A Contractors Pollution Liability (CPL) policy provides environmental and non-environmental contractors with third-party coverage for bodily injury, property damage, cleanup, and related defense costs arising from job site contracting operations, transportation risk, non-owned disposal sites, sudden and accidental pollution exposures at owned/leased/rented locations and emergency response events. Covered perils can be broad, including traditional pollution and pollutant conditions, plus silica, lead, mold, fungi, bacteria and many more. From environmental or remedial contractors to general and specialty trades, the CPL policy has become a viable financing option for environmental loss, providing coverage for large or even catastrophic losses at a reasonable premium.
The policy can be written on a project-specific or annual (also known as practice) basis. A project-specific policy requires the insured to provide the name of the project, location, job duration, scope of service and the revenue associated with the job. There is a minimum premium, which applies each and every time a CPL policy is requested for a new job.
An annual- or practice-based policy, on the other hand, covers a contractor’s operations for all projects for the year based on the firm’s projections for that year. The annual-based policy eliminates the need for the contractor to remember and contact a retail agent each and every time he/she lands a project in order to get a policy quote, making this form more marketable. In addition, unlike a project-specific policy, the insured won’t be hit with a minimum premium each time a CPL policy is purchased. If an insured is concerned about cash flow and is looking at a project-specific policy for this reason, this policy type could end up costing more due to the minimum premiums that apply each time. Also, on an annual-based policy, the total revenue is higher so the overall rate will be lower, which benefits the insured.
Ensuring Contractors Understand the Need for a CPL Policy
Contractors face a broader range of environmental exposures than ever before. Within the last decade or more, mold, products pollution (e.g., reactive drywall), jobsite runoff (silt & sedimentation), and USEPA lead-safe construction practices have all emerged as new environmental risks to control. (You can get a more detailed list of common contractor pollution exposures here.) Some may believe that their General Liability insurance will step in, however, most traditional policies contain general exclusions for pollution, and specific exclusions for silica, mold, lead and other pollutants. It’s important for contractors to fully understand their pollution exposure even if they believe their operations will not be the cause of a pollution event. A good way of driving home the need for coverage is by sharing claims examples that illustrate the type of pollution exposures that can be triggered by a contractor’s operation and the costs involved. Here are few claims examples:
- A city hired a paving contractor to finish six roads, which required 2,800 gallons of oil-based sealant to be applied. However, before the sealant could dry, precipitation washed it off the roads and into the city’s storm drains and a nearby stream. The oil-based sealant was found to be potentially harmful and the city inspector ordered the contractor to clean it up. Fifty property owners who lived along the stream filed suit for bodily injury and property damage as a result of the washout. The contractor paid all costs associated with the cleanup and settlements for approximately $600,000.
- A contractor installed an HVAC system in a new office building. Within weeks after opening, the building had to close due to occupants being overcome with breathing problems and headaches. The contactor was one of many parties sued. During discovery it was determined that the HVAC system was installed exactly as the specs described. However, the contractor had to absorb over $250,000 in uncovered defense costs because he had no environmental coverage, therefore, no defense costs.
- While painting the interior of a nursing home, a contractor was sued by over a dozen residents alleging that fumes as a result of inadequate venting overcame them. The total claim was more than $200,000.
RPS provides robust CPL coverage that includes a broad definition of pollutants; pending the carrier quoting it may include fungus, legionella, mold, asbestos, lead, and silica. Monoline CPL coverage is available and can also be provided as part of a package policy. You can review the various options available with our CPL coverage on our online portal as well as quote and bind coverage. If you’d like additional information, please call one of our RPS professionals.