May 7, 2020
Environmental insurance, also known as pollution insurance, is a specialty line that is separate from general liability insurance. General liability insurance does not typically have coverage for pollution damage or toxic spills, the only exceptions being smoke from an out-of-control fire and fumes from faulty heating or cooling systems. Because of this, companies that store or handle toxic waste often need to buy environmental insurance. Property owners can also purchase environmental insurance, called environmental impairment property insurance. This type of coverage provides protection to sites that have been previously inspected and found uncontaminated from future liabilities. Additionally, environmental insurance provides coverage of claims for bodily injury, property damage, cleanup costs, and business interruption. This coverage includes incidents that are both sudden and gradual.
Environmental insurance was first developed in the 1960s and 1970s as Americans became more concerned about environmental cleanups. This led to many companies seeking environmental coverage for pollution. At first, these early environmental policies only covered sudden and accidental incidents such as a toxic spill. However, due to different interpretations of “sudden,” most policies now include protection for pollution that was unpredicted.
Today, environmental insurance protects against risks from historic contamination, such as mold, lead paint, asbestos, or poor air quality, as well as sudden incidents, such as a toxic spill or contamination.
While environmental insurance policies are mainly used by mortgage lenders, real estate agents, and real estate developers, understanding all the parts of environmental insurance is no easy task. However, environmental insurance is growing as an industry and beginning to use innovative technology to best help clients and provide the best coverage.