Mind the GAP: Excluded Pollution Conditions in Environmental Insurance Policies

Written by Carl Spensieri, Vice President, Environment, Berkley Canada

BACKGROUND

Your Company excavates and transports contaminated soils on a redevelopment project. Being an experienced contractor, you implement several best management practices to reduce the amount of dust and odour you generate while doing this work. Further, you even implement a truck inspection and washing process to reduce soil tracking on nearby streets by way of truck traffic. In short, you are a good Contractor!

Unfortunately, your work still generates some dust and odours and neighbouring property owners complain to the municipality and the environmental regulator when they find dust on their cars and lawns.

MIND THE GAP

Despite your best management practices, the Owner of the redevelopment project receives a statement of claim from the nearby property owners. In addition, the Owner is issued a fine by the environmental regulator for allowing contaminants (dust) and odour to escape into the environment. The Owner, in turn, issues a demand letter requesting that you pay for defence costs and the environmental fine.

Thankfully, you buy a Contractor Pollution Liability (CPL) policy.  Can you identify the GAP?  The majority of CPL policies sold in Canada do not cover this exposure!

THE DETAILS

In general, CPL policies define POLLUTION CONDITION to mean:

the discharge, release or escape of any solid, liquid, gaseous or thermal irritant or contaminant, …, into or on land, any structure on land, the atmosphere or any watercourse or body of water, including groundwater.

Do you think dust and odour fall within this definition? While the above noted definition is very broad, the majority of CPL Policies sold in Canada introduce the following restriction:

 …provided such discharge, release or escape is unexpected and unintended …

Given all the actions taken the by the Contractor to manage the dust and odour risk, it is not possible to suggest the dust and odours generated while excavating and transporting are unexpected and unintended. This results in no cover being afforded for this claim.

THE SOLUTION

The solution is simple. Ensure your CPL policy does not include this restriction. When buying CPL insurance in Canada it is important to understand not all policies are created equal. Failing to recognize this GAP could cost you and your clients!


About the Author

Carl is a licensed professional engineer in the Province of Ontario with 20 years of experience in environmental liability assessment, management and insurance. He is a business leader focused on driving profitable growth through innovative specialty insurance solutions.  He is considered a positive business disruptor that seeks to deliver the best outcomes for his clients. Berkley Canada is a specialty insurance carrier.