Risk management

Pollution liability

Clause

Pollution Liability Insurance covering Contractor’s or appropriate subcontractor’s liability for bodily injury, property damage and environmental damage resulting from sudden accidental and gradual pollution and related cleanup costs incurred by Contractor, all arising out of the Goods delivered or Services (including transportation risk) performed under this Contract is required.  Combined single limit per occurrence shall not be less than $__________________.  Annual aggregate limit shall not be less than $_________________.

An endorsement to the Commercial General Liability or Automobile Liability policy, covering Contractor’s or subcontractor’ liability for bodily injury, property damage and environmental damage resulting from sudden accidental and gradual pollution and related clean-up cost incurred by the Contractor that arise from the Goods delivered or Services (including transportation risk) performed by Contractor under this Contract is also acceptable. 

When do they apply?

  • Use when a Contractor will be using, removing, hauling, storing, or disposing of hazardous materials, including lead and asbestos. Normally used to clean up pollution excluded by other policies. Sudden and Accidental Pollution coverage is usually required when contracts specify using, removing, or hauling hazardous materials. Gradual pollution coverage is usually required for contracts involving storing, or disposing of hazardous materials (in addition to Sudden and Accidental coverage). 

Hazardous material defined

  • A hazardous material is any item or agent (biological, chemical, radiological, and/or physical), which has the potential to cause harm to humans, animals, or the environment, either by itself or through interaction with other factors. ​​

  • Hazardous Material includes lead and asbestos, such as when a contractor is involved in lead and/or asbestos removal/abatement.

  • OSHA's definition includes any substance or chemical which is a "health hazard" or "physical hazard," including: chemicals which are carcinogens, toxic agents, irritants, corrosives, sensitizers; agents which act on the hematopoietic system; agents which damage the lungs, skin, eyes, or mucous membranes; chemicals which are combustible, explosive, flammable, oxidizers, pyrophorics, unstable-reactive or water-reactive; and chemicals which in the course of normal handling, use, or storage may produce or release dusts, gases, fumes, vapors, mists or smoke which may have any of the previously mentioned characteristics. (Full definitions can be found at 29 Code of Federal Regulations (29 CF​R 1910-1200.)

  • EPA incorporates the OSHA definition, and adds any item or chemical which can cause harm to people, plants, or animals when released by spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment. (40 CFR 355​ contains a list of over 350 hazardous and extremely hazardous substances.)

  • DOT defines a hazardous material as any item or chemical which, when being transported or moved in commerce, is a risk to public safety or the environment, and is regulated as such under its Pipeline and Hazardous Materials Safety Administration regulations (49 CFR 100-199), which includes the Hazardous Materials Regulations (49 CFR 171-180).

Notes

  • Covers bodily injury and property damage liability caused by pollution incident and reasonable and necessary clean-up costs for an actual or potential incident. The policy can cover sudden and accidental, or gradual pollution, or both.
  • Pollution Liability Coverage insurance policies are usually issued on a “claims made” basis. Require "Tail" Coverage for all "claims made" coverage. Note: "Tail" Coverage should be required for a minimum time period of ten years for this type of exposure. May be endorsed onto Commercial General Liability and/or Automobile Liability coverage (with separate limits). Blanket or project-specific pollution liability coverage is normally available.
  • Note: Although there are standard endorsement extensions and policies that enable insurers to provide pollution liability coverage, most pollution liability forms are manuscript policies designed by individual insurers interested in writing pollution liability coverage
  • For Asbestos removal contracts, if possible, get a policy endorsement for Asbestos liability (with separate limits.) If the pollution liability policy cannot be endorsed for Asbestos liability, have the Contractor or appropriate sub-contractor get a separate policy. Asbestos abatement liability policies cover third party bodily injury or property damage arising out of the removal of asbestos by the Contractor or appropriate sub-contractor from specified locations during the policy period.

Setting limits

  • Use the Risk Assessment tool to assess the risks of the particular contract to determine appropriate insurance limits and risk control measures. Ask questions such as, but not limited to: What is the potential loss exposure if something goes wrong when handling the hazardous materials? Probable costs associated with this exposure include bodily injury, property damage, clean-up and defense costs