Environmental Liability for Manufacturers
Pollution Mitigation and Insurance
All manufacturers should be aware of their environmental exposures and the effects of pollution exclusions. A standard general liability and property policy provide limited, if any, coverage for pollution. So, whether you’re a small operator or large manufacturing facility, a pollution mitigation plan (that includes insurance coverage) needs to be a top priority.
Pollution vs. Contamination
Pollution is the process of making land, water, air or other parts of the environment dirty and unsafe or unsuitable to use. Pollution exclusions don’t just apply to chemicals or hazardous waste. A pollution exclusion can also apply to a contaminant. The main difference between a pollutant and contaminant is that a pollutant is always a harmful substance, whereas a contaminant is not always harmful. A contamination is simply the presence of a substance where it shouldn’t be. Examples include:
- Food products such as glucose can be considered a contaminant when a large quantity is spilled into the drain system.
- A large quantity of milk can be considered a contaminant when a tanker spills into a local pond.
- Bacteria such as Listeria monocytogenes, when it renders a product impaired or impure, falls squarely within the plain and ordinary meaning of "contaminant."
In the last example, a loss of income, loss of product, sanitizing expenses and costs related to investigating the source of bacteria wouldn’t be covered since the Listeria claim wasn’t the result of a “covered cause of loss.”
Environmental insurance policies cover statutory clean-up requirements, third party claims for bodily injury and property damage, as well as associated legal expenses resulting from pollution or contamination events – whether such events are “sudden and accidental” or gradual in nature. Don’t be caught uninsured for a contamination related loss. Understanding your environmental exposures and pollution exclusions are key.
If you need assistance in understanding your exposures, contact a member of the ‘A’ Team.
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