Product Pollution Liability Insurance: Another Bridge Spanning the Pollution Exclusion Coverage Gap
Eric McCabe, Divisional Senior Vice President and National Underwriting Director, in collaboration with Alexander E. Potente and Angela Probasco from Clyde & Co US LLP, were recently featured in an Environmental Claims Journal publication. The scholarly article discussed the complementary relationship between pollution exclusions and pollution liability insurance policies, focusing on the further reduction of the pollution exclusion’s coverage gap by product pollution liability insurance policies.
Insurers have been issuing pollution liability policies since the late 1970s to fill the gap in general liability coverage created by the pollution exclusion. Until recently, coverage under pollution liability policies has been centered on an insured’s liability arising out of its premises and operations, largely overlooking environmental liabilities arising from an insured’s products. Recognizing that environmental policies initially tailored to provide coverage for liabilities arising out of an insured’s premises and operations left a gap in coverage for liabilities arising from an insured’s products, a small number of insurers now offer products pollution liability coverage.
Reduction of Coverage Gap Through Pollution Liability Insurance
In 1977, insurers began offering “environmental impairment” policies, which provided coverage for “claims arising from single, repeated, or continuing environmental impairments.”1 These early environmental impairment policies typically provided liability coverage “for damage caused by gradual pollution” and excluded coverage for “sudden and accidental” environmental impairment in light of the “sudden and accidental” exception to the qualified pollution exclusion.2
Environmental impairment liability policies were “fairly uncommon and rarely discussed in case law.”3 In the mid to late 1980s, environmental impairment liability policies “largely disappeared from the insurance market” due to “claim expenses significantly outweighing premiums,” “difficulties obtaining reinsurance on these risks,” insureds’ “reluctance to purchase the insurance,” and the policies’ failure to “close up many of the gaps that existed in CGL policies,” among other reasons.4
Learn more about the expansion of Pollution Liability Policies!
Great American Environmental’s Products Pollution Liability Coverage
Since the issuance of the first pollution liability policies in the late 1970s, an insured’s ability to fill the gap in general liability coverage created by the pollution exclusion has grown significantly.
Great American Environmental’s Products Pollution policy provides coverage for loss and clean-up costs as a result of a claim for bodily injury, property damage or environmental damage because of a pollution condition caused by the insured's product.
Products Pollution is specifically designed for manufacturers and distributors of various products including but not limited to paints and chemicals, metal goods, automotive parts, machinery and machinery parts, plastic and rubber goods, and other commercial products.
Coverage applies when the product has been put to its intended use by a person or entity that is not an insured and also applies to a pollution condition caused by the insured's product during transportation by a third party.
Additional Resources:
- Product Pollution - Great Insight
- Claims Scenarios
- Fact Sheet
- View our latest product video showcasing pollution protection across various supply chains.
Interested in downloading a whitepaper version of this article?
About the Environmental Claims Journal
The Environmental Claims Journal (ECJ) is a quarterly journal that focuses on the many types of claims and liabilities that result from environmental exposures. It is published by Taylor & Francis.
The ECJ considers environmental claims under older business insurance policies, coverage and claims under more recent environmental insurance policies, as well as toxic tort claims. Exposures and claims from all environmental media are considered: air, drinking water, groundwater, soil, chemicals in commerce and naturally occurring chemicals. The journal also considers the laws, regulations, and case law that form the basis for claims.
The journal would be of interest to environmental and insurance attorneys, insurance professionals, claims professionals, and environmental consultants.
Eric McCabe
Eric McCabe, Divisional Senior Vice President & Director of National Underwriting, Great American Insurance Group, Environmental Division
Eric McCabe is a Divisional Senior Vice President with Great American’s Environmental Division, serving as Director of the National Underwriting Department. In his role, he oversees underwriting operations for all lines of insurance products. With an extensive environmental background, McCabe has accumulated over 20 years working within the insurance field and brings expert guidance to his team of underwriters. He is based out of the New York office. Prior to joining Great American, McCabe worked for a world leading property-casualty and general insurance company as a senior national underwriter, dealing with complex accounts. His responsibilities included evaluating commercial and industrial facilities, environmental consultants and contractors for environmental exposures in order to provide risk transfer solutions. After passing the New York State Bar Exam, McCabe began working as an environmental claims analyst at leading multinational finance and insurance company. Initially working with pollution claims filed under pre-pollution exclusion GL policies, McCabe quickly transferred to the Pollution Insurance Products (PIP) claims department where he handled claims arising under fixed site and contractor’s pollution policies. McCabe’s legal training, background in real estate and understanding of secured transactions lead to his promotion to complex director of the PIP high profile claims department where he handled Secured Creditor (SC) and Cost Cap Claims with reserves exceeding five million dollars.
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Alexander E. Potente
Alexander E. Potente, Partner, Clyde & Co US LLP
Alex Potente is an experienced trial lawyer who represents insurers in complex commercial and insurance litigation matters, including the defense of consumer class actions against insurers, coverage disputes pertaining to general liability and professional liability policies, and bad faith coverage litigation. He handles complex coverage issues arising from pollution (pollution liability and long-tail CGL/excess), product defects, public sector liability, business interruption, medical device, environmental, employment, and sexual and elder abuse. Alex also represents insurance brokers in defense of professional negligence claims.
Chambers USA 2018 has ranked Alex in the category for Insurance, and clients say "he brings youth and enthusiasm, has a good presence and is sophisticated in his analysis." Alex is a fellow for the prestigious American College of Coverage Counsel.
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Angela Probasco
Angela Probasco, Senior Counsel, Clyde & Co US LLP
Angela Probasco has wide-ranging experience representing clients in insurance coverage, extra-contractual, and bad faith litigation as well as in employment, ERISA, and other civil matters. Her core practice consists of advising clients on, and representing them in litigation related to, novel and complex insurance coverage issues, time-limited settlement demands, and a myriad of bad faith allegations. Angela began her legal career as a law clerk to the Honorable Philip Hall, Arizona Court of Appeals.
Resources:
- 1 Waste Mgmt., 340 S.E.2d at 381 n.5 (internal quotation omitted).
- 2 Masonite, 224 Cal. App. 3d at 917.
- 3 Id. at 916. See also Robert M. Horkovich et al., Site Pollution Liability Insurance, in Environmental Liability and Insurance Recovery 499, 506-13 (David L. Guevara & Francis J. DeVeau eds., 2012).
- 4 Id. at 513-15.
- https://www.scimagojr.com/journalsearch.php?q=6400153114&tip=sid
- Environmental Claims Journal, Vol. 33, No. 2 (2021)