Does your business insurance include a land and water extension? Most businesses have Commercial General Liability (CGL) insurance that may protect them in the event of a third party claim for bodily injury or property damage arising out of their premises and operations, but while some CGL policies include limited coverage for environmental losses, relying on a CGL to fully cover environmental exposures is not prudent risk management and additional coverage may be required.
Under the following circumstances, business owners should consider purchasing Fixed Site Pollution Insurance if:
- Your Commercial General Liability (CGL) Insurance has a pollution exclusion clause. The Pollution Exclusion is a standard clause often found in many CGL policies. Its purpose is to exclude losses arising out of the discharge or escape of pollutants into the environment. One of the common exceptions found within the pollution exclusion is with respect to bodily injury or property damage arising out of heat, smoke or fumes from a hostile fire.
- There are limitations in the Land and Water Pollution extension provided by your Business Insurance. In conjunction with CGL coverage, most insurers also provide an extension for Land and Water Pollution in a Business Insurance Package. The primary intent of this extension is to cover expenses incurred to clean up pollutants from land and water at an insured premises. However, the spill or escape of pollutants must be:
- in conjunction with loss or damage to insured property; and
- sudden, unexpected and unintended.
While this extension does provide coverage that applies in certain situations, businesses should be aware of its limitations. The Land and Water Pollution extension specifically applies only to “expenses incurred to clean up pollutants from land and water at an insured premises.” As such, there appears to be no coverage available for third party claims for bodily injury or property damage regarding a spill or escape of pollutants. Similarly, the Land and Water Pollution extension does not cover cleanup costs at a third-party premises. This is of particular importance to note because when pollutants enter surface water or ground water, they can migrate to adjacent premises and waterways quickly.
- Responding to an environmental crisis can be a costly undertaking. A crisis that is managed poorly can result in serious reputation and financial damage to a business, which could threaten the ability of the business to continue operations.
- Fines, penalties, assessments and punitive damages can be costly. Public awareness and concern for the health of our natural environment has increased in recent years. It is important that business owners be aware of the environmental risks posed by their businesses, given that in some cases the assessment of fines and penalties has been as high as $300,000. It is also important to note that CGL policies typically only cover the insured for compensatory damages. These are damages that are payable to compensate for actual injury or economic loss. Compensatory damages do not include punitive or exemplary damages, or the multiple portion of any multiplied damage award. Compensatory damages also do not include civil fines, penalties or assessments.
These are just a few of the reasons to consider purchasing Fixes Site Pollution Insurance. Consider the risks and protect yourself, your employees and your business against environmental risks. For more information about our fixed site pollution website visit https://www.otcinsurance.ca/fixedsitepollution.