Insurance companies offer environmental impairment insurance to businesses interested in securing protection against threats not covered under their general liability contracts. Environmental impairment insurance provides protection against claims and legal action that result when a business’s operations cause injury or property damage to a third party through the release of pollutants. Insurers tailor environmental impairment policies to suit the needs of particular clients, but most contracts include common dates, exclusions and limits.
A typical environmental impairment policy pays costs related to bodily injuries, property damage, clean up and legal action that result from an insured business’s release of pollutants. A single policy covers pollution-related events stemming from one location, meaning each environmental impairment policy is site specific, even though the policy covers damage and injuries suffered beyond the boundaries of the insured location. Most policies require a business to purchase an endorsement or rider to include coverage for cleaning required on site after an event.
Generally, environmental impairment policies do not include retroactive dates, meaning a policy covers the consequences of a pollution-related event caused by a business’s location before the business purchased the policy. If an insurer is unfamiliar with the history of a particular site or has concerns about the location’s particular risks, it may insist that an insurance policy include a retroactive date to limit its responsibility for past incidents of pollution, however.
A typical environmental impairment policy includes an extended reporting period that continues between one and three years beyond the contract’s expiration. A policy covers claims filed during the extended reporting period if the damage or injury suffered resulted from a pollution release incident that occurred while the policy remained in force.
Environmental impairment policies usually exclude certain events from coverage. If a person representing a business as a senior manager or identified as responsible for its environmental affairs is aware of a past event that may result in claims against the business, the location’s environmental impairment policy excludes the pre-existing event from coverage. Policies also generally exclude coverage for claims filed against a business because of the business’s deliberate failure to comply with state or federal laws, acid rain, exposure to high-level nuclear materials or war.
An environmental impairment policy includes two limits: per loss and aggregate. A policy’s per loss limit equals the amount an insurer will pay for all claims resulting from a single incident of pollution. A policy’s aggregate limit equals the maximum amount an insurer will pay for claims resulting from all pollution events. An environmental impairment policy requires a business to pay the amount of the policy’s deductible only once per covered event rather than for each claim made as a result of the same incident.