More often than not, insurance companies have refused to pay environmental claims under comprehensive general liability (CGL) policies, which has led to lawsuits in which billions of dollars have been and are still under dispute.
Insurance companies have, however, begun offering policies that give businesses a way to address liability for environmental cleanup. The complexity of environmental issues and the sheer size of the liabilities involved make these insurance policies different from off-the-shelf products. Before buying an environmental liability policy, a business should:
If a business fails to take these preparatory steps, the policy it purchases may turn out not to provide the coverage it expects.
Policies Fall Into Two CategoriesThe new environmental insurance policies fall into two broad categories:
Here are some examples of situations in which these environmental liability policies have proven effective:
Negotiating Environmental Liability CoverageIt is impossible to give an exhaustive list of all issues that may arise in negotiating environmental liability coverage; each insured and each site will have specific issues to be addressed. Some of the most common issues are:
1. The insurer evaluates the risks differently than the insured does; and
2. Particularly on big risks, the re-insurance market may heavily influence the price of the policy.
To determine the most cost-effective and appropriate coverage, get several premium quotations from each insurer for different levels of coverage and self-insured retentions.
The new environmental insurance products offer great opportunities to address difficult problems. With sufficient planning and caution, they can be very powerful tools in controlling corporate exposure, settling the seemingly unsettleable claim or closing a difficult transaction.