According to the Environmental Protection Agency (EPA), 25% or 160 million tons of non-industrial waste generation in the United States is caused by construction activity, which includes land clearing, demolition, burning, and working with toxic materials. In addition, construction sites generate high levels of dust (typically from concrete, cement, wood, stone, silica), which can carry for large distances over a long period of time. The bottom line: the tools used and various activities performed on job sites can potentially negatively impact public safety and the environment, leading to lawsuits and claims and reputational damage for a construction operation.

Pollution Exposures

Let’s take a look at some of the types of pollution exposures faced by contractors.

• Operational exposures related to the construction services performed, such as paving, mechanical or excavation/grading. Examples include: 

• • Excavation through spreading unknown pre-existing contaminated soil
  • Disturbing naturally occurring asbestos
  • Fuel or chemical spills brought to project sites
  • Completed operations from improper line hook-up
  • HVAC construction or maintenance errors that release airborne bacteria or mold
  • Impacting surface water or wetlands from excavation or drilling

• Owned premises exposures, including: 
  • Leaking underground or above-ground storage tanks
  • Unidentified, pre-existing contamination from previous site owners
  • Contamination from spills of oils, fuels, lubricants, etc.

• Transportation exposures typically related to the movement of remediated or hazardous materials from a construction site to a disposal site. Examples include: 
  • Spills during transport to an off-site depository
  • Pollution resulting from collisions
  • Spills due to vandalism
  • Leaks from externally mounted fuel tanks

• Disposal issues: 
  • Inappropriate product disposal
  • Mishandled delivery of unidentified contaminated fill
  • Retroactive liability under Superfund for past disposal practices
  • Signing a hazardous waste manifest document as an agent for the owner

Claims Examples

When a drywall contractor was hanging new drywall for a new construction project, he didn’t realize his employee accidentally drilled through a small water pipe. It takes just 36 hours for mold to grow once water leaks, and substantial mold grew between the walls before anyone noticed. The drywaller was held responsible for third-party injury claims from mold exposure, in addition to the costs of cleanup.

When an HVAC contractor installed a new system in an office building, he didn’t realize the ducts had been improperly sealed. Once office employees began to get sick, it was discovered that the improperly sealed ducts had let condensation build up, and legionella bacteria had been sent airborne throughout the office. The employees brought a lawsuit against the contractor and property owner.

Coverage for Pollution Risks

To respond to the various pollution risks contractors face, it’s critical that Contractors Pollution Liability (CPL) insurance be an integral component of a comprehensive risk management program. Commercial General Liability insurance will not step in and provide coverage in the event of a pollution incident. Most General Liability policies for contractors contain exclusions for asbestos, lead, fungi, bacteria, silica and silica dust claims – and usually a total exclusion of pollution. Typical exclusionary language in a General Liability policy is as follows: “any bodily injury or property damage liability occurring as a result of actual, alleged, threatened discharge, seepage, migration, release or escape of ‘pollutants’ at any time.” This exclusion also eliminates any coverage for testing, cleaning up, treating, detoxifying and removing pollutants from the site. 

Contractors Pollution Liability coverage provides protection for claims against contractors arising from pollution conditions resulting from the operations of the contractor or its subcontractors.  This includes coverage for third-party bodily injury and property damage, defense costs, and cleanup. Coverage will respond to construction and remediation operations if remediation operations are designated as a covered contracting service performed by either the contractor or subcontractor. Coverage may also include non-owned disposal sites, transportation exposures and owned premises, etc.  In addition, the CPL policy typically covers site run-off, a leading cause of water contamination if the run-off contains pollutants.

Many insurance companies offer both Contractors Pollution Liability and Pollution Legal Liability (PLL) under combined forms, which will address both operational exposures and the exposures evident in owned premises. PLL coverage protects property owners against contamination risks associated with ongoing facility operations including indoor air quality, fire/explosions and the release or escape of hazardous materials. Coverage may be tailored to address on- and off-site liabilities, cleanup costs and bodily injury or property damage arising from new and pre-existing pollution conditions.

Policies can be offered on a project or blanket program basis.

Who Should Buy Coverage?

Contractors who work in the following areas should be purchasing pollution coverage:  

• Demolition 
• Street and road
• General contractors
• Maintenance 
• Sewer, waste and utility 
• Electrical, HVAC and mechanical
• Industrial and pipeline
• Above/below ground storage tanks
• Grading, site and excavation
• Roofing 
• Abatement and remediation

Even with the financial risks at stake as a result of a pollution incident occurring during a contractor’s operation as well as the number of environmental exposures inherent on the job, it’s estimated that there are only about 25,000 contractors purchasing Contractors Pollution Liability coverage in the construction industry today. This represents only three to four percent of the total construction or contracting entities in the U.S. today, which ranges from 650,000 to 750,000, putting many at risk due to the lack of having the proper insurance program in place.

About NorthStar Insurance Services

Our deep construction industry experience at NorthStar Insurance Services enables us to help our clients secure comprehensive insurance that addresses their individual risk profile, including the need for Contractors Pollution Liability insurance. For a consultation, please call NorthStar’s office at (800) 301-1944 to speak with a member of our team.

Sources: IRMI, Construction Business Owner