Everyone is responsible for taking care of the environment. So, don’t be surprised if a customer, another business, a nonprofit or a government agency sues your small business for environmental pollution. In the United States, pollution-related claims made against small businesses used to be covered by general liability insurance. However, following rampant asbestos lawsuits in the 70s, small businesses were required to purchase separate insurance coverage that we call pollution liability insurance.
The coverage protects small businesses against all pollution claims (what we call pollution liability). If you are hearing pollution liability for the first time, here are 5 things to know about it:
Pollution threats are normally unforeseen and so almost every small business is at risk. However, those that directly or indirectly come into contact with hazardous chemicals such as dyes, fertilizers, and oils are at more risk. We are talking about the following types of small businesses:
Pollution insurance not only impacts your small business but the environment and your suppliers too. While your business is protected against direct losses related to pollution incidents, your suppliers are also covered if they unintentionally contribute to pollution. Likewise, the insurance policy covers the direct impact on the environment that your small business is liable for.
Ideally, pollution insurance coverage is detailed and it includes the following losses:
This refers to pollution-related losses suffered on your business premise. It includes clean-up costs and property damages.
This professional liability insurance coverage refers to pollution-related losses caused by individuals rendering professional services. For example, a source of an oil leak that was unforeseen by a soil engineer counts as E&O.
This refers to pollution-linked losses that a contractor is liable for. It includes bodily injuries and property damages.
Often, small businesses suffer pollution liability because they chose to ignore the environmental risks. It might be that the business owner saw the risk to be trivial or didn’t understand the implications it can have on the environment in the future. A case scenario is a small business owner who leaves fertilizers or oil storage tanks exposed for long within the business premise.
Lastly, since pollution liability is comprehensive, most insurance companies choose to offer separate insurance coverage that is tailored to the needs of small business owners. In this case, the insurance policy covers all possible pollution incident-linked losses such as:
Generally, there’s so much to know about pollution liability (also known as environmental liability or pollution coverage) as it’s more detailed than most people assume it to be. But still, the above pointers are a great place to start. They can help you decide if your type of business should be investing in environmental insurance coverage or not. If you are still unsure, your questions about pollution liability insurance policies can be answered by experienced insurance agents at Small Business Liability.
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