Before we examine one readily available product—site-specific pollution coverage—with a long track record of success in protecting insureds against contamination liability, it might be useful to briefly re-visit what constitutes contamination. In the popular imagination, this term may conjure up images of Day-Glo-colored drinking water or oil-soaked sea birds. Although not incorrect, these images fail to encompass the breadth of pollution exposures that today’s policies might cover.

Because competition has increased significantly in the environmental insurance marketplace, coverage terms have been broadened to capture market share, so current definitions of a pollutant tend to be much broader than they were even five or six years ago. A quick simplification is to consider any substance that is out of place in concentrations sufficient to cause either bodily injury or property damage, or to result in clean-up costs, is a contaminant. Under this very general definition, either habanero pepper oil on playground equipment or Ebola virus on school property could fall within the realm of a pollution event, as neither is naturally occurring nor expected in those environments, and either could result in compensable damages. In the cases above, each event clearly resulted in both clean-up costs and medical costs.

Let’s assume that each school had a site pollution policy in place prior to these contamination events, with coverage for new conditions included. What policy provisions need to be reviewed to see if coverage might apply? A primary place to start would be the policy definitions. These might include a specific definition for pollutant, pollution condition, microbial substances, or perhaps biological contaminants. Because pollution policies are typically written on a surplus lines basis, policy language is not standardized and must be evaluated on individual terms, preferably by a qualified attorney or experienced insurance broker familiar with environmental liability policies. These definitions may specifically grant coverage for liquid irritants (e.g., habanero pepper oil) or viruses (e.g., Ebola), they may exclude it, or they may be silent on the subject. If biological contaminants are explicitly covered, is their definition restricted to only mold and mildew, or is it broad enough to encompass a wide range of biohazards? Whether narrowly or broadly defined, must the contaminant be associated with a “discharge, dispersal, release, or escape,” or is the mere “presence of” such contamination sufficient to trigger coverage?

Another policy definition that must be scrutinized carefully is that concerning bodily injury. The Denver school incident resulted in multiple children being hospitalized, while the Dallas school situation has to date resulted in no more than the medical monitoring of a few individuals. However, although the seriousness of the first case was relatively low, the severity associated with the second could potentially prove fatal. That knowledge alone could result in allegations of mental anguish, shock, or emotional distress in students, staff, parents, or neighbors. Are these kinds of harm included in the policy definition of bodily injury? If so, must they be associated with direct physical injury, or can any individual claim such psychological damage? Are medical monitoring costs included in the definition of bodily injury? Each of these questions should be methodically answered when determining the value offered by a particular site pollution product.

Furthermore, policy provisions concerning property damage must also be evaluated and compared between carriers. Of special note is the feature commonly known as “diminution in value,” or DIV. Sometimes known as “stigma damages,” DIV is the financial harm suffered by a property owner when their investment is no longer worth what it was prior to a contamination event—even after all cleanup has been completed—generally because of lingering public perception that the property is unsafe or otherwise less desirable than comparable properties.

In our case studies, this perception might manifest in parents removing their children from a particular school and enrolling them elsewhere, or in neighbors and business owners who find their property has declined in value due to their proximity to an affected school. Because diminution in value is often not a defined term within the policy language, its interpretation is generally subject to extensive precedent in case law and is best reviewed in concert with qualified legal counsel.

Other key provisions that should be examined in detail include any linked to the definition of cleanup costs. Does it contain a requirement for the insurer’s prior written consent before such costs are incurred? Does coverage apply only to the extent that cleanup is required by law? Particularly in high-profile cases such as those involving harm to schoolchildren, a prompt response is of paramount importance. As such, an optimal site-specific pollution liability product will include automatic coverage for emergency expenses incurred to remediate a pollution condition which represents an imminent threat to human health or the environment, unrestricted by any necessity to obtain prior approval from the insurer. Such protection not only encourages timely action, but also ultimately minimizes the extent of loss.

Because these objectives are in the best interests of all parties concerned, a coverage extension for such emergency expenses is most desirable when it is not subject to any sub-limit but rather carries the same limits as the policy as a whole. Broadened provisions that allow exceptions for cleanup in the absence of any applicable environmental regulations are also preferable to those that are tied strictly to environmental laws such as CERCLA, RCRA, or their state equivalents.

Because contamination may sometimes arise in an unanticipated or unprecedented manner, both breadth of coverage and flexibility in structuring policy terms are keys to a successful placement. After all, there is no more a standard for habanero remediation than there are training certificates for Ebola abatement--yet. Check back in six months. It is exactly because no underwriter can foresee (or price for) all eventualities that expected losses will never match with actual outcomes. Thiskeeps the insurance marketplace constantly in flux: what might be covered today could be widely excluded next week, while last week’s source of fear may be next month’s target market. For those not in a position to keep abreast of the latest developments in the environmental insurance arena, partnering with an experienced and knowledgeable specialist is always a winning strategy.