While the need for environmental insurance coverage may be readily apparent for companies that deal with environmental or hazardous waste issues, the coverage can be beneficial to small businesses in a wider variety of industries in some circumstances.
An event as routine as a sewage leak, a delivery truck accident that causes some products to be spilled, disposing of materials from a production process improperly are examples of the types of incidents that can trigger environmental damage and liability claims.
A business that owns its workplace may also wish to consider environmental insurance, especially if that property was used for industrial purposes in the past. A site that appears to be safe and clean may have hazardous materials buried beneath the surface. If a regulatory agency mandates the removal of those materials, or pollutions leech onto a neighboring site, the existing property owner may be held financially responsible for any resulting losses.
Understanding the Coverage
Environmental insurance is designed to protect a business from pollution claims resulting from bodily injury, property damage and cleanup costs associated with the accidental escape or release of pollutants.
Because such incidents are excluded from most commercial property and liability insurance policies, specialized policies focused on environmental risks should be among the insurance topics you discuss with your agent or broker.
First-party pollution coverage protects businesses against the cost of cleaning spills or environmental contamination. This coverage may be necessary if your business uses chemicals in its operation, or if you believe your property may have been 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.
Companies that deal with environmental contamination as part of their operations can purchase specialized forms of coverage. For example, customized environmental insurance is available for contractors (both environmental and general) involved in abatement projects, or who encounter materials during other construction projects. Environmental consultants can also purchase coverage related to their services.
Some companies (such as chemical plants, food processors, healthcare facilities, and others), or businesses with storage tanks, will likely have to purchase site-specific environmental impairment liability insurance.