Risk & Business Magazine Cain Insurance Fall 2016 | Page 6

ENVIRONMENTAL LIABILITY

BY: MARC LEBRUN, FCIP, CRM,
ENCON GROUP, INC.

Environmental Liability:

The Importance Of Stand-Alone Coverage

P

ublic awareness and concern
for the fragility of our natural
environment has heightened in
recent years thanks in part to
the media attention that large
environmental accidents have attracted.
One of the side effects of this publicity
is that companies are increasingly aware
of their environmental exposures.
Owners, risk managers and government
agencies at all levels are now requesting
environmental coverage for the businesses
with whom they contract. As a result, a
growing number of engineering firms
are being asked to provide proof of
contractors’ pollution liability insurance
coverage on awarded projects.
In our experience, most contractual
insurance requirements that include
contractors’ pollution liability insurance
coverage have been specific with respect
to the policy form demanded. Some firms
may question why their commercial
general liability (CGL) policy will not
suffice. The answer is that the majority of
CGL policies contain either an absolute
pollution exclusion or a total pollution
exclusion. While it’s true that some CGL
policies can provide limited pollution
coverage by endorsement (typically
referred to as “sudden and accidental
pollution coverage”), contractual
insurance requirements often stipulate
that pollution liability insurance must
include coverage for gradual pollution
conditions. This is an important
distinction as many pollution-related
losses occur over a period of time that
is much longer than the 120- or 2406

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FALL 2016

hour time limitation found in the CGL
limited pollution endorsements.
A stand-alone contractors’ pollution
liability policy can satisfy the requirement
for gradual pollution as the vast majority
of these policy forms provide coverage for
sudden and gradual pollution conditions.
It provides coverage for bodily injury,
property damage, and cleanup costs
arising from pollution conditions that

“SOME FIRMS
MAY QUESTION
WHY THEIR
COMMERCIAL
GENERAL
LIABILITY (CGL)
POLICY WILL
NOT SUFFICE.”
result from covered operations performed
by the named insured, or on the named
insured’s behalf, at a job site. For an
engineering firm, covered operations
may range from the drilling of boreholes
to physical soil and groundwater
sampling. Typically, these policies do not
exclude operations of subcontractors
hired by an engineering firm.
The policy form is available on either a
claims-made and reported basis or an
occurrence basis and provides coverage

for monetary awards or settlements of
compensatory damages. Some forms
also include coverage for punitive
damages and civil fines, penalties, or
assessments. Coverage for cleanup
costs includes not only the reasonable
and necessary expenses incurred in the
investigation, removal, or remediation
of pollution conditions but also the
associated monitoring or disposal of soil,
groundwater, or other contamination to
the extent required by environmental law.
In addition to this trend of broader
contractual insurance requirements that
include contractors’ pollution liability,
engineering firms and consumers alike
have an increasing awareness and
concern about environmental- and
pollution-related issues. Firms must
provide quality, specialized services
while maintaining the highest possible
standards of environmental protection
to ensure the safety of consumers. At
the same time, firms need to protect
themselves—their investments and their
reputations—against any allegations
of negligence arising from pollution
or environmental exposures. +
Marc LeBrun is vice president of
construction
and
environmental
insurance at ENCON Group Inc.
ENCON is a managing general agent
with over fifty years of experience
in specialty insurance, including
professional liability, CGL, construction,
and environmental insurance. For more
information, please visit www.encon.ca.