10 Things to Know About Pollution Liability

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  1.  In 2013, pollution liability news included: a $500 million cleanup plan for N.Y.’s Gowanus Canal; a $47 million cleanup plan for the Ringwood, N.J., Superfund site; a $113 million suit alleging toxicity at the “Love Canal” site; and suits against Exxon Mobil. (Source: A.M. Best’s “Market Review Report”)
  2. Pollution losses have generally stabilized for the U.S. insurance industry in recent years, with annual incurred losses ranging between $350 million and $800 million. Paid losses are expected to begin to taper off in coming years with modest additional funding occurring on an annual basis. (Source: A.M. Best’s “Market Review Report”)
  3. The estimate of net ultimate environmental losses for the U.S. P/C industry is currently $42 billion. As of year-end 2012, the industry had funded, through a combination of paid losses and loss reserves, some $38 billion in environmental costs. (Source: A.M. Best’s “Market Review Report”)
  4. Major U.S. insurers with their annual average incurred pollution losses during 2008-2012: Travelers ($70.3 million), Chubb ($67.6 million), CNA ($75.7 million), Hartford ($47.9 million), AIG ($25.5 million), Allianz of America ($53.1 million), Munich Re America ($27.0 million), Berkshire Hathaway ($19.7 million), Farmers ($16.5 million). (Source: A.M. Best’s “Market Review Report”)
  5. Pollution liabilities can impact almost any kind of commercial venture, from residential developments to shopping centers, commercial office parks, warehouses, manufacturers, and even organizations such as universities. (Source: ACE Group’s report “Pollution: The Unrecognized Risk of Business Operations.”)
  6. Because such exposures can be linked to ordinary operations, business managers may expect those liabilities to be covered by general liability insurance policies. Such policies, however, often don’t cover expenses for clean-up, remediation and litigation resulting from pollution. (Source: ACE Group’s report “Pollution: The Unrecognized Risk of Business Operations.”)
  7. There are a wide variety of exposures that are commonly overlooked. An apartment complex, for example, may have environmental risks from underground heating oil tanks, lawn fertilizers or other chemicals stored on site, such as for swimming pools. (Source: ACE Group’s report “Pollution: The Unrecognized Risk of Business Operations.”)
  8. The insurance industry typically excludes pollution exposures from general liability, umbrella and excess policies. Instead, the industry chooses to specifically underwrite pollution exposures and now provides a wide range of tailored environmental coverages. (ACE Group’s report “Pollution: The Unrecognized Risk of Business Operations.”)
  9. The types of pollution insurance coverages include: legal defense fees, clean-up efforts, accidents or oversights during operations, property transfer, and errors and omissions for clean-up companies and environmental consultants, according to Consumer Agents Portal (CAP).
  10. The cost for a pollution liability policy can differ significantly from one business to the next, reports CAP. Cost factors include: the type of business; the type and the amount of chemicals/hazardous materials used; the disposal method of hazardous waste; the proximity of the business to residential neighborhoods.

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