Why Contractors Need Environmental Insurance

No matter how careful you are, you can never eliminate all exposure to hazardous materials or waste on
construction jobsites. Improving quality control, material handling procedures, conducting site surveys, and
updating work policies can help prevent accidents and exposure and improve work site health and safety, but
these steps alone may not be enough to protect your clients. You should be concerned about the financial
impact of lawsuits against your clients, it would be a wise business decision to investigate environmental
insurance and weigh the costs against the potential damage from litigation.

As more and more attention is focused on environmental safety and cleanup in recent years, those in the
construction industry have also become more aware of their risks. Many contractors and real estate developers
have been forced to defend huge claims or to pay large fines resulting from pollution at their work sites. Some of these businesses received their funding from lenders. These boutique lenders are now foreclosing on commercial projects and find themselves in the chain of ownership and should also be taking action to limit their exposures.

On July 12, 2007, for example, Missouri Attorney General Jay Nixon issued a press release announcing that
several St. Louis area developers had been found responsible for polluting streams and lakes with runoff from
construction sites and will pay one of the largest penalties of its kind in Missouri history, a total of $590,000 in fines. This type of fine should serve as a wakeup call for any firm to reexamine its procedures and to consider environmental insurance coverage. Fines, penalties, and punitive damages can be insured in environmental insurance policies.

It has been widely known that contractors can face environmental exposures in four major areas of their operation. These are job site operations, owned or leased properties, transportation, and disposal liability. While contractors may be vigilant about avoiding jobs where site contamination exists, that is only type of risk.

A great number of unpredictable or uncontrollable dangers exist on construction sites which can generate a wide
range of exposures to air, soil or water contamination. It is not uncommon for contractors or developers to
uncover barrels, tanks or other containers of potentially hazardous materials after the project has started.
Depending on the contractual arrangements on a job, a trade contractor could be the one responsible for the cost
of removing or cleaning up these items in accordance with governmental regulations.

If a contractor performs work around pipelines or utilities, the contractor and their employees could be vulnerable to fumes or spills resulting from leaks or accidental punctures. Mold has been an environmental problem that has resulted in lawsuits to many contractors and real estate developers. In addition, there are many risks in handling chemical products and wastes that construction professionals use on a regular basis.

Most environmental insurance policies provide protection against liability resulting from claims for third party
bodily injury, property damage, or clean up costs from environmental damage. In shopping for policies, it is
important to understand what operations are covered.

Environmental insurance is one type of specialty coverage readily available to contractors, commercial real estate developers, lenders and other construction related industry professionals. These policies offer companies
coverage to help protect them from various environmental liabilities. As a specialty insurance broker familiar with environmental risk and insurance, National E&S Insurance Brokers can help you to evaluate the environmental risks facing your clients and their specific industry group. And we can help you find the right coverage at the right cost.

Contact us to learn more.