INSURANCE: A New Era in Pollution Coverage

Joseph Catanese

Today, it's much easier for companies to buy environmental coverage than it was a generation ago. Before 1970, environmental coverage was too narrow or too pricey. Also, most insurance carriers, fearing astronomical losses, refused to write environmental coverage, leaving few insurers in the environmental business.

Today, however, the tables have turned. In 1999, the environmental insurance market reached $1.3 billion in annual gross written premiums. Insurers and brokers estimate that this premium amount will increase approximately 15 percent annually as pollution coverage plays an important role in transactions, such as mergers, acquisitions and property transfers.

An affordable and complete insurance program keeps businesses out of courtrooms. For example, the Pollution and Remediation Legal Liability (PARLL) policy provides coverage for unknown pre-existing and new pollution conditions. This policy also includes coverage for onsite and offsite remediation expense, third-party coverage for onsite and offsite bodily injury and property damage, and legal defense expense.

Additionally, the policy covers third-party bodily injury and property damage claims for sick building syndrome, lead paint, asbestos and naturally occurring radioactive materials, as well as contingent transportation liability.

Other environmental insurance products available today include business interruption, professional liability, errors and omissions, and protection for subcontracted activities. Pollution policies are available with liability limits up to $100 million and a policy period up to 10 years, and even 20 years in some cases.

As businesses have become more sophisticated in their environmental management process, so too have environmental insurance underwriters. The Internet allows insurers to quickly provide customers with a competitively priced insurance package, delivered with quick quote turnaround, quality coverage, an easy application process and environmental underwriting expertise at a more affordable price.

Insurers also are looking for ways to purchase more affordable environmental coverage for alternative insurance such as group environmental insurance programs tailored to associations or industry groups.

Today's insurers understand the risks involved within specific industry classes. For instance, the Institute of Scrap Recycling Industries (ISRI), Washington, D.C., offers its members a pollution insurance program specifically designed for scrap recyclers. ISRI's endorsement of this specialized environmental coverage enables its members to purchase coverage they could not afford by themselves.

In today's market, the terms and conditions of environmental coverages are customer-friendly. Businesses are buying environmental insurance and using it strategically and successfully to move ahead, protect profitability and demonstrate their commitment to environmental protection.