The COVID-19 pandemic has many businesses reviewing what is and what is not covered by their insurance policies. It is easy to assume you have all the coverage you need until you suffer a loss and your claim is denied. One set of exclusions that consistently blindsides policyholders are for Pollution, Fungus, Bacteria and Asbestos. These are often grouped as “environmental risks”. Whether these exclusions are on your Property, Commercial General Liability or Directors & Officers Liability policy, they can leave a potentially devastating loss uncovered.
So why do so many companies not focus on environmental risks?
One common misconception is that only a business that deals explicitly with pollution or hazardous materials, like a garbage collection company, chemical manufacturer or asbestos remediation business, needs this type of coverage. This certainly is a primary concern for those companies, but there are real environmental exposures for almost all businesses. Incidents such as fuel spills, gas escaping from a refrigeration unit, toxic mold growth, Legionella in a building’s water system and many more are examples of environmental losses that can impact all types of companies.
Another factor is the legislative and legal shifts that a company may not know about. The Canadian Environmental Protection Act of 1999 puts a lot of strength behind the “Polluter Pays” principle. This means the company or person determined to be responsible for pollution event gets the bill. It does grant further power to the government to assign costs if it is in the public interest to other involved parties when the actual polluter cannot be determined or is unable to pay.
In the case of a fuel leak in the Kawartha Lakes, the city was stuck cleaning up a spill after the original property owners ran out of money. Even the directors & officers of a business can be held responsible for clean up costs, which was the case when Northstar Aerospace Inc. declared bankruptcy while owning contaminated property that needed costly remediation.
Considering that COVID-19 has and continues to cause extreme financial hardships, this can increase the likelihood of more businesses being unable to afford extensive clean-up costs. Your neighbour may be the polluter, but if they have no money you could end up paying the bill for any pollution that is found on your property.
Lastly, a lot of companies believe they are fully covered already because they have purchased some type of pollution coverage. This is understandable, as many policies have extensions or endorsements that provide limited versions of environmental risk coverage. With all the names that insurers use and all the throw-ins it can be hard to tell if you have the right coverage or the right limit. There can be time limitations on discovering and reporting an incident, such as with Sudden and Accidental Pollution Liability on a Commercial General Liability Coverage. It is important to note that such a coverage extension would not pay to clean up your own property. A coverage such as Pollution Clean-Up on a Property policy is good to see, but the limit may be relatively low and may only be available when there has been another covered loss such as a fire.
Even if you have purchased coverage, that coverage can change. COVID-19 has resulted in new exclusions being applied by insurers. The intent is to exclude any claim relating to the pandemic, but if they use general terms like ‘contagious disease’ or ‘bacteria and virus’ it can create new gaps in your coverage. Suddenly a previously insured claim, such as a legionella outbreak, may no longer be covered.
The environmental risks facing business are complex and continue to shift. Ensure you review your insurance program regularly with a licensed insurance broker. The experts at Purves Redmond Limited are here to help. For more information, contact:
Client Executive, 416.668.9550, firstname.lastname@example.org