICLES