With climate change and environmental awareness hitting an all-time high in Canada, small business owners in every sector of the economy would be wise to ensure they aren’t exposed to the threat of a third-party pollution liability lawsuit.

Environmental- and pollution-related litigation is on the rise in Canada. For example, in July 2021, a judge certified a $40 million class-action lawsuit launched by a group of homeowners near Ottawa who say a local fire research lab polluted their drinking water and devalued their homes.

Pollution liability insurance is designed to protect businesses and contractors against specific risks and environmental liabilities associated with exposure to pollution while working at a jobsite. It covers third-party claims against bodily injury, property damage, legal and cleanup expenses caused by hazardous pollutant exposure from your company’s operations while you are completing a job and after your work is done. For example, if a problem arises because you are hired to remove mould for a client, and did not remove it all, which causes a respiratory illness to the client in the future, you can rest easy knowing you are protected from any potential liability issues.

Mold removal professional

Does Your Business Need Pollution Liability Coverage?

Any business that uses environmentally unsafe chemicals runs the risk of a third-party pollution liability lawsuit. That could be a hair salon, professional cleaning company, or dry-cleaning service. Auto repair shops, garages, junkyards, and industrial manufacturers also face these kinds of risks.

Moreover, contractors and subcontractors in the construction industry may need and require pollution insurance coverage if their work may affect the air quality or have environmental impacts at their jobsites during a construction project or after completing it.

Construction activities such as mould and asbestos remediation, fire restoration work, and drilling can lead to potential bodily injuries and property damages. For example, while drilling you accidentally strike an oil pipeline resulting in a leak that causes significant damage. 

A pollution liability insurance policy covers cleanup costs, bodily injuries, or property damages caused by pollution or toxic substances produced because of your work. There is a common misconception that contractors only need pollution insurance for hazardous waste and materials. However, nearly all contractors may be exposed to pollution-related risks that aren’t covered by a commercial general liability policy

What to Look for in a Pollution Liability Policy

Protecting your business from a pollution liability claim means understanding common business insurance terms and having a policy that takes into consideration multiple factors, including:

  • The types of coverage available. That may involve pre-existing and new pollution conditions relative to your business, cleanup costs resulting from regulatory requirements, legal expense coverage to protect you from third-party claims alleging damages arising from your business’s activities.
  • The scope of coverage. Insurance policies generally include exclusions for some types of bodily injury and property damage claims. For instance, third-party bodily injury coverage will consist of protection resulting from physical injuries, sickness, and death, but some policies may not include coverage for mental and emotional injuries, and they do not include coverage for ‘virus removal’ services. Similarly, property damage coverage may exclude claims related to a property neighbouring an insured worksite that is not directly affected, meaning there may be a potential coverage gap. Speak to your broker about identifying any possible gaps and how best to account for them.
  • Voluntary discoveries. Some pollution liability policies may exclude environmental cleanup costs that a policyholder voluntarily discovers. For example, some form of environmental contamination is uncovered at a construction site for a typical business operation like drilling. Some insurance companies may include such an exclusion as a means of deterring someone from drilling holes in a property to find such a problem and file a claim for damages.

Have a chat with one of our licensed brokers and determine what pollution liability risks your business faces. Don’t leave your business exposed to the threat of a third-party lawsuit. Be sure you’re covered if something goes wrong or an unexpected event unfolds that could hurt your business’s reputation and cost you thousands of dollars.

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