Insurance coverage and clean up expenses

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Question: We have a situation in which an insured had a single vehicle accident involving a telephone pole. It was a significant impact, and required that the vehicle be extracted from a pole by a tow truck. The tow company also cleaned up vehicle debris, anti-freeze, and oil from the scene.

The tow company’s request to be reimbursed for the cost of the vehicle extraction and the hazardous debris clean up, which is being denied by the insurer because the insured did not carry collision on his policy. 

Collision covers property damage to the insured’s vehicle. There is nothing under the tow company’s claim that would pay for the physical damage to the vehicle itself. It would seem that this level of clean up would fall under Liability Property Damage, which the insured is legally responsible for causing.  

Is there a valid argument to the claim adjuster’s decision to associate the clean up to Collision coverage? Or am I correct in associating it to be the insured’s legal responsibility to the third party who would otherwise have to pay to remove the vehicle and clean the debris on their own?

— Vermont Subscriber

Answer: The only way that a clean up expense would be paid under the personal auto policy is if the insurer considers that particular type of clean up to be property damage as defined under the policy. Some insurers may go along with necessary clean up being considered property damage and others may not. We are of the opinion that clean up expenses in and of themselves may not fit the definition of property damage, although much depends on the facts of the particular incident. For example, if the hazardous substance leak actually causes the roadway to buckle and become unusable to the point that it has to be repaired, we see that as property damage as defined, and the repair and the clean up as part of the repair would be covered. But if a spill just requires a clean up and there is no actual physical damage, that is not property damage as defined. So, you have to see exactly what the circumstances are before deciding to cover or not cover a claim.

In this case, since the vehicle was stuck in the telephone pole, and the telephone pole could not be repaired without the removal of the vehicle, the damage to the telephone pole should be considered property damage. The other items that caused a mess that needed to be cleaned up though, the oil, anti-freeze, and debris, probably would not be covered because those things did not cause any property damage that would be considered covered under the personal auto policy.

When a life ends, and clean up begins

Question: This question involves an HO-6 condo policy. Our insured rented the unit to a couple with whom they were acquainted. Then the wife shot herself in the head in the master bedroom after the husband went to work. We now have bodily remains on the walls, ceiling, floor, master bedroom furniture, and the hallway and bathroom.

There were also a small cat and dog found in the residence two days later.

Would this damage be excluded due to pollution?

Endorsement HO 17 52 FL defines pollutants as any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste included materials to be recycled, reconditioned or reclaimed. Also, the HO-6 exclusion 8, Intentional Loss states: In the event of such loss, no “insured” is entitled to coverage, even “insureds” who did not commit or conspire to commit the act of causing the loss.

Please advise if either of the above exclusions would apply or if this would not be considered pollution?

— South Carolina Subscriber

Answer: While bodily remains need to be cleaned up, they are not waste in the sense that they can be recycled, reconditioned or reclaimed.

The pollution exclusion applies to gaseous, liquid or solid irritants including alkali, acids, etc.

While cleaning up a body may be distasteful, human remains aren’t an irritant in the chemical sense that is described in the pollution exclusion. The exclusion specifically refers to man made pollutants or contaminants, and exclusions are to be read narrowly. Therefore the remains are not pollutants and are not excluded.

As far as intentional loss, the tenant’s intent was to end her life, not to cause damage to the home. While one could suggest that she knew it’d make a mess, most people who commit suicide don’t think beyond the immediate end to their emotional pain. The results beyond that are not part of their intent, however logical it seems.

The cleanup is covered.

Covered clean up or negligent maintenance?

Question: Our insured is a long-haul trucker insured under the business auto policy (BAP) with a truckers endorsement and a broadened pollution liability coverage endorsement.

The insured was in possession of a non-owned refrigerated trailer, and completed a delivery. Before returning the trailer to its owner, the insured disconnected the trailer for the weekend. Over the weekend, the refrigeration unit on the trailer leaked diesel fuel.

Does the insured’s policy cover the pollution clean up? We think that the spill was due to poor maintenance by the trailer owner.

— Delaware Subscriber

Answer: There may be coverage here, depending on certain details.

First, the insured has to be liable for the leak so that he legally has to pay for the clean up. We cannot answer questions about legal liability so you may want to check with an attorney in your area to see if the insured is liable for the clean up based on the circumstances of his using a non-owned trailer and possible poor maintenance by the trailer owner.

Second, the BAP will pay for clean up expenses under the covered pollution cost or expense insuring agreement only if there is bodily injury or property damage caused by the same accident. So, presuming that there is no bodily injury due to this pollution spill, there has to be some property damage here and not just a clean up charge.

Third, if the insured is legally liable for the spill and there is some property damage, the wording on the broadened pollution liability endorsement has to be reviewed. There is a standard broadened pollution liability endorsement from the Insurance Services Office (ISO) that applies to the garage form which may be of some help to you for comparison purposes. That endorsement changes the pollution exclusion on the liability coverage form so that paragraph a. of the exclusion, pertaining to a leak of pollutants contained in any property in the course of transit by the insured, applies only to liability assumed under a contract or agreement. The way you describe the incident, the trailer was still in the course of transit since it was not yet returned to the owner at the time of the leak. So, paragraph a. of the pollution exclusion would not apply to a claim for bodily injury or property damage in this instance if your endorsement is worded the same as the ISO endorsement.

The ISO endorsement also revises the definition of covered pollution cost or expense to include the type of claim that you describe, that is, a leak of pollutants from property in the course of transit by the insured.

The bottom line is that the insured can have coverage for this claim, but he has to be liable for the spill, there has to be some property damage involved and not just clean up expenses, and the wording of your broadened pollution liability endorsement has to be similar to the standard ISO endorsement.

Covering the costs of a creepy-crawly claim

Question: We insure a pretzel manufacturer. During a recent storm, the insured’s building was infested with an army of grasshoppers.

The insurer initially denied the entire claim, identifying the infestation of insects exclusion as the reason for denial. One of my employees pointed to the attached coverage enhancement for food processors, and she was successful in her attempts to convince the insurer to provide coverage for the stock that needed to be discarded because of the infestation of grasshoppers (organism).

Unfortunately, the policy holder incurred a large cleanup expense. We argued this expense should be paid, and we referred to the insured’s duties in the event of a loss to mitigate the loss. The provision indicates the insured should keep track of these expenses and submit them for consideration of the claim.

Unfortunately, there is a specific exclusion of consequential loss in the enhancement endorsement. I knew this prior to submitting the claim. The exclusion specifically excludes business income and extra expense. The insurer never utilized this exclusion in the reasons for declination (until now).

I asked the adjuster to reconsider the coverage. She took the claim to her supervisors, and they are now utilizing this consequential loss exclusion.

Which provision will prevail?

• (a) The provision that excludes consequential loss (insurer’s position), or;
• (b) The provision indicating expenses incurred to prevent further loss to covered property from a covered loss (contamination from organisms; in this case, insects) should be considered as part of the loss. (Cleanup of grasshoppers to prevent further damage to covered stock.)

— Pennsylvania Subscriber

Answer: The clean up would not be considered a consequential loss but would be part of the covered infestation loss. Since it is not consequential, we do not see anything in the policy that would exclude the costs, so the cleanup costs would also be covered.

See also: Top 10 ZIP codes with the highest environmental-hazard risk for homes