Pollution Insurance

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With the increasing awareness of environmental issues, new legislations are being introduced affecting our everyday economy. One of the main culprits of pollution is synthetic chemical. It has enhanced the quality of life and is easily found in our everyday lives.

Unfortunately, it is nonbiodegradable and negatively impacts our environment. The chemicals found in the process of producing pesticides, weed killers, petrochemicals and plastic are main sources of pollution.

When it comes to environmental issues, it is easy to think of only large oil industries and radioactive waste disposal plants. However, even for businesses that look very safe, there is a potential risk of producing, storing, or releasing environmentally threatening waste materials.

One example is a dry cleaner. Perchloroethylene (PERC) is used by most dry cleaners due to its effectiveness in dirt removal, color retention and ease of use.  However, it is highly toxic and can travel fast and far in soil and water.  Whether due to an operator’s mistake or machine defect, Perc leak can lead to serious groundwater contamination. For this reason, landlords may request a dry cleaner to receive an inspection or obtain a pollution insurance.

 

What is Pollution Insurance?

Environmental accidents can cause major disasters to businesses. This is because general business insurance declarations contain a clause called ‘Pollution Exclusion’.

In other words, regardless of whether the chemicals are gradually leaked over a long period of time or a sudden and accidental release, all losses caused by environmental accidents are excluded from the coverage of general business insurance.

As a result, a separate pollution insurance needs to be purchased.

Starting from the surge of asbestos litigation in the 1970s, pollution insurance gradually developed. Then in the mid-1980s, pollution insurance became a separate type of policy. This was followed my environmental accidents being excluded from the coverage of general business insurance.

 

Who Needs Pollution Insurance?

If the soil or groundwater of the commercial real estate you currently own or intend to purchase is contaminated, the current or past owner faces environmental cleanup costs that may exceed the value of the property. Being unable to meet the environmental requirements will bring disadvantages. Not only will the value of the property plunge but restrictions on land use and development will be imposed.

The danger of casualties also needs to be put into consideration. Whether you are buying or selling a property, pollution insurance will provide protection from such dangers.

Many buyers hire experts to conduct a Property Assessment before purchasing commercial real estate. However, this only reflects the current condition of the property. It doesn’t consider the possibility against environmental pollution that may be discovered or may occur in the future.

However, if a property owner has a pollution insurance, he or she can be compensated for damages caused by environmental pollution that may be discovered or occur in the future.

Businesses such as golf courses, auto repair shops, gas stations, dry cleaners, apartment complexes, plastic manufacturers, and amusement parks require pollution insurance.

 

What Does Pollution Insurance Cover?

Pollution insurance protects against the following accidents related to liability from damage caused by hazardous materials, land relocation, cost of recovering contaminated undeveloped land, above ground or underground storage tanks, etc.

  • Expenses incurred in purifying pollutants at the insured’s property.
  • Property and personal injury to a third party.
  • Cost of cleanup when pollutants flow into the property of a third party.
  • An environmental accident that occurred while transporting chemical products or wastes.

Coverage may vary slightly depending on the insurance company and industry.  When in the process of obtaining pollution insurance, you should fully discuss the risks with an experienced agent. This will help you in choosing the appropriate amount and scope of coverage.

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