About the Author
Rich Corbett is President of XL Insurance's Environmental group. XL Insurance has an ongoing 20 year commitment to protect contractors and developers from environmental risk. We have a strong seasoned team of underwriting, claim and risk control professionals helping businesses manage their environmental risks.
To learn more about these products, visit xlinsurance.com or contact XL Insurance's Environmental group directly at: RMXLEnvironmental@xlgroup.com.
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STIMULUS FUNDING WILL ALSO STIMULATE ENVIRONMENTAL INSURANCE
By Rich Corbett, President
XL Insurance — Environmental Group
President Barack Obama's economic stimulus package allocates more than $140 billion for infrastructure projects, a massive boon for the recession-starved construction industry. The list of infrastructure projects that the President is pursuing, in addition to highways, includes rail and other transit projects ($49 billion), water and environmental programs ($21 billion), and the renovation and building of private, government and school structures ($38 billion). Plus, the energy and technology plans include developing alternative energy and weatherization to the "smart grid," along with wireless/broadband ventures ($30 billion). We expect these projects will inject plenty of new opportunities into the marketplace.
Before contractors even think about putting a shovel into the ground, they should first consider the environmental factors that can unexpectedly stall projects, inflate costs and put everything on hold once again. Environmental liability insurance can no longer be an afterthought. The problem — it is easy to overlook environmental risks in due diligence process. By approaching the environmental issues early in the process, contractors can save themselves a lot of headaches and unanticipated cost issues later. There well may be exposures lurking there, such as underground storage tanks or other residual contaminations, regardless of the project.
This is especially critical for contractors who are bidding on types of infrastructure projects out of their normal range of work that will test knowledge and experience levels. For example, a contractor who typically acts as a road contractor in housing developments, where opportunities which have screeched to a halt, might bid on an interstate project generated by the stimulus package. These contractors have to quickly develop a new expertise, and they may have to learn on the job.
Building roads in a housing development is miles apart from constructing an interstate; this presents a new set of environmental concerns. These contractors, especially, need to consult environmental experts during their planning stages. At this point, the insurer can review the due diligence on the site for potential problems as part of its service. And that means securing the necessary environmental liability insurance to protect all aspects of the project, from business interruption to bodily injury, property damage and cleanup expenses.
During the course of the work, there are a number of common exposures con-tractors may encounter, depending on the project, for example:
- Disturbing naturally occurring asbestos and silica;
- Conducting site preparation/excavation work through pre-existing contaminated soil, where, for example, petroleum contaminations can be encountered;
- Confronting residual lead from leaded gasoline and chromate from the paint used to line the roads;
- Experiencing chemical and fuel spills from materials brought on site;
- Creating contamination from lubricant oils and other field equipment fluids;
- Contamination of surrounding soil and water by over application of fuels, oils or other materials;
- Contaminating the soil through faulty application of asphalt;
- Contaminating groundwater through drilling and excavation work;
- Discovering leaking underground and above ground storage tanks and spreading the contamination further;
- Causing silica exposure from abrasive activities, such as blasting and drilling;
- Storing fuel and lubricants improperly, causing surface contamination;
- Encountering unidentified pre-existing contamination from past owners.
That's just a partial list of exposures contractors could discover that will stall a project. Environmental liability insurance, such as contractors' pollution liability, is key to protecting the company and project from these risks.
Likewise, school renovations carry the risk of asbestos, mold, and related hazards, which could require on-site remediation and disposal. Consider, too, other types of developments, such as re-utilizing old buildings which could contain asbestos, lead, PCBs and mercury in the building materials.
There are untold risks associated with those projects, depending on the building's previous use. Could there have been a gas station or drycleaner on that site in previous years? Perhaps there was a company that used pollutant-causing substances during its manufacturing process. Also, be aware that the renewable energy investments are new to just about every contractor, so that would mean getting involved with work they probably haven't done before, and, consequently, may not know what to expect.
How do contractors protect themselves from these exposures? Liability insurance provides coverage for the unexpected and the unknown. Insurance to cover pollution and remediation expense, such as XL Insurance's Pollution and Remediation Legal Liability (PARLL) policy, is designed to guard against the unknown. To borrow from the old American Express® credit card slogan cautioning people "don't leave home without it®," we would caution contractors "don't start a project without it."
Over the past decade, environmental issues have attracted a lot of attention as we try to clean up our planet and stall the effects of global warming. We're recycling more, using bio-degradable products and disposing of hazardous substances in a responsible manner. Fortunately, our new administration is encouraging the prevention and remediation of environmental pollutants. That's one reason why we're seeing an increase in new players in the environmental insurance marketplace.
On the other hand, we made a commitment more than 20 years ago to protect contractors and developers from environmental disasters. As the stimulus package activity begins to break ground, probably in the second half of 2009, we recommend that contractors start to investigate environmental liability coverage now, before they are forced to shut down their work and ask themselves, "What do we do now?"
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INsight is an XL Insurance publication. Copyright 2010. All rights reserved.
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