Risk Manager’s Guide to
Environmental Insurance
A number of specialized environmental insurance policies have been developed to
address the environmental liability faced by insureds as a result of the pollution
exclusion. This article examines pollution insurance policies, environmental regulations,
the environmental risk management process and environmental loss exposures.
Provided by: Kempkey Insurance Services, Inc.
Introduction
Torts
Most commercial insurance policies contain pollution
Tort liability for pollution can be based on
exclusions that leave many organizations uninsured
against significant loss exposures. To cover these
pollution exposures, insurers have developed
negligence, intentional torts, or strict liability.
Negligence - Negligence is the failure to do what is
reasonable under the circumstances to protect third
parties from injury or damage. The following are
examples of negligent acts that have resulted in actual
various types of environmental insurance. The term
environmental liability claims:
environmental insurance includes both first-party
1.
contaminated a municipal water supply, which
(property) and third-party (liability) insurance
policies whose purpose is to manage pollution-
resulted in bodily injury and property damage
claims.
2.
related loss exposures.
The next day it was discovered that the
contents of a storage tank connected to the line
the United States, beginning in 1977, was
had been released into an adjacent stream,
environmental impairment liability (EIL) insurance,
causing property damage, bodily injury, and
also called pollution liability insurance. The market
restricted until the late 1980s and then expanded
rapidly. This chapter examines eight basic types of
environmental insurance that have evolved from
the original EIL policies to meet specific coverage
needs. To provide a background for understanding
and using the different policies, the chapter
discusses the legal basis for environmental liability
in the United States, including several federal
statutes; describes the difficulties of managing
environmental loss exposures; and reviews the
limitations on pollution coverage in conventional
property and liability policies.
A contractor working at a manufacturing facility
left a valve open on a process line overnight.
The first type of environmental insurance offered in
for environmental insurance remained relatively
An oil spill from a petroleum refinery
natural resource damage.
3.
A hazardous waste hauler transporting toxic
waste to a disposal facility had an auto accident
in the downtown section of a city. The
hazardous liquid being transported was
released into the street. Passersby inhaled the
fumes, and the business district of the city was
evacuated for two days as cleanup contractors
responded to the spill. Claims were filed against
the transporter alleging bodily injury, property
damage, and business interruption.
Other possible sources of liability for the negligent
release of pollutants include hazardous product
manufacturing, testing, and transporting;
Legal Basis for Environmental Liability
Environmental liability losses can be incurred
hazardous waste disposal; product failures;
inadequate emergency response procedures; and
incompetent environmental consulting.
through torts, contractual obligations, or violations
of statutes. The source of liability for environmental
Intentional Torts – The international torts most
losses will most frequently be the actual or alleged
commonly alleged in environmental claims are
release of pollutants, the violation of a law designed
nuisance and trespass.
to protect human health and the environment from
those pollutants, or the enforcement of
Nuisance - A property owner is entitled to the
environmental protection laws that require
peaceful enjoyment of his or her property. If a
remediation expense payment.
neighbor or another third party engages in an
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activity that interferes with the owner’s right of
enjoyment of the property, the owner may bring an
action alleging nuisance against the party causing
the interference. Potential environmental liability
exposures alleging nuisance can involve load
noises, noxious odors, bright lights, fog generation,
electrical waves, and electromagnetic fields.
Trespass - Unlike nuisance, which requires no
transmission of materials from one property to
another, trespass involves the physical deposition of
pollutants on the property of the claimant alleging
injury. The material that is deposited may be a toxic
substance, but it does not have to be. Claims have
Contractual Obligations
A general contractor that agrees to hold harmless
and indemnify a project owner for all claims that
arise during the course of the project may incur an
environmental loss under the contract if the
proximate cause of the loss is a release of
pollutants. For example, a worker who is employed
by a subcontractor at the project and is injured as a
result of breathing ammonia might sue the project
owner, thus activating the general contractor’s
contractual liability to the owner.
resulted from releases or deposits of water, sand, and
Environmental Statutes
clean soil. As long as the deposits are objectionable to
Environmental statutes contain provisions that can
the property owner, a trespass claim can be brought
lead to injunctions, fines, and penalties for
against the party responsible for the release.
noncompliance. The statutes also contain provisions
Environmental claims for trespass could result from the
for the criminal prosecution of individuals, including
release of dust or particulate into the air, the discharge
corporate officers. Although this latter point is not a
of chemicals into a stream, the runoff of pesticides
subject of insurance, it is an important point to
onto a neighbor’s property, or thermal emissions into a
consider when developing environmental risk
river.
management programs. For insurance practitioners,
the most common and significant risk management
Strict Liability
implications of these statutes are the cost recovery
When manufacturing operations use inherently
financial responsibility requirements.
provisions for cleanup expenses and the proof of
hazardous materials or processes, courts may
impose strict liability, which eliminates the
The “modern era” of environmental legislation
common-law defenses normally available to the
began with the passage of the National
defendant in a negligence suit. No degree of care is
Environmental Policy Act (NEPA) of 1969. NEPA
considered to be adequate for ultra-hazardous
resulted from the efforts of conservationists to
activities or materials. For example, a remediation
compel the federal government to consider the
contractor working on a job to incinerate nerve gas
environmental ramifications of proposals for new
could face strict liability for ultra-hazardous
highways, dams, and other public projects capable
activities if a release of the nerve gas injures a third
of affecting wildlife or scenic areas. Since the
party, even though the contractor might exercise a
passage of NEPA, environmental laws to protect
very high degree of care in performing the work.
human health and the environment have
Some examples of materials that could create strict
proliferated, and the public interest has changed
liability loss exposures include nuclear materials,
from preserving conservationist values to protecting
explosives, polychlorinated biphenyl (PCB)
the environment, primarily surface waters (the
materials, pesticides, oil, highly toxic chemicals, and
Clean Water Act) and the air (the Clean Air Act). As
hazardous waste.
the “environmental movement” caught on, the
more ambitious and complex Resource
Conservation and Recovery Act (RCRA) of 1976 and
the Comprehensive Environmental Response,
PAGE 3 OF 26
Compensation, and Liability Act (CERCLA) of 1980
Control, and Countermeasure Plan for certain
soon followed. Both CERCLA and RCRA have had a
regulated facilities, such as oil-handling facilities.
significant impact on the risk management
programs of many organizations.
Many environmental laws do not require fault or
Clean Air Act (CAA)
negligence on the part of the party charged with
The Clean Air Act seeks to improve the quality of
responsibility, in effect creating strict liability by
ambient air by regulating emissions from both
statute. One of the common threads that run
mobile and stationary sources of air pollution.
through most of these laws is the theory that the
Permits are required to construct or operate sources
person that caused the pollution should be
of air emissions. The terms of the permit vary from
responsible to pay for the cleanup of that pollution
one emission source to another and from one
in the case of a spill or release. This is commonly
pollutant to another. Similarly, restrictions are
referred to as a “let the polluter pay” funding
tighter in areas of poor air quality (such as urban
scheme. Various forms of environmental insurance
areas) than elsewhere. The zones around cities
can be used to finance many of these statutory loss
where ambient air quality fails to meet Clean Air Act
exposures.
requirements are classified as “Nonattainment
Areas.” In these areas, regulators can curtail new
Federal statutes provide the baseline standards for
industrial or commercial development by denying
state and local environmental laws. Local
the required air permits.
governments are able to establish standards that
are more restrictive than the federal standard. This
legislative freedom and the public interest in laws
protecting the environment lead to a profusion of
environmental regulations that vary geographically.
The sections that follow summarize some of the
most influential federal environmental laws. Most
states actually administer these laws under state
statutes that have different names but virtually the
same content as the federal laws. For insurance
practitioners, the most common and significant
implications of these statutes are the cost recovery
provisions for cleanup expenses and the proof of
financial responsibility requirements under some of
the laws.
Motor Carrier Act
The purpose of the Motor Carrier Act of 1980 is to
protect the environment from releases of harmful
materials during transportation of such materials by
motor carriers in interstate or intrastate commerce.
The Motor Carrier Act of 1980 established minimum
levels of financial responsibility sufficient to cover
third-party liability including property damage and
environmental restoration for both private and forhire carriers of hazardous materials.
One insurance mechanism that meets the
requirements set forth is the MCS 90 Endorsement.
This endorsement must be attached to a
commercial vehicle liability insurance policy and
becomes a promise from the insurer that the
Clean Water Act (CWA)
The Clean Water Act seeks to improve the quality of
surface waters by prohibiting or regulating the
discharge of pollutants into navigable waters and
restoring them to “fishable” and “swimmable”
quality. A number of activities are regulated under
the legislation including pollutant discharge into
waterways and storm water runoff. The Clean
Water Act also mandates a Spill Prevention,
insurer will pay any claims or judgments made
against the transporter for public liability (bodily
injury, property damage, or environmental
restoration costs) resulting from operation of the
vehicle.
The MCS 90 Endorsement is essentially a surety
bond in that it requires the insured to reimburse the
insurer for any payments made under the
PAGE 4 OF 26
provisions of the MCS 90 that would not have been
RCRA also regulates underground storage tanks,
paid under the insurance policy in the absence of
medical wastes, and non-hazardous solid wastes,
the endorsement. Because commercial auto
although the requirements for some of these waste
insurance policies typically exclude most claims for
categories are considerably less stringent than
loss caused by the release of pollutants, it is
those for hazardous wastes.
probable that the insured will have to reimburse the
insurer for many losses that might be paid by the
RCRA was one of the first environmental statutes to
insurer under the MCS 90 for release of
adopt proof of financial responsibility requirements
contaminants. To provide true insurance coverage,
for permit holders. Under these provisions, the
an additional endorsement (such as ISO
owners of hazardous waste treatment, storage or
endorsement CA 99 48) must be used to modify the
treatment facilities, landfills, and underground
pollution exclusion in the commercial auto coverage
storage tanks are required to provide evidence that
form to which it is attached.
they have the financial resources to clean up any
material from the facility that causes environmental
The Toxic Substance Control Act
(TSCA)
damage and to compensate victims for bodily injury
The Toxic Substance Control Act, enacted in 1976,
including specially endorsed insurance policies,
regulates the chemical manufacturing industry and
performance bonds, letters of credit, cash in
prevents the importation or manufacture of
escrow, self-insurer status, or, in some states, any
dangerous chemical substances without adequate
financial arrangement acceptable to the regulators.
safeguards to ensure that their use does not harm
The amounts of required proof vary by the type of
human health or the environment. The act’s
facility and by state regulations. Insurance
statutory framework also facilitates extensive
practitioners in need of advice on compliance with
regulation of individual hazardous substances on a
these regulations should consult with the state
case-by-case basis. Consequently, the act has been
environmental regulators for the current
used to regulate PCBs and, to a more limited
requirements and acceptable methods of providing
extent, asbestos and radon. The EPA has also
the proof of financial responsibility.
and property damage. Permit holders have a
number of options available to evidence this proof,
contemplated using the act to impose extensive
regulations on the use of lead. Under the Toxic
RCRA includes a wide variety of wastes within the
Substance Control Act, manufacturers of chemical
scope of its regulatory program. The most notable
substances must provide extensive information to
exceptions are waste oil and certain high-volume,
the EPA regarding the formulation, use, and risks of
low-toxicity wastes (such as various mine wastes
each substance they manufacture or import,
and incinerator ash). Waste generators must
including any information on known or suspected
manage hazardous wastes in accordance with
adverse health or environmental effects.
detailed regulations governing containers, labels,
record keeping, storage, spill prevention and
Resource Conservation and Recovery
Act (RCRA)
The Resource Conservation and Recovery Act
(RCRA) provides “cradle-to-grave” regulation of
hazardous waste. RCRA imposes strict waste
management requirements on generators and
control, and employee training. On-site storage is
limited both with respect to time and quantity.
Shipments of hazardous waste require completion
of a shipping manifest that tracks the journey from
“cradle to grave,” thus ensuring final disposal only
at proper facilities.
transporters of hazardous wastes and on hazardous
waste treatment, storage, and disposal facilities.
PAGE 5 OF 26
Comprehensive Environmental
Response, Compensation, and
Liability Act (CERCLA or
"Superfund")
Because RCRA regulations cover active but not
abandoned waste disposal sites, the Comprehensive
Environmental Response, Compensation, and
Liability Act (CERCLA or Superfund) was passed in
1980 to facilitate the cleanup of any abandoned or
uncontrolled sites containing hazardous substances,
including numerous old dump sites.
The average cost of a Superfund cleanup of a site
on the National Priority List is approximately $30
million, exclusive of substantial transaction costs.
There are approximately 1,300 Superfund sites on
the National Priority List and more than 3,500 sites
targeted for cleanup under state programs similar
to CERCLA. These sites can take more than twentyfive years to remediate if groundwater is involved.
Potentially Responsible Parties (PRPs) are the
persons or entities that are legally responsible for
the costs of remediating a Superfund site. Parties
involved with a Superfund site are referred to as
PRPs until liability under the act is established. At
that point they become Responsible Parties (RPs).
They are responsible for all costs associated with
cleaning up the site, including the costs of
identifying and evaluating contaminants and
developing a plan for remediation. Following the “let
the polluter pay” principle, the drafters of the
original legislation included all parties who enjoyed
an economic benefit from the waste disposal
activities or in the ownership of the site.
The list of Potentially Responsible Parties includes
the current owners and operators of a site (even if
they had no involvement with the original waste
disposal activities), prior owners and operators who
may or may not have been involved with the site
during the disposal of hazardous materials, the
generators of the waste materials disposed of at the
site, the transporters who hauled waste to it, and
anyone who “arranged” for the disposal of materials
at the site. Parent corporations may be liable for
subsidiaries that are PRPs, depending on the extent
of control over their subsidiaries and their
involvement in waste disposal practices or
decisions. Traditional notions of “piercing the
corporate veil” (invalidating the legal protections of
the corporate entity and suing the owners
individually) will generally be applied during cost
recovery efforts by the government. Similarly,
corporate successors may also be liable, depending
on their involvement and the application of
traditional principles of successor liability. Lessees
may be liable as “operators” of the site, as may
individuals such as corporate officers or
shareholders of closely held corporations. Even
bankrupt parties may incur liability under CERCLA.
Superfund liability is strict (without regard to fault)
and retroactive. This legislated liability is a
significant deviation from traditional theories of
recovery under common law, which normally
requires negligence on the part of the defendant for
the plaintiff to recover damages. In fact, many of
the disposal sites that ultimately became Superfund
sites were permitted, legal operations at the time
the sites were actively accepting waste.
Superfund liability is also “joint and several,”
meaning any liable party may be responsible for the
entire amount, regardless of its “fair share,” if, as is
usually the case, the harm is indivisible. In
allocating liability for the cleanup costs of a
particular site, a PRP’s assessment can be based on
the volume of waste contributed to the site, not the
toxicity of the waste. Therefore the contributor of
large volumes of non-hazardous materials to a
Superfund site could be responsible for a large part
of the cleanup cost even though it contributed only
non-hazardous waste to the site.
The EPA investigated over 40,000 potential
Superfund sites between 1980 and 1995, but only a
small percentage of these sites will be cleaned up
under CERCLA. CERCLA authorizes the EPA to clean
up sites where there is a release or threatened
release of a hazardous substance into the
environment. The EPA can either have its own
PAGE 6 OF 26
contractors clean up the site or force liable parties
who acquire contaminated property, did not know,
to conduct the cleanup. If the EPA conducts the
and had no reason to know, it was contaminated,
work, it can seek cost recovery from the responsible
and did not contribute to the contamination. The
parties as they are defined in the statute for up to
purchaser must, at the time of acquisition (which
three times the amount of the actual cleanup
may have occurred many years ago), have
expenses. As an alternative to EPA contracted
undertaken all appropriate inquiry into previous
cleanups, private parties may conduct a cleanup
ownership and uses of the property consistent with
voluntarily and, under appropriate circumstances,
good commercial and customary practices in an
recover their costs from other responsible parties.
effort to minimize liability.
CERCLA provides an express right of contribution
whereby one or a group of PRPs can bring an action
that seeks contribution from another PRP. A private
Oil Pollution Act (OPA)
CERCLA recovery action may be brought against
The Oil Pollution Act (OPA) of 1990 seeks to reduce
any liable party regardless of whether the federal
the risk of spills of petroleum or hazardous
government has initiated either cleanup or a cost
materials into United States coastal or navigable
recovery action of its own. Parties that settle with
waters by mandating technical standards for
the government, however, are not liable for
facilities and vessels operating in or near such
contribution.
waters. OPA also imposes requirements on owners
of facilities and vessels to prevent releases and to
Superfund is harsh and expensive for liable parties
pay for the costs of releases that are not prevented.
because it operates under a “let the polluter pay”
Similar in concept to the proof of financial
funding scheme that features retroactive, strict
responsibility requirements under RCRA, OPA
liability. The passage of CERCLA and the resulting
mandates that each party responsible for a vessel
flood of claims by responsible parties under general
or facility from which oil is discharged (or is
liability policies were largely responsible for the
threatening to be discharged) into or upon
proliferation of pollution exclusions in U.S.
navigable waters, adjoining shorelines, or the
commercial insurance policies in 1986. The far-
exclusive economic zone of the United States is
reaching cost recovery provisions of CERCLA create
liable for removal costs and damages.
a complex array of liability exposures for a broad
The amounts of required financial responsibility for
spectrum of the American economy. Most of the
a single vessel can be in the millions of dollars.
prospective loss exposures associated with
Similar to RCRA, the methods that may be used to
Superfund can now be insured though a
meet these requirements include specially endorsed
combination of various forms of environmental
insurance, a surety bond, a letter of credit, or
insurance.
qualification as a self-insurer.
There are only three defenses to CERCLA: (1) acts
of God, (2) acts of war, and (3) acts of an unrelated
APPLICATIONS - Potential Loss
Exposure Under CERCLA
third party. The third-party defense is narrowly
Ace Manufacturing Company disposed of its off-
defined and rarely applies. It is largely intended to
specification chemical materials in Joe’s Dump
be limited to such occurrences as the unanticipated
between 1960 and 1970. Joe’s Dump was licensed
acts of vandals.
for this entire period by the state in which it is
located under a law applicable to municipal solid
The third-party defense includes a provision known
waste disposal facilities. Ace had hired Sam’s
as the “innocent landowner defense,” an important
Sanitary Service to transport the hazardous waste
provision for lenders and those who lease or acquire
material from Ace to Joe’s Dump. In 1972, Joe sold
real property. CERCLA excludes liability for persons
his land to Wonder Products Incorporated. Wonder
PAGE 7 OF 26
still owns the land but discontinued use of the
This enforcement model has changed dramatically
landfill in 1980.
in recent years. Now, an evaluation of compliance
In 1984, the drinking water supply of a nearby
not only includes a review of the physical facilities,
municipality was found to be contaminated.
but it also considers management systems and
Groundwater investigations determined that Joe’s
control of the processes that pose a threat to the
Dump was the source of the contamination. The
environment. Such an evaluation reviews the
cost to clean up, remediate, and reconstruct Joe’s
accountability of the board of directors for
Dump is expected to be $30,000,000. Under
environmental matters, the assignment of
CERCLA, the following parties are Potentially
environmental responsibility within senior
Responsible Parties, subject to strict liability for the
management ranks, the effective dispersion of
cleanup expenses:
responsibility through all levels of the organization,
and the day-to-day operation of the system in




Joe’s Dump as an owner/operator
controlling activities that involve hazardous
Ace Manufacturing Company as a waste
materials. Accordingly, not only the EPA but also
generator
the corporation’s shareholders and employees have
Sam’s Sanitary Service as a transporter to
come to expect that a corporate environmental risk
the site
management program should have certain
Wonder Products Incorporated as the current
components.
owner and a past operator of the site
Such a program begins with a written corporate
All responsible parties face joint and several liability
environmental policy, which is implemented by
for the cleanup expenses. In this case, if Joe’s
written procedures and carried out by the
Dump, Ace Manufacturing, Sam’s Sanitary Service,
executives responsible for the management of day-
and other PRPs were out of business at the time of
to-day activities. This formal plan should be
the EPA Superfund cleanup action, Wonder Products
adequately funded to ensure that it will be
could be assessed the entire cleanup expense.
successful. A reporting system provides
management and the board of directors with
Enforcement of Environmental Laws
enough information to assure that everything is
For many years, the focus of environmental
working as intended. When extraordinary events
regulatory activities was compliance in a very
take place within a corporation, such as a major
technical sense. Under the Clean Air Act, the Clean
pollution incident or the corporation’s merger with
Water Act, and a host of earlier environmental laws,
an organization having serious environmental
compliance involved monitoring the outflow from
exposures, additional expectations must be
pipes into streams and from smokestacks into the
addressed.
air. The EPA set standards, counted contaminants in
parts per million, and enforced statutes with stiff
fines that could exceed hundreds of thousands of
dollars a day. The process was highly empirical.
Technically trained inspectors met with the
corporate mechanics that controlled the tools of
compliance. Those subjected to enforcement
actions were often the compliance personnel and
technically trained employees who operated
pollution control systems or the equipment that
failed to meet the EPA standards. Risk managers
were rarely involved in this process.
APPLICATIONS - Management’s
Responsibility for Environmental
Compliance
One company’s experience illustrates the current
trend for regulators to focus on the responsibility of
management in assessing environmental
compliance. The company was involved in metal
fabrication processes at thirteen plants
geographically dispersed in seven states with a total
workforce of more than 8,000.
PAGE 8 OF 26
At one of the company’s facilities, regulators were
effectively eliminated any possibility of an insurance
called in when neighbors discovered hydrocarbon
recovery to help offset the expense of the legal
solvents in their drinking water. An inspection of the
actions.
facility found that the normal practice for cleaning
up trichloroethylene spills from the shop floor was
Environmental insurance can be used as a tool to
to hose the material out the door and let it run into
help manage environmental risks, not just insure
storm-water drains. Further inquiry revealed that
them. Environmental underwriters are in a position
the company had only one employee assigned to
to compare one applicant to another and are
environmental compliance for all thirteen
therefore able to provide useful advice on the
manufacturing facilities.
adequacy of the environmental management
systems relative to the applicant’s peer group. Thus
Fines were assessed against the corporate
the underwriting process may give early warnings
executives and the corporation for failure to
to an organization that needs to improve its
adequately provide for environmental management
environmental management efforts.
within the company when the hazards associated
with the materials in use were widely known. The
Environmental Risk Management
chief executive officer of the firm was given a
As the effort to clean up contaminated sites in
suspended sentence and three years’ probation as a
America gains momentum, risk managers are
first offender; a result that would not occur today
increasingly faced with the daunting task of
under the current mandatory minimum Federal
effectively managing their firms’ environmental
Sentencing Guidelines for violations of
impairment liability exposures. Estimates for the
environmental protection laws.
cost of the environmental cleanup effort at all
contaminated sites in the United States range
A shareholder suit against the officers and directors
between $700 billion to well in excess of $1 trillion,
for failing to properly manage the firm’s
and the work will take over twenty-five years to
environmental matters quickly followed the
complete. These figures do not include third-party
environmental enforcement litigation. The
claims or the future cost of industrial spills or other
shareholder suit alleged that because of the failure
releases of pollutants in the environment.
of senior management to develop an adequate
environmental management protocol, the
There is a common misconception that
corporation incurred unnecessary expenses to
environmental liability losses affect relatively few
resolve the ensuing enforcement actions.
industries and a limited number of organizations
within a given industry group. With the far-reaching
The risk manager quickly learned how important an
cost recovery provisions of Superfund and similar
environment risk management program was when
state cleanup laws, the ultimate cost of
she was asked to provide a detailed analysis of the
environmental remediation and of liability claims
incident and an explanation of what insurance
will be shouldered by a relatively large number of
protection the company had for this incident and
organizations within the U.S. economy. When the
future events of a similar nature. Of course, the
costs of environmental liability are reflected in the
insurance coverage available to help pay for this
increased costs of products and higher insurance
costly claim was of great interest to the directors
premiums, the ultimate price of the cleanup will be
and officers of the firm. It is easy to imagine the
paid by society as a whole.
directors’ and officers’ disappointment when they
were informed that the pollution exclusions in the
From a risk management standpoint, the severity of
firm’s directors and officers liability policy, general
environmental damage claims requires that
liability policy, and umbrella liability policy
organizations must plan for these risks if they are to
PAGE 9 OF 26
survive long enough to pass their increased costs
on to their customers. To implement such a plan,
managers must develop effective environmental
risk management programs that include adequate
funding and support from corporate management.
The Environmental Risk Assessment
Process
A three-step process can be used to identify
Characteristics of Environmental
Loss Exposures
Environmental loss exposures have some unique
characteristics that must be considered when
developing a plan to manage them. Some of the
more prevalent of these characteristics are
summarized below.
1.
Many environmental loss exposures are
environmental loss exposures in the development of
difficult to identify because they arise from
an environmental risk management strategy.
activities that were conducted many years
in the past or may be created by extremely
1.
The first step in the process is to identify
small quantities of hazardous substances
what materials are present, the quantities
that are difficult to detect or measure.
of those materials, and the potentially
2.
Environmental loss exposures tend to elude
harmful properties of the materials at the
traditional exposure identification methods.
locations in question.
For example, reviewing summaries of
historical losses may not reveal any
2.
The second step is to identify the potential
information on potential environmental
routes those materials could take if they
claims. Physical inspections of facilities do
were released from the facility. Air,
not always reveal possible causes of
groundwater, surface water, and sewers
environmental damage that may be buried
are examples of routes that contaminants
underground or otherwise hidden from
can follow.
view.
3.
3.
Often, no cause-and-effect relationship is
The third step is to identify the target
apparent between exposure to a substance
populations of living things that could be
and measurable injury because of the long
affected if the identified materials followed
latency period of some injuries or diseases
the potential routes.
associated with toxic exposures. Similarly,
there is often no direct cause-and-effect
Environmental claims encompass a broad spectrum
relationship between a release of pollutants
of potential contaminants. Moreover, material does
and actual damages. The amount of the
not need to be hazardous or a waste to create an
loss may be difficult to measure at a
environmental impairment liability loss exposure.
particular point in time.
For example, environmental claims have resulted
4.
Environmental liability claims may result
from a large-volume milk spill into a stream and
from a perceived, rather than real,
from the removal of water from a river to make
exposure to a toxic material or from a fear
snow for a ski hill. Moreover, the standard pollution
of future injury due to an actual exposure.
exclusions that are discussed later in this
5.
Environmental losses are often expensive.
publication are not dependent on a material being
The average cost to clean up a Superfund
either hazardous or a waste to fall under the
National Priority List site is $30 million. The
exclusionary language of a “pollutant.” Practitioners
average cost to clean up a leaking
developing environmental risk management
underground storage tank is $150,000. The
strategies should expand their thinking beyond
Exxon Valdez oil spill in Alaska is reported
“hazardous waste.”
to have cost in excess of $3 billion in
PAGE 10 OF 26
6.
cleanup costs and $1 billion in third-party
Because most risk managers are not environmental
claims.
scientists or lawyers, environmental exposure
Many environmental remediation laws are
identification presents a special challenge.
funded in accordance with a “let the
7.
8.
polluter pay” funding concept. Under these
The difficulty of identifying environmental exposures
laws, organizations and individuals can be
can sometimes be overcome by the effective use of
held retroactively liable, without having
internal and external resources. Environmental
been at fault, for bodily injury, property
compliance personnel within the firm are often
damage, cleanup expenses, and natural
familiar with the laws that apply to the operations of
resource damage. There is also a danger
the firm. Legal counsel is another source of
that courts will award multiplied damages,
expertise with respect to the regulatory risks that
fines, and criminal prosecution under these
an organization must address. Operational
laws.
personnel who work with hazardous materials on a
Advances in technology can change the
daily basis are usually familiar with those that are
exposure to loss. As detection equipment is
toxic and the risks associated with their use.
developed that can measure smaller
Environmental consultants can also be used to
quantities of contaminants, the loss
assist in the identification of environmental
exposure increases. For example, if current
exposures, through independent audits or as part of
state-of-the-art equipment can measure
an internal/external environmental audit team.
concentrations of contaminants only to ten
Employees of the United States EPA or the
parts per million, a new machine with
particular state’s EPA can also provide useful
detection capabilities of ten parts per billion
information.
would change the detection threshold a
To effectively manage environmental loss
thousand fold. In a cleanup project in which
exposures, the risk manager should attempt to
the goal is to achieve “non-detect” levels of
distinguish between exposures resulting from prior
a particular contaminant, a change in
activities and those that could result from ongoing
measuring technology could dramatically
and future operations. Obviously, a lesser number
change the costs of the cleanup.
of risk management options are available if the
The amount of the loss can increase
activity that created the exposure has already been
substantially over time as the
conducted. For example, a firm that has been
contamination migrates farther from its
designated a responsible party in a Superfund
source. Imagining a leaking underground
cleanup action cannot prevent that loss from
storage tank helps one to envision this
occurring.
phenomenon. If the leak is discovered on
the first day, the remediation could be as
Risk managers can, however, formulate effective
simple as removing the tank and one
strategies for dealing with the environmental
shovel full of contaminated soil. If,
liability exposures associated with past activities of
however, the leak is not discovered until
the entity. Here is where exposure identification
after the material has contaminated the
continues to be important in the overall risk
groundwater, the remediation could take
management program. Risk managers should
more than twenty-five years to complete.
attempt to identify the “skeletons in the closet” and
address as many of the environmental exposures as
Overcoming the Difficulties in
Managing Environmental Exposures
possible before having to answer to a regulatory
body, citizens’ action committee, class action suit,
or third-party claim.
PAGE 11 OF 26
If an environmental problem can be identified and
Insurance practitioners or risk managers designing
corrected, the risk manager may have the
environmental insurance programs should compare
opportunity to prevent all or part of a liability loss
the coverage provided by the firm’s conventional
from occurring. For example, leaking barrels of
property and liability policies—including any
toxic waste material may have already caused
available pollution coverage endorsements with the
contamination that requires a cleanup, but perhaps
coverage that could be obtained under the
their prompt removal will prevent contamination of
appropriate forms of environmental insurance.
groundwater and possible third-party bodily injury
Insurance buyers are often surprised to see the
claims.
coverage gaps for environmental claims that even
an endorsed CGL policy can leave.
Covering Environmental Exposures
Under Conventional Insurance
Policies
Most organizations carry several types of liability
insurance. However, general liability policies,
commercial auto policies, and most other types of
commercial liability policies exclude some or all
claims for injury or damage resulting from pollution,
including the cost of cleaning up released
pollutants. These exclusions have been discussed in
prior chapters of this text. Commercial property
insurance policies often provide coverage for
cleanup of pollutants on the insured’s premises if
the loss is caused by an insured peril. However, this
cleanup coverage is usually subject to a low
sublimit that would provide little relief for a
The remainder of this chapter describes the various
types of insurance that have been designed
specifically to cover environmental loss exposures.
Types of Environmental Insurance
The current marketplace includes only a handful of
insurers capable of writing a full range of
environmental coverages and supporting those
policies with claims and loss control services. Each
insurer typically creates its own policy forms and
creates names for its coverages in accordance with
its marketing objectives. Thus, two insurers may
use different names to describe essentially the
same coverage.
To add to the complexity, different policy forms can
substantial pollution incident.
be significantly modified by endorsement or
Organizations that wish to insure their
environmental insurance that share a common
environmental loss exposures must understand how
each of their property and liability insurance policies
will respond to possible pollution-related losses. If
an organization’s basic policy forms exclude
important environmental exposures, the
organization might be able to obtain coverage for
some of the excluded exposures by buying
coverage endorsements to these policies. In some
cases, these endorsements may provide coverage
that is sufficient to meet an insured’s particular
needs. For many firms, the coverage is too limited,
and the only way for such firms to obtain
appropriate coverage is to obtain separate
environmental insurance policies.
combined to provide packages of different types of
policy limit. Some environmental coverages are
available only as part of specialty insurance
packages. For example, a specific environmental
coverage may only be available to golf courses or
doctors’ offices. Instead of trying to describe all of
the various environmental policies in existence, the
remainder of this chapter examines eight major
types of environmental insurance policies:
1.
Site-specific EIL policies
2.
Contractors EIL policies
3.
Environmental professional (E&O) liability
policies
4.
Asbestos and lead abatement contractors
general liability policies
5.
Environmental remediation policies
6.
Remediation stop-loss policies
PAGE 12 OF 26
7.
8.
Underground storage tank compliance
coverage for bodily injury claims. These
policies
requirements could substantially restrict coverage
Combination policies
under the EIL policy for claims alleging “cancer
phobia” or a similar fear of future disease or injury.
These eight types of policies are intended as a
Because some EIL policies do not contain these
generic listing of the various types of environmental
restrictions, each policy must be analyzed to
insurance policies. In the marketplace, the actual
determine the extent of coverage provided.
policies are usually titled somewhat differently.
The definition of the term “loss” often includes the
Site-Specific EIL Policies
cost to defend against pollution claims within the
Environmental impairment liability (EIL) insurance
scope of the policy. The term “cleanup costs” may
originated in the late 1970s to fill the coverage gaps
appear as a separate coverage term, or it may be
in the CGL policy. Site-specific EIL policies cover
included within the definition of “property damage.”
third-party claims arising from either sudden or
The policies sold by different insurers may contain
gradual releases of pollutants from insured
differing definitions of “cleanup costs.” Most of the
locations. EIL coverage enhancements allow
definitions include, as a minimum, the expenses the
policyholders to purchase protection against the
insured incurs in the removal or remediation of soil,
costs of on-site cleanup, claims arising from
surface water, groundwater, or other contamination
releases from third-party disposal sites, and claims
in responding to a covered pollution liability loss.
arising from pre-existing pollution at insured sites.
Factories, waste disposal sites, golf courses, farms,
EIL policies respond to loss arising from “pollution
municipalities, warehouses, and oil refineries are
conditions.” The definition of “pollution conditions”
just a short list of the types of risks that purchase
follows the definition of “pollutants” in ISO pollution
EIL insurance coverage.
exclusions found in general liability, auto liability,
and other liability insurance policies. A typical
Insuring Agreement
The typical insuring agreement in a site-specific EIL
policy obligates the insurer to pay on behalf of the
insured a loss, in excess of any deductible, for
bodily injury, property damage, cleanup costs, and
defense expenses. The loss must result from
pollution conditions that exist beyond the
boundaries of the site(s) listed within the policy
declarations. However, on-site cleanup is commonly
definition of “pollution conditions” in an EIL policy
reads as follows: “Pollution conditions means the
discharge, dispersal, release or escape of smoke,
vapors, soot, fumes, acids, alkalis, toxic chemicals,
liquids or gases, waste materials or other irritants,
contaminants or pollutants into or upon land, the
atmosphere or any watercourse or body of water.”
The definition of “pollution conditions,” like the
added by endorsement to the policy form.
definition of “pollutants” in the pollution exclusions
The policy definitions of “bodily injury” and
words “hazardous waste” or “hazardous material.”
“property damage” are the same as those in other
liability insurance policies, with two notable
qualifications. The first is that for the environmental
coverage to apply, the bodily injury or property
damage must result from pollutants emanating
in the CGL and other policies, does not include the
The definition is much broader than hazardous
waste, which is an important point to remember
when analyzing potential coverage gaps between
EIL policies and the insured’s other liability policies.
from an insured site. The second qualification is that
Claims-Made Coverage
some of the policy forms require physical injury or
EIL policies provide coverage on a claims-made
actual exposure to pollutants in order to trigger
basis. In most respects, the policies operate like
other forms of claims-made insurance, except that
PAGE 13 OF 26
EIL forms have three noteworthy characteristics not
a longer extended reporting period by endorsement
shared by other liability policies: (1) there is no
for an additional premium.
retroactive date, although these are sometimes
added to the policy, (2) they have a relatively short
The third difference between an EIL policy and
extended reporting period, and (3) all claims arising
other claims-made forms is the way that multiple
from a pollution incident (release) are treated as a
claims are treated. Several separate claims can
single loss with one deductible and one per loss
arise from a single pollution incident. There may
limit.
also be a delay in the discovery of damages after
the incident that could result in a delay in the
For a claim to be covered in a typical claims-made
reporting of claims. To address these issues, EIL
policy, the injury or damage must occur on or after
policies commonly treat all claims arising out of the
the retroactive date, and the claim must be
same pollution incident as a single loss, subject to
reported to the insurer during the policy period or
one limit of liability and one deductible. This
during the extended discovery period. EIL policies,
approach prevents the stacking of policy limits from
in contrast, often do not contain a retroactive date.
successive claims-made policies over multiple
In effect, a claims-made policy without a retroactive
years. The insured benefits by avoiding the
date provides unlimited prior acts coverage, a
application of multiple deductibles to the same loss.
valuable feature for covering environmental
impairment exposures that are often unknown to
the insured.
When the prior use or the current conditions at the
site make the risk unacceptable, the underwriter
can impose a retroactive date on an EIL policy to
limit the time period for coverage of prior acts.
Adding a retroactive date allows the underwriter to
provide EIL coverage prospectively without being
overly concerned about the prior use of the site.
Once the insured and the underwriter have
developed more information about the site, the
underwriter might be willing to remove the
retroactive date from the policy.
Like other claims-made policies, EIL polices contain
extended reporting period provisions that obligate
the insurer to provide an extended reporting period
for a specified additional premium upon the
termination of the insurance. Coverage is provided
only for claims that result from pollution releases
that occurred (in total or in part) before the
termination of the EIL policy. The time allowed for
the reporting of such claims under the extended
reporting period is typically one to three years, in
contrast to the option for an unlimited extended
reporting period under the ISO claims-made CGL
coverage form. Most underwriters are willing to add
APPLICATIONS - Application of EIL
Limit and Deductible
Ace Manufacturing Company discovered through
inventory reconciliation that approximately 1,000
gallons of plating bath solution from its chrome
plating operations could not be accounted for.
Further investigation revealed that over a threeyear period the materials in the plating bath had
seeped from a drainpipe into an adjacent stream.
Ace immediately reported the situation to the
appropriate governmental agency and completed a
cleanup of the stream. Ace had a claims-made EIL
policy at the time of the loss. The EIL policy paid for
the cost of cleaning up the stream, subject to the
policy deductible.
Two years after the cleanup had been completed, a
group of fishermen brought a class action suit
against Ace alleging that they had been exposed,
through the consumption of fish, to harmful levels
of heavy metals released by Ace into the stream.
The EIL policy that paid for the cleanup will also
respond to the fishermen’s class action. However,
any damages for which Ace becomes liable because
of the class action will be considered part of the
same loss as the earlier cleanup because the
pollutants were attributable to the same release.
PAGE 14 OF 26
Thus, the amount of insurance available for the
Punitive Damages Exclusion - EIL policies
class action will be the limit of liability less the
commonly exclude punitive, multiplied, and
cleanup costs paid earlier, and Ace will not have to
exemplary damages and environmental fines and
pay another deductible amount for the second
penalties. Insuring such costs is considered to be
claim.
contrary to public policy in many jurisdictions
because it would relieve guilty parties of a portion
In this situation, it would also be common for all
of the burden imposed by law for their culpable
subsequent EIL policies issued by the same or
acts. In those states where the law allows insuring
different underwriters to contain an endorsement
punitive or exemplary damages, the exclusion can
that would exclude all losses arising from the
be modified to cover such damages.
previous release of plating materials into the
stream.
Alienated Premises Exclusion - EIL policies
commonly exclude coverage for an insured location
Exclusions
that the insured has sold or leased to others, or of
Site-specific EIL policies typically contain all or most
which the insured has otherwise relinquished
of the exclusions discussed below.
operational control. Underwriters have felt this
exclusion to be necessary because they expect the
Known Pre-Existing Conditions Exclusion - To
insured to exercise operational control over insured
provide a reasonable degree of protection for the
sites. This exclusion can be modified to provide
insurer without eliminating coverage for all pre-
coverage for sites that the insured leases to others
existing conditions, EIL policies commonly exclude
or to provide ongoing coverage for properties that
only those pre-existing conditions that are known to
the insured has sold.
an individual or a group of designated persons in
the insured organization. The exclusion usually
Nuclear Liability Exclusion - EIL policies have
limits the list of employees who must have
nuclear exclusions comparable to the broad form
knowledge of pre-existing pollution conditions to (1)
nuclear liability exclusion that is attached to the
those directly responsible for environmental affairs
CGL policy. In general, the nuclear exclusion
and (2) senior managers. To trigger the exclusion,
eliminates coverage for high-level nuclear
the specified employees must have known or
materials. Low-level nuclear materials can be
reasonably foreseen that the pre-existing condition
covered under the EIL policy, with the exception of
would give rise to a claim under the policy.
materials that are covered under liability policies
The purpose of this exclusion is to eliminate
underwritten by the nuclear insurance pools.
coverage in situations when the purchaser of the
policy knew of an impending claim that would be
Acid Rain Exclusion - Most EIL policies exclude
covered under the policy. The purpose is not to
claims arising from acid rain. Acid rain is caused in
eliminate coverage if the insured might have
part by sulfur dioxide emissions from large
anticipated that an event could take place that
industrial and commercial boilers that are fired by
could lead to a claim under the policy.
fossil fuels. Because the damage caused by acid
rain can be widespread and can occur at
Exclusion of Deliberate Noncompliance With
considerable distances from the source of
Environmental Laws - EIL policies exclude
emissions, underwriters are reluctant to delete this
environmental losses that are caused by the
exclusion from EIL policies unless the insured does
insured’s intentional, willful, or deliberate
not operate the type of equipment that can cause
noncompliance with any current environmental
acid rain.
statute or regulation.
PAGE 15 OF 26
War Exclusion - EIL policies typically exclude liability
that are similar to those found in the CGL coverage
resulting from war in any form.
form.
Contractual Liability Exclusion - Unlike CGL policies,
Transportation Exposures Exclusion - Site-specific
many EIL policies do not cover liability assumed
EIL policies ordinarily exclude liability arising out of
under an “insured contract.” The contractual liability
the ownership, maintenance, operation, use,
exclusion in an EIL policy typically eliminates
loading, or unloading of any automobile, aircraft,
coverage for all liability assumed under contracts,
watercraft, or railcar. Exposures to environmental
other than liability that the insured would have
impairment liability arising out of the transportation
incurred in the absence of the contract.
of pollutants are insurable under separate policies.
This coverage is also available in some EIL policies.
Exclusion of Damage to the Insured Site - The
purpose of an EIL policy is to insure third-party
Limits of Liability and Deductibles - As noted earlier,
claims for bodily injury and property damage arising
EIL policies are typically subject to a per loss limit of
from the release of pollutants and to provide for the
liability, which is the most that the insurer will pay
cleanup of the pollutants. To reinforce that purpose,
for bodily injury, property damage, cleanup costs,
EIL policies have traditionally contained exclusions
and defense expenses resulting from each release
that eliminate coverage for releases of
of pollutants. EIL policies also contain an aggregate
contaminants that do not migrate beyond the
limit of liability.
boundaries of the insured site. It is also common for
EIL policies to specifically exclude on-site cleanup
The inclusion of defense expenses within EIL policy
expenses. However, this practice is changing, and
limits is an important difference from the CGL
EIL policies that cover first-party exposures (on-site
policy, which pays defense costs in addition to the
cleanup) are now available. On-site cleanup
applicable limit of liability until the limit is used up
coverage is particularly important when
by the payment of damages. Defense expenses in
groundwater beneath the insured’s property is
an environmental damage claim can be substantial
contaminated by a release emanating from the site.
because of the normal requirement for technical
Products and Completed Operations Exclusion
experts and testing of materials. These costs should
Site-specific EIL policies commonly exclude the
be considered when selecting limits of liability. For
insured’s liability for products and completed
example, installing one groundwater monitoring
operations. The reason for this exclusion is that
well can cost $10,000. If a claim is made against an
standard CGL policies generally cover the insured’s
insured for contamination of an aquifer, the
liability for products and completed operations
groundwater investigation used to determine the
unless the insured’s products are used at a waste
condition of the resource can easily cost in excess
disposal site or the completed operations involve
of $100,000. These costs, along with attorney fees
remediation of contamination at any owned or
and other defense costs, reduce the amount of
nonowned site. Products pollution liability coverage
insurance recoverable for settlements or judgments
is available in a stand-alone policy that is often
against the insured.
issued without a pollution exclusion. Contractors
can purchase environmental liability coverage for
Selecting appropriate limits for an EIL policy is
completed operations, including remediation of
comparable to selecting limits for any other type of
contaminated sites.
insurance. The process begins with an identification
of exposures. This is followed by an effort to
Workers Compensation and Employers Liability
quantify the loss potential associated with the
Exclusions - EIL policies contain workers
exposures identified. Quantification of the loss
compensation and employers liability exclusions
potential requires a systematic approach but is not
PAGE 16 OF 26
beyond the capability of many risk managers. If
stores any materials that could be contaminants or
assistance is required, plant environmental
pollutants, or that could unexpectedly come into
personnel, outside consultants, underwriters, or
contact with materials on a job that could cause
insurance producers may be able to offer additional
pollution or contamination, may wish to obtain a
expertise in assigning numerical ranges to the
contractors EIL policy to fill the gaps in coverage
identified exposures.
created by the pollution exclusion in the CGL policy.
Substantial limits of liability are available today
Insuring Agreement
from the markets that write environmental
Unlike site-specific EIL policies, contractors EIL
insurance. Limits of $100 million per loss are
policies provide coverage for loss arising from the
available from a single insurer, and the total market
described operations of the named insured. The
capacity is in excess of $400 million per loss.
obligation of the insurer to pay a “loss” on behalf of
the insured has the same meaning in the
Contractors EIL Policies
contractors policy as in the EIL policy, which is to
Contractors EIL policies were introduced to the U.S.
cover claims arising out of a pollution incident for
market in 1987. These policies were developed to
bodily injury, property damage, cleanup costs, and
address the environmental insurance needs of
defense expenses.
contractors that were performing environmental
remediation services on contaminated sites. The
Contractors EIL policies are available with either a
contractors EIL policy has its roots in the site-
claims-made or an occurrence coverage format.
specific EIL policy discussed above. In fact, the
There is a significant difference between the way an
original contractor’s policies actually used a lengthy
EIL policy addresses prior acts and the way they are
endorsement to a site-specific EIL policy to create
handled in a claims-made contractors EIL policy.
the contractors’ version of EIL coverage.
Although most site-specific EIL policy forms do not
contain a retroactive date and therefore provide full
Many of the policy terms and conditions in
prior acts coverage, claims-made contractors EIL
contractors EIL policies are similar to those found in
policies often contain a retroactive date. Prior acts
site-specific EIL policies. Both provide coverage for
coverage is available in a contractors policy, but it
bodily injury, property damage, cleanup costs, and
has to be negotiated and added to the policy.
defense costs. However, many of the features of
the site-specific EIL policy had to be modified
Exclusions
substantially to address contractors’ insurance
A contractors EIL policy may contain most of the
needs. The site-specific EIL policy is written on a
exclusions of site-specific EIL policies that were
designated premises basis, whereas the contractors
discussed earlier. However, a contractors EIL policy
policy is designed to cover a contractor’s operations
ordinarily omits certain exclusions of site-specific
and activities at project sites and to cover the
EIL policies so that the contractors EIL policy will
contractor’s completed operations and contractual
cover completed operations, damage to the insured
liability exposures.
site, and the cost of remediating the job site for a
loss created by the contractor’s operations.
Environmental services vendors often buy
contractors EIL policies. However, a wide range of
In addition to the exclusions commonly found in
contractors, from general contractors to
site-specific EIL policies, contractors EIL policies
construction managers, now purchase this coverage
often contain exclusions of asbestos abatement
because of the far-reaching pollution exclusion in
operations, radioactive matter (more restrictive
the CGL policy. Any contractor that works on a
than the standard ISO nuclear exclusion), and
waste disposal or storage site, that handles or
PAGE 17 OF 26
professional liability. However, these exposures can
liability. Consequently, many environmental
often be covered by endorsement to the contractors
consultants had to operate without pollution
EIL policy. With regard to nuclear materials, the
insurance coverage until specialized environmental
contractors EIL policy can provide coverage for low-
consultants professional errors and omissions
level radioactive exposures but not for risks
policies were introduced in 1989.
associated with high-level materials used for
weapons or fuel rods in nuclear power reactors.
Unlike contractors EIL insurance, which was
introduced and gained market acceptance as a
Environmental Professional E&O Liability Policies
monoline, gap-filling coverage for the pollution
The “Cleanup America” effort of the 1980s created
exclusion in contractors’ CGL policies, an
a large environmental consulting industry in the
environmental professional E&O policy that
1990s that has continued into the present decade.
responded only to pollution claims was quickly
Environmental engineers and consultants face
eclipsed by a blanket E&O policy that covered all of
many of the same environmental exposures as site
the traditional E&O exposures of the engineer or
owners, with the exception of legislated liabilities for
consultant, including claims for environmental
prior acts involving the disposal of hazardous
damages.
wastes (the major risk of PRPs under Superfund).
Environmental service vendors may also incur PRP
Today, a wide spectrum of the engineering industry
liability for prospective work at a Superfund site
purchases these blanket E&O policies. At one point
either as an “arranger” for deposit of materials at a
in time, E&O policies that excluded environmental
designated facility or as an “operator” of a site as
losses were less expensive than those that provided
those terms are defined in the act. Cleanup
coverage for them. However, this pricing differential
contractors have lobbied for a change in Superfund
has become less noticeable over time and many
on this issue, arguing that they are there to help
engineering firms buy these policies to cover their
solve the problem and should not be considered to
entire practice, not just their environmental work.
be a “polluter” under liability provisions of CERCLA.
These policies are useful to any professional
To date, these changes have not been incorporated
services firm that does environmental work or
into the legislation.
whose work could lead to a pollution loss.
In addition to Superfund liability, environmental
Insuring Agreement
service vendors can face potential liability from
The early environmental E&O policy forms amended
negligent professional errors, acts, or omissions.
the insuring agreement of the contractors EIL policy
Claims against such vendors may include
form to cover “negligent professional errors, acts or
allegations that they have failed to identify
omissions in the performance of the Insured’s
contaminants, that their characterization of the site
professional services.” Many of the early policies
contains errors, that their design for remediation of
provided coverage only for personal injury (similar
contamination is faulty, that they have made
to bodily injury, but including libel and slander in
mistakes in analysis of samples, or that they have
the definition), property damage, cleanup costs,
otherwise failed to perform in accordance with the
and defense expenses. The insuring agreements of
standards of their profession.
these policies were more restrictive than the
broader insuring agreements in traditional
At the same time that environmental consultants
engineers professional liability policies that
were experiencing rapid growth in their business
responded to “claims arising out of professional
sector during the 1980s, the insurance industry was
services.” “Claims,” in the traditional E&O policies,
adding pollution exclusions to all commercial liability
could encompass considerably more than personal
insurance policies, including those for professional
injury, property damage, cleanup costs, and
PAGE 18 OF 26
defense expenses. Therefore, environmental
can be negotiated for the vast majority of the
engineers found it expedient to purchase two
exclusions in one of these policies.
professional E&O policies, one to cover
environmental claims on a broader basis.
Asbestos and Lead Abatement
Contractors General Liability Policies
Contemporary environmental professional E&O
In the mid-1980s, the combined effects of
environmental claims and one to cover non-
liability policies now contain insuring agreements
that resemble the coverage grants of traditional
engineers professional liability policies, without a
pollution exclusion. A wide range of professional
environmental services vendors purchase these
policies, including environmental engineers, testing
labs, tank testers, and environmental consultants.
Environmental professional E&O liability policies,
like most other professional liability policies, are
written on a claims-made basis, usually subject to a
retroactive date and a substantial deductible.
legislation, increased public awareness of asbestos
risks, and a strong real estate market created a
demand for asbestos abatement services. During
the same time period, insurance companies were
trying to limit their exposure to asbestos products
liability and environmental damage claims by
adding stronger pollution and asbestos exclusions
to all commercial liability insurance policies.
Consequently, a demand for liability insurance
covering asbestos abatement arose at a time when
the availability of liability insurance, in general, and
environmental liability insurance, in particular, was
Exclusions
restricted.
Exclusions in environmental professional E&O
liability insurance policies differ by insurer. The
Nonetheless, the law of supply and demand in a
insured-versus-insured exclusion and the
free market economy resulted in the introduction of
contractual liability exclusion are common
asbestos abatement contractors general liability
exclusions in engineers professional liability policies
policies. Early policy forms were written on a
that have found their way into environmental
claims-made basis and were very restrictive in
professional E&O policies. The insured-versus-
terms of the coverage provided. By 1990, the
insured exclusion eliminates coverage for claims in
market for this coverage had switched to
which one insured sues another insured for
occurrence-based policy forms, which are used
damages arising out of a professional error, act, or
almost universally for asbestos abatement liability
omission. Most professional liability underwriters
insurance today. The pricing of coverage has also
believe that such suits are a business risk that
been adjusted to reflect a good loss history in this
should be assumed by the affiliated entities and
class of business. The policies are written for one-
therefore not be insured. The contractual liability
year terms or longer periods if required by the
exclusion addresses a similar business risk issue.
project owner.
Other exclusions found in environmental
As concern over lead paint has grown, many
professional E&O insurance include nuclear risks,
asbestos abatement insurers have expanded their
warranties and guarantees, and fiduciary liability.
policy forms to include lead paint exposures as well.
The asbestos (or lead) abatement contractors
Care must be exercised in evaluating the coverage
general liability insurance policy is essentially a CGL
needs of the insured when dealing with
policy that contains an amendment to the pollution
environmental professional E&O insurance. Most
exclusion deleting asbestos (or lead) from the policy
underwriters of this type of insurance have latitude
definition of “pollutants.” Thus, unlike the
in their ability to endorse their policies to address
contractors EIL policy, which is a “gap-filler” for the
the needs of the insured professionals. Coverage
PAGE 19 OF 26
pollution exclusion in the CGL policy of the
were concerned that their borrowers might default
contractor, an asbestos (or lead) abatement
on loans if a borrower was faced with unexpected
contractors general liability form covers a
environmental cleanup expenses on the secured
contractors general liability and asbestos (or lead)
property. Early versions of the coverage forms were
abatement liability insurance needs in a single
often referred to as property transfer environmental
policy.
insurance. They are now more commonly called
environmental remediation policies, although the
An asbestos (or lead) abatement contractors
titles of policy forms vary. Such policies can be
general liability policy often contains other
written to provide remediation coverage on virtually
exclusions in addition to those of the standard CGL
any class of property that may be contaminated.
policy. For example, many policies exclude liability
assumed under any contract for injury to any
Insuring Agreement
employee of the insured. The standard CGL policy
Environmental remediation insurance policy forms
covers such liability as long as it is assumed under
are designed to pay on behalf of or to indemnify the
an insured contract as defined in the policy.
insured for remediation costs or expenses caused
Because such claims are excluded under the
by environmental damage at a covered location. To
employers liability coverage of the standard
be insured, the environmental damage must be
workers compensation policy, they may represent a
discovered and reported during the policy period.
coverage gap for asbestos or lead abatement
The coverage is intended to insure cleanup costs
contractors, who should seek either to have the
incurred at the insured location on a first-party
exclusion eliminated from their general liability
basis. In addition, third-party EIL coverage is
policy or to have the contractual assumption
routinely included within environmental remediation
eliminated from their contracts with customers.
policies to insure the traditional third-party EIL loss
Other important differences from the standard CGL
exposures.
form include changes in the limits of liability,
deductibles, and defense cost provisions. The
Insuring environmental cleanup costs presents a
asbestos or lead abatement contractors policy
problem for the insurer in defining what a covered
forms usually include defense costs within the
loss is. Environmental cleanups are usually
general aggregate limit. Deductibles are typically
triggered by the discovery of contamination in
higher than those found in most contractors’ CGL
excess of baseline levels that are set forth in
forms.
various environmental protection laws.
Contamination levels above that level may need to
The market for asbestos or lead abatement
be remediated. To set the baseline for a cleanup
contractors insurance is changing rapidly, and
action, environmental remediation insurance
underwriters compete with each other through the
policies typically define “remediation expenses” as
use of manuscript coverage forms, as well as on
expenses incurred for the investigation, removal, or
price. No standard forms exist in the market except
treatment of pollution conditions only to the extent
for the CGL, which is the basic building block for the
required by specified environmental regulations
policy. Care must be taken in evaluating the
such as CERCLA, RCRA, the Toxic Substances
coverage provided by these policies because
Control Act, the Clean Water Act, and the Clean Air
modifications to the policy can delete standard CGL
Act. Thus, coverage under the policy is triggered
provisions in the process.
when the insured discovers levels of contamination
that the environmental laws or regulations require
Environmental Remediation Policies
the insured to remediate.
First-party environmental insurance was originally
developed to address the needs of lenders who
PAGE 20 OF 26
To address the insurable interests of the buyer,
anticipated costs in performing an environmental
seller, and lender in a property transfer transaction,
cleanup of a specific location. Such policies provide
environmental remediation insurance policies have
only first-party coverage. However, third-party
broad definitions of who is an insured. The
coverage is often provided as part of an overall
additional insureds must be named in the policy for
insurance package by adding an EIL coverage form
the coverage to apply to their interests.
to the transaction.
Exclusions
Remediation stop-loss coverage is very useful in
The exclusions of environmental remediation
policies vary considerably from policy to policy.
Nearly all policies exclude loss resulting from known
pre-existing conditions, intentional or illegal acts,
liability assumed by contract, products and
completed operations, asbestos, lead-based paint,
off-site transportation, bodily injury to an employee
of the insured, and workers compensation
obligations. As is true in all forms of environmental
insurance, many of the potential loss exposures
that could be covered under the insuring agreement
of the policy are initially excluded to force the
applicant to disclose those exposures to the
underwriter. Once the underwriter has received this
additional information, the exclusions can often be
removed or modified, usually for an additional
facilitating the sale of contaminated property.
Usually there will be a wide range of estimated
cleanup costs associated with the remediation of a
contaminated property. A wide discrepancy often
exists between the low and high estimates of
cleanup costs, creating a problem for buyers and
sellers of property in establishing the sale price.
Potential buyers tend to discount the sale price by
the maximum potential remediation cost, and, of
course, the seller favors the low cost estimate.
Because environmental laws impose joint and
several liability for cleanup costs on all parties in the
chain of title, potential purchasers are extremely
cautious about taking title to contaminated
property. For similar reasons, sellers want to
transfer properties to parties that have the
premium charge.
resources not only to remediate the property but
Other Provisions
costs related to environmental liability associated
Environmental remediation policies are usually
issued on a claims-made basis with varying options
for extended reporting periods. Policy periods of up
to ten years are common in this line of coverage.
However, environmental remediation policies
usually have no provision for extended reporting
periods. The policies are written with deductibles
that vary depending on the underwriter’s comfort
level with the risk. Regardless of the number of the
same or related pollution releases from a covered
location, only one deductible and one per-loss limit
will apply.
also to protect the seller from any possible future
with the property. Remediation stop-loss policies
are used to close the gap between the seller’s and
the buyer’s perceptions of the expected remediation
costs.
Remediation stop-loss policies typically agree to pay
on behalf of the named insured the expenses (in
excess of the deductible) that the insured incurs in
completing an approved remedial action work plan
at a specified location. A claim under the policy is
defined as “written notice to the insured that the
remediation costs incurred at the project have
exceeded the costs contained within the scope of
work.” The description of the “scope of work,” which
Remediation Stop-Loss Policies
Remediation stop-loss environmental policies (also
known as cost cap policies) were designed to insure
remediation costs that exceed the projected or
is different in each policy, is usually expressed in an
endorsement to the policy.
Remediation stop-loss policies typically contain
relatively few exclusions because they are written
PAGE 21 OF 26
on a first-party coverage basis. Like other types of
appropriate selling price for this property might be
environmental insurance, these policies are
$1.5 million. This sum is equal to the fair market
manuscript forms without standard terms or
value of the property if it were clean, less the
conditions. Some of the more common exclusions
expected cost of remediation in accordance with the
found in the remediation stop-loss policies are
approved work plan, calculated as follows:
intentional acts or misrepresentations, bodily injury,
contractual liability, and war.

Appraised value $3,000,000

Less remediation expenses
In underwriting these policies, the underwriter

Original work plan (1,000,000)
reviews the applicant’s proposed remediation work

Expected cost of revised work plan
plan to establish the reasonableness of the cost

($5,000,000 additional cost × 10%
estimates. The underwriter also evaluates the
quality and reliability of the consultants and
probability) (500,000)

Adjusted sales price $1,500,000
contractors performing the work, the types of
contaminants present, and the cleanup technologies
In reality, this transaction might never take place.
being used at the work site. A sizable deductible is
Estimates of environmental remediation expenses
used as a pricing tool to eliminate loss amounts that
are seldom as precise as those cited in this
have a high probability of occurring.
example, and if the cleanup costs an additional $5
million, Able would be responsible for all of the
APPLICATIONS - Using Remediation
Stop-Loss Coverage
Midland Grain Growers Cooperative would like to
sell a grain elevator to Able Elevator Company. The
appraised value of the elevator is $3 million, and
the buyer and seller agree that this is a fair market
value for the property. However, the land that the
elevator is located on is contaminated with
chemicals used in the past to fumigate the grain in
storage. The seller’s estimate for the expected cost
to remediate the land is $1 million. The work plan
for this remediation plan was submitted to and
additional expenses, not just 10 percent of them.
To encourage Able to purchase this property and
not incur any risk for excess cleanup costs, the
seller might agree to indemnify Able for costs in
excess of the discounted sales price. This option
might be unacceptable to Midland Grain Growers
because that indemnity would show up on its
balance sheet as a contingent liability (perhaps
forever).
Another alternative would be for the seller to
discount the agreed sales price by the worst-case
approved by the environmental regulators.
loss estimate of $6 million. In other words, Midland
Able Elevator Company was concerned about
property and $3 million in cash just to take the
purchasing this contaminated property, so Able
hired an environmental consultant to evaluate the
cost estimates for the approved work plan. Able’s
consultant concluded that the remediation action
could cost as much as $6 million but that there is
only a 10 percent chance that the costs will exceed
Grain Growers would give Able the title to the
property off Midlands’ hands. Midland Grain
Growers would undoubtedly reject this alternative.
A more viable approach to the transaction would be
to use a remediation stop-loss insurance policy with
a limit equal to the worst-case loss estimate of $6
$1 million.
million. The underwriter would set the deductible at
Assuming the information on expected costs is
remediation costs of $1 million.
an affordable amount above the expected
correct, how much should Able pay for the grain
elevator? According to its expert’s estimate, an
PAGE 22 OF 26
Underground Storage Tank
Compliance Policies
RCRA created financial responsibility regulations
that apply to the owners and operators of
underground storage tanks. When such tanks are
used for storage of fuels (home heating oil is
excluded in most states) or hazardous materials,
the RCRA regulations require the owners or
operators to demonstrate their ability to pay claims
resulting from the release of such materials from
the tank. One method by which financial
responsibility can be demonstrated is through the
operators of aboveground storage tanks, a number
of insurers also insure aboveground tanks on the
same policies used for underground tanks. Another
point of potential differentiation on compliance
policies is that some policies may only cover
releases from the UST and underground piping
itself, which is all the regulations apply to. Other
compliance policies also cover releases from the
piping, pumps, valves, and other equipment directly
attached to the insured tank. Because leakage from
the attached equipment poses a significant loss
exposure, the second version of coverage is
purchase of insurance.
obviously more desirable.
The RCRA financial responsibility regulations
Most UST compliance policies do not provide the full
resulted in the development of a special type of
environmental impairment insurance often referred
to as underground storage tank (UST) compliance
policies. These policies, which vary by insurer, have
as their core coverage a site-specific EIL policy.
Special policy provisions, usually added by
endorsement, modify the policy form to comply
with the financial responsibility regulations. These
special provisions include an additional limit for
defense costs, usually equal to 25 percent of the
policy limit. In contrast, an ordinary EIL policy
includes defense costs within the limit of liability.
The UST compliance policy also adds a sixty-day
notice of nonrenewal and an automatic extended
scope of coverage granted by full EIL policies. One
restriction of coverage in a UST compliance policy is
that it does not insure all releases of contaminants
from the insured site. Most UST compliance policies
only respond to a “corrective action,” as that term is
defined in RCRA, and not to other environmental
damage claims. This distinction is important for any
insured that may face environmental liability claims
based on legal grounds other than RCRA. For
example, a warehouse storing environmentally
damaging materials would not have coverage for
those materials under a UST compliance policy on
the gasoline tank used to fuel their fleet.
assure regulators that UST policies comply with the
APPLICATIONS
UST VERSUS EIL Coverage
minimum proof of financial responsibility
The owner of a retail service station that has four
requirements of RCRA or the applicable state
underground storage tanks is required to provide
regulations.
proof of financial responsibility for the cleanup of
reporting period provision. These two provisions
releases from the tanks as well as third-party
RCRA requires the owners or operators of
claims for bodily injury and property damage. A
underground storage tanks to provide evidence of
UST compliance policy is used by the owner for this
financial responsibility for specified limits. For most
purpose. The policy responds only to corrective
tank owners, the required limit of insurance is $1
actions under RCRA. The policy has a limit of
million per claim. Larger retailers of petroleum
liability of $1 million per claim and a deductible of
products may be required to provide evidence of $2
$5,000 per claim.
million of financial responsibility per claim.
While a customer of the station was pumping gas
Although the current regulations do not require
into her car, the hose from one of the pumps
evidence of financial responsibility of owners or
ruptured. The gasoline injured the customer and a
PAGE 23 OF 26
bystander and also damaged the customer’s car,
which makes direct comparisons of the policies
which had to be repainted as a result of the spill.
difficult.
Because the UST policy responds only to corrective
CGL/EIL Combination Policies
actions under RCRA, it would not cover the bodily
Some insurers offer CGL/EIL combination policies to
injury or property damage claims of the customer
provide a more complete insurance package for
or the bystander. To cover such claims, the owner
insureds. Nearly all EIL policies are written on a
would need to purchase an EIL policy (with on-site
claims-made basis, and most general liability
coverage) that also covers the tanks or purchase a
policies are written on an occurrence basis.
separate EIL policy and a UST compliance policy.
Accordingly, CGL/EIL combination policies are
Because of the limited pollution coverage provided
offered with the EIL coverage on a claims-made
in a UST policy designed purely for regulatory
basis and the CGL portion on either an occurrence
compliance, it is recommended that the retail
or a claims-made basis. Separate limits can be
service station owner purchase coverage under an
specified if the insured needs higher limits for the
EIL form or under a CGL/EIL combination policy as
pollution or the general liability exposures. Both
discussed below.
coverages are subject to a single aggregate limit
and typically a single deductible (when both EIL and
Combination Policies
CGL claims are involved).
As the variety of environmental insurance policies
grew, it became apparent that insurance buyers
CGL/EIL combination policies may also be endorsed
that had more than one type of environmental loss
to provide products liability coverage that includes
exposure could benefit from having a single policy
protection against pollution claims related to a
that combined multiple environmental coverages
release of pollutants caused by a failure of the
and sometimes non-environmental coverages in a
insured’s product. Some insurers will also provide
single policy.
coverage for pollution risks related to transportation
of the insured’s products or waste materials when
The demand for combined environmental liability
they are carried on vehicles owned by third parties.
policies began with environmental consulting firms
that were also involved in on-site remediation of
Advantages of Combination Policies
contamination. Because these firms had both a
Using combination policies has several advantages.
professional liability exposure and a contracting
The first is that they provide the coverage needed
exposure, they found it necessary to purchase both
by the insured to adequately protect it against
a contractors EIL policy and a professional E&O
pollution claims. As was mentioned above for
liability policy to adequately cover their
environmental consultants who also do on-site
environmental liability exposures. Once the pattern
work, the combination of contractors’
of combining coverage forms was established,
environmental insurance with professional E&O
underwriters developed other combinations of
insurance provides the pollution insurance needed
coverage to meet the specific needs of various
by the insured in a single policy that takes the place
customers.
of two.
Prepackaged combination policies are now an
Another advantage of combination policies is that
they can eliminate coverage disputes that might
otherwise occur if the coverages were provided by
two different insurers. For example, if a contractor
that is excavating soil to remove heavy-metals
contamination unexpectedly strikes an underground
important part of the environmental insurance
market. Insurers combine a variety of different
insurance coverages (both environmental and nonenvironmental), usually for marketing purposes,
PAGE 24 OF 26
storage tank, releasing diesel fuel into an area of
clean soil, the fault may be that of the contractor
that directly caused the release or the engineer who
failed to identify the presence of the tank. If the
firm that had done the site assessment is also doing
the on-site remediation, it may experience a thirdparty claim that falls in a “gray area” between the
contracting and professional aspects of its work.
warranties concern disclosure of past claims against
the organization and knowledge of violations of
environmental laws and regulations. The application
is signed by an officer of the organization and
attached to the policy when it is issued. Failure to
provide honest or accurate information may result
in the insurer’s denial of coverage in the event of a
loss.
Having both exposures covered by the same insurer
eliminates the possibility of two separate insurers
both denying coverage for the “gray area” claim.
Combination policies also provide a uniform defense
for claims because no dispute will arise over which
insurer has the duty to defend. Similarly, a CGL/EIL
combination policy eliminates the potential for interinsurer disputes on claims that would otherwise fall
in the gray area between separate CGL and EIL
policies.
One of the difficulties faced by potential applicants
for environmental insurance has been that the
information required in the applications is not
common to other forms of insurance. Although
gross receipts or some other simple accounting
measures may be used as the rating base for the
policy, much more detailed information on the
specific environmental risks is usually required to
underwrite the policy. The underwriter can use a
number of resources to assist in the application
process, including specialized insurance producers
and wholesalers and environmental engineers and
consultants.
Another advantage to combination policies is cost. A
combination policy is typically less expensive than if
the two or more coverage forms were purchased
separately. For example, a contractors
EIL/engineers professional E&O liability combination
policy is typically less expensive than would be the
case if these coverages were purchased separately.
This is primarily because the coverages in a
combination policy are subject to a single aggregate
limit. Although this makes the policy less costly, it
has the drawback of offering only one limit when
the purchase of separate policies would provide two
limits. However, only one deductible applies in the
combination form, whereas the use of separate
policies would result in the application of two
deductibles.
Application Process for
Environmental Insurance
Each insurer has a different application process for
environmental insurance. Regardless of the process
used to underwrite environmental insurance, the
application for insurance ordinarily includes certain
warranties that become a part of the policy. The
warranties include a statement that the applicant
knows of no existing pollution conditions that are
likely to lead to a claim against the organization.
The warranties also verify the truthfulness of the
information submitted to the underwriter. Additional
SUMMARY
Liability for pollution incidents can be based on
negligence, intentional torts (such as nuisance or
trespass), strict liability, or various environmental
statutes. These environmental laws have made
environmental risk management and insurance
much more important than in the past. Although
the risk management process can be applied to
environmental loss exposures, such exposures have
several unique characteristics that must be
considered when planning to manage them.
Environmental risk financing is complicated by
pollution exclusions in the majority of commercial
liability insurance policy forms. Insurers’ actions to
eliminate coverage for environmental damage
claims from standard insurance policies created the
need for various types of environmental insurance
designed to fill the resulting coverage gaps.
Site-specific environmental impairment liability (EIL)
insurance, also called pollution liability insurance,
was the first type of environmental insurance
offered in the United States, in 1977. Site-specific
EIL policies cover third-party claims arising from
either sudden or gradual releases of pollutants from
insured locations. Coverage applies to claims for
PAGE 25 OF 26
bodily injury, property damage, cleanup costs, and
defense expenses. Unless modified to provide onsite coverage, the claim must result from pollution
conditions that exist beyond the boundaries of the
described location.
Several additional types of environmental insurance
evolved from site-specific EIL policies to meet
various needs. Contractors EIL policies fill the gaps
in a contractor’s liability coverage that result from
the pollution exclusion in the standard CGL policy.
Contractors EIL policies provide coverage for
pollution liability claims arising out of the described
operations (including completed operations and
liability assumed under contract) of the named
insured at the various sites where the named
insured performs operations.
Environmental professional E&O liability policies,
when first introduced in 1989, responded only to
pollution claims made against the environmental
consultants who purchased these policies to fill the
pollution coverage gaps in their conventional
professional liability policies. The policies quickly
evolved to cover all of the insured’s professional
E&O exposures, including environmental claims. A
wide range of professional environmental services
vendors purchase these policies, including
environmental engineers, testing labs, tank testers,
and environmental consultants.
Asbestos and lead abatement contractors general
liability policies are essentially CGL policies that
contain an amendment to the pollution exclusion
deleting asbestos (or lead) from the definition of
“pollutants.” Thus, unlike the contractors EIL policy,
which is a “gap-filler” for the pollution exclusion in
the contractor’s CGL policy, an asbestos (or lead)
abatement contractors general liability policy covers
a contractor’s general liability and asbestos (or lead)
abatement liability in a single policy.
Environmental remediation policies are an example
of first-party environmental coverage. These policies
were developed to address the needs of lenders who
were concerned that their borrowers might default
on loans if a borrower was faced with unexpected
environmental cleanup expenses on the secured
property. The coverage is intended to insure cleanup
costs incurred at the insured location on a first-party
basis. Third-party EIL coverage can be added to
environmental remediation policies to cover the
traditional third-party EIL exposure.
Remediation stop-loss policies, another example of
first-party environmental insurance, cover
remediation costs that exceed the projected or
anticipated costs in performing an environmental
cleanup of a specific location. These policies are very
useful in facilitating the sale of contaminated
property because they close the gap between the
seller’s and the buyer’s perceptions of the expected
remediation costs for the property.
Underground storage tank (UST) compliance policies
provide coverage that satisfies the financial
responsibility requirements of RCRA for underground
storage tanks containing fuels or hazardous
materials.
Environmental insurers write a variety of
combination policies. A single combination policy
may include two or more types of environmental
insurance (such as contractors EIL coverage and
environmental professional E&O liability coverage for
an environmental consultant that also performs onsite remediation operations), or it may combine
environmental coverage and non-environmental
coverage (such as a CGL/EIL combination policy).
Combination policies are advantageous to insureds
because they are convenient, eliminate coverage
disputes, and often cost less than separate policies.
This document is for information purposes only. It is not intended to be exhaustive nor should any discussion or opinions be construed as
legal advice.
WRITTEN BY DAVID J. DYBDAHL, CPCU, ARM, DYBDAHL@ARMR.NET.
SOURCE: CPCU ENVIRONMENTAL INSURANCE AND RISK MANAGEMENT, CHAPTER 12. REPRINTED WITH PERMISSION.
PAGE 26 OF 26