How can brokers assist shoppers who face long-tail air pollution liabilities?
Daniel Singerman (pictured), director of complex claims at Risk International, urged companies to consider their exposure to pollution liabilities amid this strong push for environmental justice.
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“Leaders are more actively enforcing environmental regulations, which means you’re more likely to be brought into these claims,” Singerman told Insurance Business.
Long-tail environmental liabilities are some of the most challenging risks to cover for companies operating in the US. Agents and brokers must be prepared with options if their client is dealing with old pollution liabilities without appropriate coverage.
“Companies that might have been under the radar are not involved before could now find themselves getting tagged or getting a notice saying that they’re a potentially responsible party associated with this particular [pollution] incident,” Singerman pointed out. “The more activity you have from the government and regulators, the more likely it is that a company will be brought in on these cases.”
The challenge is that businesses are unlikely to get adequate coverage under a general liability policy issued today.
“There’s almost certainly going to be an absolute exclusion on pollution. If you’re operating today and you have reason to believe that you might have some pollution liability risks, you will have to purchase a specialized policy,” said Singerman.
Historical waste disposal practices and oil run-offs into a water supply are some potential sources of liability that businesses face. “It could be as simple as the manufacturing process that company was using led to chemicals getting into waterways or surrounding soil,” Singerman illustrated.
If a company faces a third-party lawsuit or regulatory action due to alleged pollution, it may have recourse to insurance even without a stand-alone pollution liability policy. General liability policies issued before 1986 would have made coverage available for at least some pollution incidents.
This means that if the pollution liability relates to activities before 1986, a client could potentially tap into their general liability policy. But coverage may depend on the nature of the pollution activities and the states where the pollution occurred. Singerman stressed that companies must have access to their historical insurance policies.
Companies should take a proactive approach to pollution liability risks by keeping copies of their insurance policies going back decades. Singerman said agents and brokers should encourage their clients to quickly track these documents down and consider whether any identified insurance carriers should be notified.
“For any company that has been around for a long time and might have anything to do with pollution in any way, it’s a great idea to try to get a full understanding of your historical insurance,” said Singerman.
“Sometimes it becomes more important because you’re amid litigation. But even if there’s no active litigation, if you have reason to believe this is something that could happen to you at some point, it’s a good thing to be proactive.”
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For many businesses, accessing old insurance policies may not be easy. Singerman noted that other corporate records could help pinpoint relevant policy information. Documents such as certificates of insurance, legal files, accounting ledgers, and environmental health and safety documents could help companies piece together their insurance history.
What if there are no other ways to obtain historical insurance policies? Singerman said it might be well worth hiring an insurance archaeologist who can track down lost or missing insurance policies. The investment could result in millions of dollars’ worth of coverage for existing cases and other liabilities downstream.
“I think many companies want to do the right thing and clean up if it’s their responsibility. But it’s expensive. If you have an insurance resource available to help you with that, it can be a significant game changer,” Singerman added.
“The company doesn’t have to foot the bill itself. There are many benefits from seeking out and finding those resources.”