We all know which clients need pollution coverage, right? They have smoke stacks puffing away all day. It’s the oil refineries and gas stations, the truckers who haul hazardous loads and the manufacturing plants. It's the coal powered electric plant and the pulp mill. While it's true these businesses need pollution coverage, there are other commercial clients who are less conspicuous who need pollution coverage as well.
A few new areas of concern include companies that install spray foam insulation, companies that package microwave popcorn and companies that spray chemicals such as herbicides. We have seen claims made against insurance agencies in recent years, where the agency customer's claim was denied by the Commercial General Liability carrier citing the pollution exclusion.
We have seen a couple of claims where the agency customer installed spray foam insulation in a building while other people were present. When spray foam insulation is being installed it emits fumes, which allegedly can cause long-term medical conditions. The insurance agencies were sued because their customer lacked pollution coverage for their business.
Speaking of medical conditions, there is a new medical condition called "popcorn lung" associated with workers who are exposed to the powdered butter flavoring used in microwave popcorn. Multi-million dollar awards have been given to injured workers at these packaging plants. In some cases the insurance agencies have been sued because there was no pollution coverage in place for the packaging plant.
Finally, there are the herbicide claims. While our insureds have yet to see a health related herbicide claim, we did have a claim where a landscape company sprayed the lawn of an apartment complex with herbicide instead of fertilizer, the result was a dead lawn. The liability carrier denied the claim under the pollution exclusion on the landscape company's policy, and the landscape company made a claim against their insurance agent.
A few other obscure pollution claims we have seen are for noise pollution at an outdoor gun range, odor pollution at a rock quarry and water pollution at a BBQ picnic. As our population grows and urban sprawl continues we often hear of people complaining of business practices by their new residential neighbors. One such case involved a gun range, which was sued for noise pollution due to all of the shooting. The gun range did not have pollution coverage.
Another victim of urban sprawl was a rock quarry, which cut stone for commercial and residential use. Neighbors complained about the odor emitted when they would cut rock and eventually filed suit against the quarry. The carrier for the quarry denied the claim based on the pollution exclusion. The quarry then filed suit against its insurance agent.
Lastly, we had a claim where a business held a BBQ for its employees. During the clean-up after the meal, the BBQ grill was hosed down and the contents of the grill ended up in a stream. The business was sued for contaminating the stream and they in turn sued their insurance agent for not having pollution coverage in place.
Hopefully you get the idea: potentially every commercial client may need pollution coverage or at least every commercial client should be offered pollution coverage. Pollution coverage is not cheap since pollution claims are expensive to defend and pay. Just because a customer will not purchase the coverage does not mean the coverage should not be offered. The best way for an agency to protect itself is to include pollution coverage on its checklist of coverages offered to all commercial clients. Having documentation that pollution coverage was offered and rejected by the customer will go a long way in defending the insurance agency in a subsequent suit. It will also qualify the agency for Westport's deductible elimination in the event a claim is made against the agency for not placing pollution coverage.
Jim Redeker is vice president and claims manager at Swiss Re Corporate Solutions and works out of the office in Overland Park, Kansas. Insurance products underwritten by Westport Insurance Corporation, Overland Park, Kansas, a member of Swiss Re Corporate Solutions.