Why You Should Care About the Pollution Exclusion

Nobody would expect their insurance to cover damages caused by nuclear waste, however, did you know that you might not have coverage for damages to property or people due to mold, bacteria, carbon monoxide, chemical fumes, or irritants?

Every standard policy has an exclusion for ‘pollutants’ and the definition of ‘pollutants’ is pretty broad; it includes fumes, bacteria, mold, irritants, and more, and a few of these have their own specific exclusions as well. In other words, standard insurance policies want nothing to do with anything that could even remotely be considered a pollutant.

So let’s dig a little deeper into the total exposure for pollutants. In the case of irritants, nearly any substance could, in some fashion, be called an irritant. Mold spores are literally everywhere and they just need a little time and moisture to grow. Again, bacteria are everywhere, and very harmful bacteria can be easily spread through day-to-day activities. Then you have various ways carbon monoxide can be created, many common chemicals that produce fumes, and other fairly common known pollutants, like lead paint. All of these can harm people, cause property damage, and result in loss of income; all of which would not be covered.

Alright, pollutants are everywhere, so what coverage might you have in a standard policy? In a Commercial General Liability policy, all claims for bodily injury and property damage caused by 'pollutants' are excluded. This then also excludes any coverage for loss of income or other financial losses due to pollutants. The most coverage you might have is a nominal amount of ‘cleanup expenses’, literally just covering basic cleaning of pollutants. This doesn’t provide coverage for any soil testing or similar contaminant testing expenses that have to be done during or after either. However, some policies might cover pollutants that occur because of a certain peril. A common one is if a fire in your building results in mold growth; in this case, you would have coverage for the consequential pollutant, under some policies.

‘Pollutant’ claim activity is on the rise due to these broad definitions and growing awareness. However, most people are unaware of their lack of coverage. Depending on your operations, specialized policies can help fill the gaps in your general liability policy. For example, there are policies designed to cover your exposures as a property owner, and others that covers your work that is done for others, along with pollution coverage for the products you create. Better yet, with the increased awareness of pollution exposures, more carriers are providing options and prices have significantly decreased.