Since statutes governing liability for environmental contamination were passed 20 years ago, environmental liabilities have derailed many business and real estate deals.
Insurance companies now, however, offer policies that give businesses a way to address liability for environmental clean-up, which is typically excluded from commercial general liability (CGL) policies. There are two broad types of environmental insurance policies:
* Cost-cap policies typically provide coverage when a claim requiring the insured to incur clean-up costs has already been made. These policies usually cover cost overruns from unexpected factors, e.g., a change in the law or the failure of a remedy up to a limit beyond a self-insured retention.
* Pollution legal liability policies typically provide coverage for a broader range of environmental exposures, provided that claims are first made during the policy period.
The complexity of environmental issues and the size of the liabilities require insurers to customize these policies; none are off-the-shelf products. Before buying an environmental liability policy, a business should clearly identify the risks it wants to cover and have a good grasp of the history of the site or sites and the technical issues relating to contamination and remediation.
Someone familiar with insurance coverage and environmental law should be consulted in determining whether such a policy is appropriate.
Eckert Seamans Cherin & Mellott