Environmental risk: Exposures and solutions for general contractors

A construction project does not have to involve building on contaminated land in order to be subjected to potential environmental claims. (Photo: iStock)

A construction project does not have to involve building on contaminated land in order to be subjected to potential environmental claims. Most environmental exposures stem from routine construction activities and often are not visible until they become costly problems. It is the responsibility of the general contractor to have an all-inclusive vision of the entire building project and prepare for any environmental concerns that could affect their employees, the public, and the environment.

General contractors often try to shift their environmental liabilities onto their subcontractors by ensuring that they are added onto their subcontractors’ insurance policies as additional insureds. In the case of environmental claims, subcontractor General Liability policies often have sublimits for environmental incidents or time element restrictions, which mean that if there is a pollution event at a construction site, that pollution event must be discovered within a certain time period (ex. 7 days) and reported to the insurance carrier within a certain time period (ex. 30 days). Because many environmental incidents at construction sites take place below ground and are not visible until they impact off-site properties or may not be discovered until workers have completed work at the job site (as in the case of mold, for example), time element restrictions may hinder a general contractor’s ability to access coverage for pollution events. In the worst case scenarios, subcontractor policies may not include any pollution coverage at all.