Risk & Business Magazine Spectrum Insurance Magazine Fall 2018 | Page 27

CONTRACTORS POLLUTION LIABILITY INSURANCE
CPL COVERAGE BASICS
CPL policies provide contractor-based
insurance for third-party coverage for
bodily injury, property damage, defense,
and cleanup as a result of sudden and
gradual pollution incidents arising from
contracting operations performed by or on
behalf of the contractor. CPL insurance
is intended to provide coverage to all
types of contracting operations, including
contractors who are involved in building
construction and environmental firms that
remediate polluted sites.
CPL policies are offered on either a claims-
made or occurrence basis. What’s more,
CPL policies are nonstandard, meaning
each policy is different and can be modified
to cover the various needs of the contractor
purchasing the policy. Policies can be
offered on a project or blanket program
basis.
In some instances, CPL policies can also
be used to cover losses from civil fines,
penalties, and punitive damages.
COVERED POLLUTION INCIDENTS
Contractors should keep in mind that
CPL insurance policies differ in regard to
the types of pollution incidents that are
covered. Two important considerations
when evaluating CPL insurance policies
are:
• whether or not the policy will respond
to gradual releases of pollutants, as
opposed to sudden and accidental
releases, and
• the types of substances that are
considered “pollutants” under the
terms of the policy.
Generally, policies that cover both
gradual and sudden releases of pollutants
provide contractors with a broader scope
of coverage. In addition, policies that
provide a broad definition of pollutants
are considered superior to those that
contain a narrow definition. Accordingly,
it is important that contractors work
with their broker to find a CPL policy
that is tailored to their needs.
CGL POLLUTION EXCLUSIONS
A primary reason why contractors obtain a
CPL policy is due to the various pollution
exclusions contained in most CGL policies.
The pollution exclusions found in most
CGL policies take one of two forms, either
“absolute” or “total.”
CGL policies
with an absolute
pollution exclusion
remove coverage
for most pollution
events that would
occur in the course
of an insured’s
business operations.
However, despite its
name, an absolute
pollution exclusion
may preserve
coverage for certain
incidental pollution
damages, products
and completed
operations liability,
and certain off-
premises work .
More commonly, CGL policies include a
more restrictive “total pollution exclusion.”
This type of exclusion effectively removes
coverage for any event the insurer
characterizes as a pollution incident.
CONTRACTUAL REQUIREMENTS
Contractual requirements serve as
another motivating factor that leads many
contractors to obtain a CPL policy. In many
instances, project owners and general
contractors will require contractors to
obtain pollution insurance that meets
certain predetermined standards.
From this perspective, having a CPL
insurance policy in place can serve as an
up-front sales tool during the bidding
process that enables contractors to qualify
for opportunities when such coverage is
required.
FINDING THE RIGHT POLICY
Regardless of specialty, all contractors
should be mindful of the pollution
risks associated with their work. A CPL
insurance policy can provide much-
needed security in the event of a pollution
incident, even in the most unlikely of
circumstances.+
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