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Contractors pollution liability insurance

Contractors pollution liability (CPL) insurance is a type of environmental insurance that covers pollution liability risks for contractors and their subcontractors.

What is contractors pollution liability insurance?

Pollution liability coverage provides those in construction management with third-party coverage for pollution incidents that result from the contractor’s work. It’s similar to business environmental liability insurance that insures against environmental risks.

What does contractors pollution liability insurance cover?

A pollution liability insurance policy covers things like third-party bodily injury, property damage, mediation, and legal defense costs for pollution events that happen as a result of a contractor’s work.

This includes pollution incidents directly caused by a contractor, or from work done on a contractor’s behalf, by subcontractors and others.

Contractors face pollution risks in their work, which may involve working with toxic materials. A construction site can generate high levels of silica dust and particulate matter that can travel considerable distances, leading to public complaints and lawsuits over pollution conditions.

Keep in mind that contractors pollution liability policies can be written as claims-made insurance or occurrence based:

  • Claims-made policy: Only provides benefits if you file a claim from an incident that happens while your pollution insurance is active (during the policy term)
  • Occurrence-based policy: Also known as an occurrence basis policy, covers losses that happen during the policy period, even if your policy is no longer active
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What kinds of pollution liability risks do contractors face?

Contractors face all kinds of pollution risks, from dust and debris to unknown contaminants stirred up by renovations and demolitions.

For example, a storage tank might leak dangerous substances without being detected, especially if underground. An underground tank could unexpectedly turn up during excavation and renovation work.

Or, a construction site could be contaminated by any number of unknown pollutants that are discovered during construction or renovation work. A contractor might be asked to sign a hazardous waste manifest, without realizing the full nature of risks at a particular job site.

Also, spills can happen for a number of reasons, such as a collision during transport, faulty equipment, or vandalism.

Here are some of the other types of pollution exposures that contractors face:

  • Asbestos could be unexpectedly discovered or disturbed during demolition or renovation work
  • Excavation and grading work could reveal contaminated soil or naturally occurring asbestos
  • HVAC maintenance could release mold or airborne bacteria, such as legionella
  • Fuel and chemical spills can happen on worksites, or while transporting materials
  • Wetlands and surface water could be impacted by excavation work, or contaminated from a spill

What is the cost of contractors pollution liability coverage?

A small business owner calculating their environmental liability insurance payments.

On average, environmental liability insurance costs about $223 per month. Your exact cost may vary depending on the type of work you do and your risk of causing environmental damage or pollution.

Many small business owners obtain their contractors insurance or pollution coverage by adding it as an endorsement to an existing general liability policy, which typically excludes this coverage.

What impacts the cost of your contractors pollution liability policy?

Your insurance company will consider several risk factors, starting with your type of business and location, as this has a direct impact on your odds of facing a claim and how expensive it could be.

Working in an area that’s known for pollution risks, such as brownfield sites, increases your chance of filing a claim. If you work in an area with expensive real estate, it could increase any cleanup costs and third-party claims in case of a mishap.

Other factors the insurance company considers include:

  • Whether you handle hazardous materials, or your odds of dealing with them
  • Your number of employees and their risk exposures
  • Your annual payroll, employees, and subcontractors

Who needs CPL coverage?

Most construction contractors could benefit from a CPL policy. It may be required to qualify for certain contracts, and a customer may ask to see your proof of insurance before hiring you for a job.

For example, an excavator digging a foundation, or demolishing an old one, could unexpectedly damage an old storage tank that wasn’t listed in any of the property records. If any fuel, oil or other contaminants leak during the excavation work, the contractor could face expensive remediation work and lawsuits.

Demolishing an old building could result in dust and debris spreading over a neighborhood. The pollution liability would be considerable. Any claims would be even more substantial if toxic substances were released, or if an emergency response is required by the local authorities.

General contractors could also benefit from pollution liability coverage, as they face multiple risks from their own work and that of subcontractors.

What are the minimum requirements and limits for CPL insurance?

Generally speaking, the minimum coverage requirements are $5,000 for the minimum self-insured retention. This is similar to insurance deductibles, as this is the amount you would be required to pay on an environmental loss before your CPL insurance would kick in.

The maximum coverage limit for pollution liability insurance is $25 million, both per incident and aggregate, including your legal defense costs. There could also be sub limits that apply to certain coverages within a pollution liability claim.

How do I get contractors pollution liability insurance?

You can buy pollution liability insurance coverage as a standalone policy. You could also add it to your existing commercial general liability insurance or a commercial package policy (CPP) as part of your risk management insurance program.

General liability insurance covers the types of risks faced by any business such as customer injury, damage to a customer’s property, and advertising injury.

A CPP combines your general liability and property insurance into one policy, with more flexible coverage options for businesses facing higher risks.

Keep in mind that either of these coverages would likely have pollution exclusions, unless you ask your insurance provider to add this coverage.

Fill out our free online application to get quotes from top-rated providers. You can also contact an Insureon agent if you have any questions on finding the right coverage.

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Updated: June 30, 2023

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