As a broker, I tell my clients never to rely upon their CGL for pollution related liability. Although I choose those words carefully – “rely upon” – as in some situations the CGL can be somewhat responsive to pollution loses. In fact I once had an educator say he refers to the Pollution Exclusion as a “sieve” and I think that phrasing fits – there is some coverage but it must be a specific case that allows it to go through the “sieve”.
Below is a line-by-line analysis of the unendorsed ISO CGL Pollution Exclusion. Note this is 2007 wording as that is what my notes are predominantly for; I’m not aware of any significant changes since but please let me know if otherwise!
So let’s begin:
[This insurance does not apply to…]
(1) “Bodily injury” or “property damage” arising out of the actual, alleged or threatened dis-charge, dispersal, seepage, migration, release or escape of “pollutants”:
(a) At or from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to, any insured. However, this subparagraph does not apply to:
Pollution at an owned/rented premises is referred to as “Premises Pollution” (natch) and is typically the primary (coverage A) insuring agreement of a standalone pollution policy.
Note that this exclusion applies at your premises regardless of whether they solely exist there (such as a storage tank) or if they were brought to your premises, even by a third party. If the “escape” of pollutants happens on your premises, coverage is excluded.
The exceptions to this:
(i) “Bodily injury” if sustained within a building and caused by smoke, fumes, vapor or soot produced by or originating from equipment that is used to heat, cool or dehumidify the building, or equipment that is used to heat water for personal use, by the building’s occupants or their guests;
(ii) “Bodily injury” or “property damage” for which you may be held liable, if you are a contractor and the owner or lessee of such premises, site or location has been added to your policy as an additional insured with respect to your ongoing operations performed for that additional insured at that premises, site or location and such premises, site or location is not and never was owned or occupied by, or rented or loaned to, any insured, other than that additional insured; or
(iii) “Bodily injury” or “property damage”arising out of heat, smoke or fumes from a “hostile fire”;
To summarize, we are adding back coverage for:
i. HVAC/Plumbing mechanicals releasing smoke
ii. Off-Premises work for an Additional Insured, and only for ongoing operations. We will see more restrictions later; this coverage grant is not nearly as broad as it seems.
iii. Smoke & fumes due to a fire at your premises
Continuing the exclusion:
(b) At or from any premises, site or location which is or was at any time used by or for any insured or others for the handling, storage, disposal, processing or treatment of waste;
(c) Which are or were at any time transported, handled, stored, treated, disposed of, or processed as waste by or for:
(i) Any insured; or
(ii) Any person or organization for whom you may be legally responsible; or
Naturally the CGL is not the policy for you if you handle waste in any capacity. This can be a catch for certain contractors, manufacturers, etc. who may handle, or haul debris that’s not theirs.
(d) At or from any premises, site or location on which any insured or any contractors or subcontractors working directly or indirectly on any insured’s behalf are performing operations if the “pollutants” are brought on or to the premises, site or lo cation in connection with such operations by such insured, contractor or subcontractor. However, this subparagraph does not apply to:
Here we see the additional limitations I mentioned earlier. The best way to visualize this is: if the pollutants are either yours, or from someone you hired, there is no coverage. This reinforces the intent of the CGL to not be a true “pollution” policy – if you handle pollutants, if you have an existing exposure for them, then CGL is not intended to protect from that.
There are a handful of exceptions here but, again, they are limited.
(i) “Bodily injury” or “property damage”arising out of the escape of fuels, lubricants or other operating fluids which are needed to perform the normal electrical, hydraulic or mechanical functions necessary for the operation of “mobile equipment” or its parts, if such fuels, lubricants or other operating fluids escape from a vehicle part designed to hold, store or receive them. This exception does not apply if the “bodily injury” or “property damage” arises out of the intentional discharge, dispersal or release of the fuels, lubricants or other operating fluids, or if such fuels, lubricants or other operating fluids are brought on or to the premises, site or location with the intent that they be discharged, dispersed or released as part of the operations being performed by such insured, contractor or subcontractor;
(ii) “Bodily injury” or “property damage”sustained within a building and caused by the release of gases, fumes or vapors from materials brought into that building in connection with operations being performed by you or on your behalf by a contractor or subcontractor; or
(iii) “Bodily injury” or “property damage”arising out of heat, smoke or fumes from a “hostile fire”.
There is a lot to unpack here, but I’d summarize these as:
i. Obviously your equipment is going to have “pollutants” inside of it (fuels, oil, etc.) and the CGL does cover unintentional release of those. However note the incredibly strict requirement that such release must be from a part of the vehicle designed to store those pollutants. In practical terms this means something like extra fuel you may bring in a can, or extra oils and lubes, will not be covered if they spill since those didn’t escape from “that part of the vehicle” designed to hold them. This really is only for (e.g.) an accident with your mobile equipment that releases incidental fuels and such.
ii. Once again we see a very specific set of wording here with “materials brought into that building“. The number of cases this is likely to apply will be very limited.
iii. This is similar to “hostile fire” wording we’ve seen before.
We have one final section to exclusion 1:
(e) At or from any premises, site or location on which any insured or any contractors or subcontractors working directly or indirectly on any insured’s behalf are performing operations if the operations are to test for, monitor, clean up, remove,contain, treat, detoxify or neutralize, orin any way respond to, or assess the effects of, “pollutants”.
Similarly to waste handling, the CGL is not sufficient if your operations are to otherwise work with pollutants (testing for, cleaning, etc.). The exclusion is fairly strict here – even if the liability is from a subcontractor you do not have coverage. This means simply “subbing out” your pollution related items (say requesting a survey before a job begins) is not enough to insulate you. You will need to review your sub’s coverages, request to be an AI, and/or otherwise look at your own policy.
Section 2 of the policy deals with the “non-liability (i.e., statutory) costs associated with pollutant losses:
(2) Any loss, cost or expense arising out of any:
(a) Request, demand, order or statutory or regulatory requirement that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of, “pollutants”; or
(b) Claim or “suit” by or on behalf of a governmental authority for damages because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying or neutralizing, or in any way responding to, or assessing the effects of, “pollutants”.
However, this paragraph does not apply to liability for damages because of “property damage” that the insured would have in the absence of such request, demand, order or statutory or regulatory requirement, or such claim or “suit” by or on behalf of a governmental authority.
This is important as standalone pollution coverage is available for these costs, many of which are quite substantial, especially if you’re dealing with waterways. Since this is also a completely separate section to the exclusion (item 2 instead of item 1) it also means that if you otherwise have coverage under the CGL for a pollution loss, you still won’t have statutory/regulatory compliance costs paid.
The Pollution Exclusion is one of the hardest to parse. For a personal “internal summary” I reiterate what I said before: my advice is to never rely on the CGL for pollution coverage. Even if you are “lucky” enough to have some sort of pollution loss covered you’re still bare for any sort of continued testing and regulatory compliance, costs which can accrue for literal years.
In a future article we will look at options for some coverage here, on the Auto, as well as a sample standalone policy. Stay tuned!