Environmental and pollution insurance-do you need it?

Environmental and pollution insurance-do you need it?
Author: Garris Thorntenson

If you are considering the purchase of a commercial property, the first thing you should do is check if it shows any signs of contamination by pollutants or toxic waste. The pollution problems could be caused by contaminated soil, underground water or by the building itself. The worse case scenario causes problems and harm to the estates or properties nearby as well. If that happens, the property owners might find themselves having to pay for cleaning up of the pollutants which might add up to be much more than the market price of the property. The owners might also be facing penalties which they didn't know about earlier in compliance with environmental safety laws and rulings.

Being the owner or the past owner of the property could mean that you will be held responsible for the toxin and poisons spreading to buildings nearby. Possible charges against you would include personal injury lawsuits or property damage. In such cases, how do you protect you and your company from getting into trouble?

Many local, state, and federal environmental laws are in their infancy, most less than 20 years old. As the new laws are passed the “old” laws are continually amended. This will sometimes overwhelm a potential buyer: Don't let this happen to you. With the hundred of laws out there, only a few are vital to improving your understanding of environmental liabilities.

One of the most well-known and important laws is CERCLA, which stands for Comprehensive Environmental Response, Compensation and Liability Act, where it is passed as an official law in the year 1980. Another revised and improved version of CERCLA is SARA, which stands for Superfund Amendments and Reauthorization Act) where it was authorized in the year 1986. There are currently a few active funds in the world today where the money is intended to help pay for the clean-up costs of deserted commercial sites that are too contaminated to be used and to cover the liability costs of the owner of the property.

If you think a new policy may be too costly or simply doesn’t make economic sense, be sure to review your current Commercial General Liability (CGL) policies. Precedent in recent court decisions have sometimes found the CGL covers pollution or environmental accidents, even though the policy was not intended to cover pollution or environmental accidents. This has caused most new CGL policies to amend and exclude coverage for pollution and environmental accidents.

With rising news coverage on the pollution problems and the large amount of money property owners have to pay for the damages and cleaning up, insurance companies have come up with policies which provide coverage especially for environmental damages and pollutions. This type of insurance will cover costs and damages resulting from pollution and contamination of toxic waste, damages and harm to the estate or physical harm to a third party, the cleaning-up bills of a third party's estate that is not considered the policy owner's estate, the cleaning costs of an estate that is not owned by any individuals but damaged by the policy holder’s estate, and finally the transportation costs of products or waste which have caused pollution and contamination problems.

The insurance firms have also developed special insurance policies for companies which are thinking of investing in brownfield sites. The term "brownfield" refers to commercial estates which are not developed even though they are considered commercial sites because of excessive contamination and pollution in the area. Without such policies, these sites will go undeveloped as developers may not necessarily want to take such high risks which may result in lawsuits relating to environmental issues.

To minimize your personal risk, before you decide to purchase a commercial real estate property, make sure you research your local pollution and environmental laws. take note of liability amounts and potential liability to neighboring areas if your property is deemed polluted. If you are confused by the laws consult a professional environmental lawyer. Armed with this knowledge you can determine if purchasing pollution/environmental insurance is for you.

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Garris Thorntenson works in the construction industry and always go form construction contractors insurance, specifically the environmental insurance. He highly recommends residents in California, Washington, Arizona, Utah or Nevada to look for the experts at J6 insurance as they are highly knowledgeable in this area.