Assessing environmental exposures, and the insurance policies available to address them, has become a common part of the risk management process. 

Understanding one’s pollution exposures and developing a strategy for managing the associated risks is a fundamental part of every conscientious insurance review, and is a crucial tool for insureds to manage their risks.

One only has to look at the news today to find examples of high-profile pollution related losses. From train derailments to refinery fires to chemical plant explosions, the widespread ramifications of these unfortunate events are clear.

In addition to the normal environmental coverage concerns of cleanup, bodily injury, and property damage, these events all contain more intangible exposures related to how the insured manages the event in the eyes of the public. The stress of a pollution release on the community at large can be huge, and how companies respond to that can be as important as dealing with the pollutant itself. Environmental policies have evolved in the last ten years to provide a range of coverages to help with these exposures.

As with everything in the environmental insurance world, the insurance products offered by individual carriers are unique to the carrier. No two companies use the same wording, although the titles of the forms may be the same or similar. The enhancements that relate to management of the event itself are similarly unique to each carrier. Examples of these enhancements would include Crisis Management Costs, Disaster Management Costs, Public Relations Expenses, and Catastrophe Management Costs. In several cases, the terms are similar, but the definitions of those terms are different, necessitating a close analysis of the form.

Most of these definitions include some elements of the following: the costs to hire a Crisis Management Consultant to help manage media relations, as well as  consulting with the insured with respect to maintaining and restoring the company’s public image or reputation. They might include funds to hire a public relations firm to minimize damage to the insured’s reputation, and to take steps to restore public confidence. This can include costs related to printing and mailing items, as well as travel for the insured’s senior management to the event location itself for the purposes of managing the public response.

Some forms provide even more coverage, adding in coverage for costs to secure the area impacted by the pollution condition as well as sums advanced to parties who are not insureds or affiliated with insurers that are directly harmed by the pollution condition. These funds can relate to medical costs, funeral expenses, temporary living costs, and more.

Another variation of note relates to Evacuation Expenses, costs to relocate parties from the insured’s location where the event occurred. This variation exists in a subset of forms specifically aimed at the healthcare industry, but its impact and value are clear. A practical real-world situation can help explain the value of this coverage. We have seen many losses over the last several years where chlorine is released from a cold storage facility. In each of these situations, a cloud has drifted from the facility requiring evacuation of a region around the property. Resulting bodily injury, cleanup costs, and property damages are covered by the core of the Site Pollution Policy, but what about costs associated with managing the community interactions?

It has been proven time and again that communicating quickly and clearly with the surrounding community is an important tool to mitigate the overall damage done from a pollution release. Having insurance coverage and the related resources in hand before an accident occurs saves crucial time and allows the insured to manage the message as much as possible. Whether it is coordinating press conferences, getting materials out to the relevant news outlets, or engaging a full blown public relations team, these enhancements are proven to work.

When the pollution event is bad enough, an insured may need to spend a significant amount of money to repair their reputation; an expense that can be meaningful and require a great deal of time. Restoring the community’s faith in their neighbor is an important step towards making the insured whole again after their loss. With the coverage enhancements discussed, this is an expense the insured would not bear alone.

Typically, these costs have to be necessitated by a covered pollution event and require coordination with the carrier regarding selection of any third party consulting firm to act on their behalf. As with all pollution related losses, it is very important for the insured to have the mindset that their carrier is their partner in resolving the issue. These coverages also generally only exist for a period of time after the event itself, further highlighting the need for early action on the part of the insured and carrier.

Additionally, many carriers only provide a sublimit of coverage for these exposures. Determining if the offered limit is acceptable needs to be part of the broader insurance discussion. It is also important to know that sublimited coverages are generally not carried into any Excess layer, so the limit offered on the primary may be all that is available.

While these enhancements are not the core value of a Site Specific Pollution policy, they are meaningful additions to the coverage available. They are also an excellent example of the environmental insurance industry adapting to the changing needs of insureds in an effort to provide more complete coverage for their environmental liabilities. Agents need to be sure to address these exposures and solutions with every environmental policy they place.