FEATURES
ENVIRONMENTAL INSURANCE
GOING MAINSTREAM No longer a specialty coverage, environmental insurance is becoming ever more necessary to cover exclusions in general liability policies – and it’s likely cheaper than your clients think MOLD. EBOLA. Toxic vapors. Fracking. It sounds like the setting of a scary movie, but it’s actually just a glimpse into the murky waters the environmental insurance industry plies on a daily basis. With 40 or so carriers vying to cover pollution exposures in the US and a robust market capacity of more than $600 million, the environmental insurance sector is a surprisingly stable and competitive marketplace marked by both overcapacity and growing demand, where agents and carriers alike have to fight to hold on to their best clients. Environmental insurance got its start covering superfund-sized site pollution risks and asbestos abatement and containment in the 1970s. It has evolved since then to become less of a specialty coverage and more of a necessary purchase for day-to-day operational risks for all manner of contractors and consultants – both environmental and non-environmental – running the gamut from window installers to hazardous waste cleanup contractors. The environmental contractors and consultants industry segment is where many carriers and wholesalers still find their meat and potatoes. But the real gravy in the sector over the past several years has shifted to Main Street businesses that are realizing they have environmental exposures – and that coverage for these exposures is actually within their reach. “It really helps for agents to understand that pollution coverage on a monoline
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basis is affordable now,” says Bill Pritchard, president and CEO of Beacon Hill Associates, a national wholesale broker and industry expert specializing exclusively in commercial environmental insurance solutions. “A lot of agents still are stuck in a mindset … that pollution coverage is expensive. It currently is very easy and affordable to get quality coverage. Most agents don’t realize this is something they can sell.”
Pollutant protection The environmental insurance business is largely driven by the pollution exclusion in the standard general liability policy. That exclusion applies to anything that could meet the definition of a pollutant, be it solid, liquid, gaseous, or a thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals or waste. What qualifies as a pollutant frequently gets hashed out in the courts, where some game-changing cases have been decided over the past year. One recent case in Wisconsin, for example, involved bacteria contamination in drinking
water wells stemming from a dairy farm’s practice of spreading manure on a field. The Wisconsin Supreme Court ruled that it should be an excluded cause of loss under the common pollution exclusion used in liability insurance policies. On the same day, the court also ruled that nitrates in groundwater (also stemming from spreading manure on a field) should be an excluded cause of loss. In commentary published by the International Risk Management Institute, David J. Dybdahl, president of the American Risk
“I think ... Main Street businesses that recognize they have an environmental exposure are creating a marketplace for environmental carriers” Stacy Brown, Freberg Environmental
www.ibamag.com
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