The
insurance industry calls them "pollution incidents," and they could mean
financial devastation for your company. The reason? Your property and general liability
insurance policies may not cover damage from gradual leakage or sudden releases of
chemicals or gasoline.
This is, of course, the reason insurance companies have introduced pollution liability
insurance.
The most common use of pollution insurance is to protect buyers, sellers and lenders in
commercial property transactions. Traditionally, buyers have hired environmental
consultants to conduct site assessments, which usually take three to four weeks to
complete at a typical cost of $3,000-to-$5,000. In addition to the delay involved, another
drawback of site assessments is they express the consultant's opinion of the condition of
the site at the present time and do not consider future discoveries or incidents.
By contrast, pollution liability insurance protects the policyholder for the term of the
policy (typically up to 10 years and renewable) for any future incident or discovery of
previous damage. And it's generally less expensive than performing a site assessment. For
example, environmental liability insurance on a $2 million service station will cost
approximately $3,500 for $1 million of coverage for a five-year term.
This is such a useful, flexible, economically advantageous way to manage environmental
risks that I expect that within a few years it will become as common as title insurance in
real estate transactions. Any business whose ongoing operations involve the storage,
handling or transportation of materials that, should they be released into the
environment, would be considered pollutants should look into this type of coverage.
The insurance protects you when the pollution event occurs on your property, as well as
when you suffer damages because of pollution at a nearby property. So if your neighbor's
chemical spill migrates to your property, your insurer takes care of the cleanup and the
responsibility for recovering costs from the party that caused the problem. By the same
token, if you cause damage to other property, your policy pays. Policies also cover bodily
injury caused by pollution and may even be written to cover loss of business income due to
a pollution incident.
Environmental coverage is a relatively new product, so check with your insurance agent for
details on coverage in your area.
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