Pollution Insurance: Addressing Manufacturing Risks in a Changing Regulatory and Liability Environment

Standalone Pollution Legal Liability (PLL) programs provide coverage for cleanup costs, bodily injury and property damage associated with pollution conditions on, at, under, or migrating from your property. Coverage can be tailored to address potential future pollution events as well as potential liabilities associated with existing contamination at a property. PLL programs typically include numerous enhancements, including legal defense, transportation, business interruption and waste disposal coverage, among others.

Our team can also obtain excess liability coverage with follow-form PLL coverage to obtain the desired limit of liability (given that many carriers have capacity limitations).

The value of a combined General Liability and Pollution Legal Liability (GL/PLL) program can vary depending on several factors, including the size and nature of the business, the industry it operates in and the specific risks it faces. However, there are several potential benefits that can add value to such a program:

• Comprehensive coverage: By combining GL and PLL coverage, businesses can obtain a more comprehensive insurance solution that addresses a broader range of risks under a single policy. This can help protect the business from financial losses and potential lawsuits arising from both general liability and pollution-related incidents. Additionally, numerous enhancements would be included, such as product pollution for pollution-related losses arising from your product (which would be excluded on standard GL forms).
• Cost savings: Purchasing a combined policy can often be more cost-effective than buying separate GL and PLL policies. Insurers typically offer discounts or package deals to combine these coverages, resulting in potential cost savings for the business.

As environmental liabilities become more complex, manufacturers should evaluate their risk profile and implement insurance solutions that align with their operational footprint, regulatory environment and long-term business objectives. Factors to consider include program type, coverage limits, retroactive dates, policy exclusions and additional endorsements. Working with Gallagher Environmental can help manufacturers navigate the complexities of insurance policies and ensure adequate coverage.

• In 2023, an agricultural pesticide manufacturer sold their product to their agricultural customers across the country. Despite rigorous testing and safety protocols, a batch of their pesticide was found to have been contaminated during the manufacturing process, ultimately leading to unintended environmental pollution in the form of runoff into surface water near their customers properties. Additionally, significant claims from farmers alleging their crops had been damaged by the contaminated pesticide were received. Total losses from property damage, natural resource damage, cleanup costs and business interruption claims exceeded $11,000,000.
• In 2022, an Indiana steel company was ordered to pay $3 million in a settlement with environmental groups after its 2019 cyanide spill into a river killed almost 3,000 fish, closed beaches and shut down a water facility.
• In 2022, an unknown amount of milk from a new factory spilled into the city's stormwater system, leading to an emergency response given the potential impacts to the ecosystem. While the emergency response costs are unknown, a $600,000 fine was imposed on the company.