Published on March 19, 2009
CONTRACTORS PRODUCT PROFILE: POLLUTION LIABILITY (CPL) AIG ENVIRONMENTAL® BUSINESS SOLUTIONS FOR GENERAL CONTRACTORS, STREET AND ROAD CONTRACTORS, MAINTENANCE, MARINE AND MECHANICAL CONTRACTORS, ELECTRICAL CONTRACTORS, DEMOLITION CONTRACTORS, TRADE, HVAC AND INDUSTRIAL CONTRACTORS, ENVIRON- MENTAL REMEDIATION/ABATEMENT CONTRACTORS, RESPONSE ACTION/EMERGENCY SPILL RESPONSE CONTRACTORS, HOME BUILDERS AND DEVELOPERS (CLAIMS MADE ONLY) Product Profile: Contractors of all disciplines can create or worsen a pollution condition when providing services. Whether an environmental contractor causes a pollution release during an excavation or a utility contractor hits an underground pipeline – contractors can be held liable in the event of a pollution accident. AIG Environmental recognizes the different risk management needs of the contracting industry and offers Contractors Pollution Liability (CPL) to address a wide range of contractor’s specialties. Contractors Pollution Liability (CPL) from AIG Environmental helps to protect an insured contractor against pollution liabilities resulting from the performance of construction activities, even for work completed by subcontractors. With contractor’s environmental coverage, AIG Environmental offers contractors a business-critical solution to minimize loss for liabilities when sudden or gradual pollution conditions become a job-related issue. That potential loss, though infrequent, can be severe and is typically left uncovered by standard general liability programs with limited “buy backs” or restrictive exclusion clauses. Protection for Pollution Liabilities CPL is designed for the specific pollution liability risks contractors face, allowing them to focus on day-to-day operations and on finishing each job on time and within budget. Insured contractors are covered for environmental liabilities resulting from: • Construction and remediation operations, whether performed by the contractor or subcontractors • Claims alleging improper supervision of subcontractors Coverage Includes: • Third-party bodily injury • Third-party property and environmental damage • Cleanup costs, for pollution conditions both on and migrating from the work site Negotiate Contracts with Confidence In contract negotiations, this coverage may assist the contractor with hold harmless or indemnification language requested by the owner. CPL can help provide protection against third-party claims for pollution-related bodily injury and property damages arising out of contractual liabilities assumed by the insured contractor and excluded under the Insured’s Commercial General Liability policy. Claims Made and Occurrence Basis CPL is available on both a claims made basis and on occurrence as Contractors Pollution Occurrence (CPO). In fact, AIG Environmental was the first insurer to offer contractor’s pollution liability on an occurrence basis for eligible contractors. With occurrence-based coverage, claims may be reported during or after the policy period pursuant to the terms of the policy, provided the covered damage occurred during the policy period.
CPL is available on a blanket-basis covering scheduled contractors operations at numerous sites, or on a project-specific basis. Project-specific contractor controlled coverage may include work on infrastructure construction, single or multiple- site projects, land or marine-based projects, Superfund and Brownfield sites or other remedial/construction projects. Increased limits may be available to meet contract requirements for specific projects. Business Solutions for: 1. POLLUTION RESULTING FROM ON-SITE ACCIDENTS Overview – Compliance Inspection of an Existing UST A service station hired a general contractor to complete major renovations, which included adding three gas pumps. Before renovations began, the contractor hired a reputable environmental contractor to inspect all existing underground storage tanks (USTs). The report findings showed no evidence of leaking or corrosion. Problem – Spilled Fuel Leads to Costly Remediation While conducting the storage tank inspection, the environmental contractor’s probe ruptured a diesel fuel line on one of the tanks, spilling more than 11,000 gallons of diesel, of which 4,000 gallons were recovered. Tests conducted on the soil revealed extensive on-site contamination as well as some off-site soil contamination. In addition, the service station was shut down during the cleanup process. The service station management filed a claim that alleged when the general contractor signed the contract he assumed liability for pollution-related damages caused by the environmental contractor. The court found the general contractor liable for all cleanup costs and claims for lost profits from the service station in the amount of $600,000. Solution – A Solution That Protects All Parties CPL helps to protect a contractor against potentially devastating costs that arise from pollution conditions caused by work performed by the insured or a subcontractor. This policy covers both on-site pollution conditions and those migrating from the site to an off-site location that result in cleanup costs, as well as third-party pollution condition-related property damages that may not be covered under the contractor’s CGL policy. Additional Benefits • CPL can cover pollution conditions, resulting from covered operations, that are discovered after the completion of a project. • Protection is provided against claims arising from both sudden and gradual pollution conditions. This is especially relevant when dealing with items such as an underground storage tank, where contamination can occur for years before it is discovered. 2. PAVING AND INFRASTRUCTURE CONSTRUCTION PROJECTS Overview – Construction of New Roads Construction of new roadways is a complex process. The land is prepared and a gravel bed is then laid on top. Next, two different coats of asphalt are laid on top of the gravel. The first is a thick, coarse layer that provides the foundation upon which a thinner layer of finished asphalt is applied. To assist in adhesion, a tack layer of sealant is often applied on the gravel bed and between layers. Problem – Pollution Condition Caused by Inclement Weather A city hired a paving contractor to finish six roads, two primary and four cul-de-sacs. The size of the job required that the contractor apply 2,800 gallons of oil-based sealant. However, before the sealant could dry, precipitation washed it off the roads and into the city’s storm drains and a nearby stream. The oil-based sealant was found to be potentially harmful and the city inspector ordered the contractor to clean it up. Fifty property owners who lived along the stream filed suit for bodily injury and property damage as a result of the washout. The contractor paid all costs associated with the cleanup and settlements for approximately $500,000.
Solution – Protection from Pollution Conditions Resulting from Construction Operations CPL can help provide the assurance that pollution conditions from unexpected events will not become a financial burden on the contractor by providing coverage for liability associated with cleanup costs and third-party property damage compensation claims due to pollution conditions caused by covered operations. Additional Benefits • CPL helps to protect contractors from third-party claims for bodily injury and property damage resulting from pollution conditions arising out of covered operations. This is especially useful for jobs where neighbors’ properties or businesses are potentially affected by the execution of the contract. • Protection against claims for cleanup costs where mandated by a governmental agency. 3. USING SUBCONTRACTORS TO IMPROVE PROFITABILITY Overview – Who is Accountable When a Subcontractor is Used? Few general contractors can perform all of the work on a project and still maximize efficiency. Usually specialists are hired who can finish certain areas of the project quicker and cheaper. This not only saves time and money; it allows the general contractor to allocate resources to areas where they are better served. Unfortunately, using subcontractors reduces the general contractor’s level of control, potentially increasing the risk of an accident. In the end, environmental liability for the project rests with the general contractor. Problem – Responsibility for Pollution Costs A general contractor was hired to remove PCB transformers at a warehouse. After thorough evaluation and verification of credentials, training procedures and state and federal licensing, several remediation subcontractors were brought in to assist in the project. One of the subcontractors was removing PCB oils from transformers located on the roof when contaminated oil spilled through an opening and splattered over the interior of the building. The owner of the warehouse sued to recover cleanup costs resulting from the spill incident. The subcontractor also sued the contractor, claiming it was not responsible for the spill but that the cause of the accident was a result of the general contractor’s negligence in meeting environmental regulations. The general contractor was found liable for cleanup costs of approximately $250,000, not including litigation expenses. Solution – Freeing the Contractor to Complete the Job This is where CPL adds extra value to a contractor by providing the contractor liability protection for pollution or environmental contamination resulting from operations completed by a subcontractor — allowing the general contractor to focus on getting the job done right, on time and within budget. Additional Benefits • Protection against claims alleging improper supervision of subcontractors is especially valuable on larger jobs requiring many different subcontractors. Submission Requirements: 1. CONTRACTORS POLLUTION LIABILITY (CPL) APPLICATION 2. PROJECTS MUST INCLUDE: JOB SPECIFICATIONS, BACKGROUND ENGINEERING AND PROJECT DESCRIPTION
FOR MORE INFORMATION ON AIG ENVIRONMENTAL CONTACT: Contact us at 1-800-348-4314 Department CPL Visit us at www.aigenvironmental.com Send e-mail to email@example.com AIG Environmental Home Office 175 Water Street, 12th Floor, New York, NY 10038 VISIT WWW.AIGENVIRONMENTAL.COM The scenarios summarized above are offered only as examples. Coverage depends on the actual facts of each case and the terms, conditions and exclusions of each individual policy. Anyone interested in the above product(s) should request a copy of the policy itself for a description of the scope and limitations of coverage. Policy terms may vary based on individual state requirements and may not be available in all states. Insurance underwritten by member companies of American International Group, Inc. (AIG). The description herein is a summary only. It does not include all terms, conditions and conditions of the policies described. Please refer to the actual policies for complete details of coverage and exclusions. Coverage may not be available in all states. Issuance of coverage is subject to underwriting. Printed on recycled paper. 90512 ( 02/2006)
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