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Construction Insurance Bulletin


By April 1, 2008No Comments

Environmental exposures and pollution risks are a common concern at construction sites. Contaminated soil disposal, toxic mold contamination and the release of toxic materials through broken pipelines are just a few common types of environmental incidents. In the scope of projects, contractors face environmental exposures not just at their physical job sites but also during transportation and material disposal and at their other owned or leased properties. Contractor’s Pollution Liability (CPL) insurance is available to protect contractors against liability and financial losses when an environmental incident occurs.

Since CPL insurance applies to a broad range of construction project pollution risks, the product is appropriate for firms in various specialties including general contractors; trade contractors such as those in the HVAC, paving and concrete specialties; remediation contractors; and specialty contractors including drillers and those who perform pipeline and tank installation.

CPL insurance products are available to cover remediation costs and third-party property damage or bodily injury resulting from a pollution incident. The most comprehensive policies can be customized to cover the pollution risks of an entire project including all contractors and off-site transportation. CPL insurance is generally written on a claims-made basis to limit the insurer’s exposure to unknown future liabilities.

Although CPL insurance can protect against environmental losses, it, in itself, will not prevent potentially catastrophic reputation-damaging incidents from occurring in the first place. This is why contractors also need to incorporate environmental risk management practices into their operations.

An important initial risk management step is to develop a current environmental risk profile by conducting a thorough review of administrative control documents in order to identify possible risk and loss exposure areas. Although this process can be completed in-house, environmental consultants offer expertise and a valuable outside perspective.

To develop an environmental risk profile, the International Risk Management Institute recommends assessing the following documents and then identifying strategies to minimize or eliminate exposures to environmental risks:

  • Any environmental management or mold prevention programs to make sure that a consistent approach is taken so that incidents can be prevented;
  • Hazard communication programs and environmental data searches of job sites;
  • Subcontractor agreement language and subcontractor’s environmental and mold management prevention systems;
  • Standard client agreements;
  • History of environmental losses including trends, employee communications and corrective measures that were taken;
  • Corporate health and safety programs including training and incident response protocols;
  • Quality assurance programs;
  • CPL insurance policies; and
  • Environmental assessments of owned or leased properties.

Please contact our office for more risk management ideas you can use in your operations.