You Don’t Cry Over Spilled Milk, But You May Have to Pay for It
By Matt Dinverno, Commercial Insurance Advisor
“Don’t cry over spilled milk” is a phrase I’ve heard hundreds of times. I frequently read headlines about large legal settlements over spilled coffee or other perplexing liability scenarios. As an insurance professional, with insurance protection and clients’ exposures on my mind, I think about what would happen if someone did spill milk. Could a complex legal system determine that “spilled milk”, the thing I’m not supposed to cry over, is considered a “pollutant”?
The standard ISO General Liability policy covers every cause of loss, unless it is specifically excluded. Unfortunately, Exclusion f. within the Coverage section does just that.
The same policy defines Pollutants as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste. Waste includes materials to be recycled, reconditioned or reclaimed.
If this is the definition and your current general liability policy excludes coverage for all Bodily Injury and Property Damage arising out of the actual, alleged or threatening discharge from any site you occupy, rent or own as a result of pollution scenarios, you may be leaving yourself wide open for uncovered claims.
Although it seems illogical, milk could be deemed a pollutant by ISO’s definitions. Yes, spilled milk is a now a pollution event.
Why does this matter? You are covered – right??
Although certain endorsements can provide “give-backs” and add coverage back in, you will need to construct your policy to cover legal defense, clean-up costs, environmental consultants, business income loss, fees to move tenants or other expenses that impact your business
Exposures are common. We walk by them every day and think nothing of them. I know what you are thinking: I’m in property management (construction manager, painter, owner of a trucking or recycling business), why should I have to be concerned about pollution? Where’s my risk?
- HVAC systems leak fumes into rooms causing sickness, or worse, delaying openings and impacting operation
- Renovation materials or stored chemicals omit odor when stored in your buildings and incapacitate residents and staff
- Liability claims result from transportation of materials while on and off covered premises
- Water run off can be deemed a pollutant to the various portions of the path of the water
- Leaking storage tank or materials leaching on the property
Litigation, clean-up costs, and allegations can drag out for years and final numbers are hard to confirm. A.M. Best’s Market Review (Global Insurance Credit Ratings & Information Services) reported that the net of environmental expenses in the property and casualty markets in 2012 was $42 billion dollars. Understanding the scenarios that may impact your business is essential.
Finally, make sure you work with a company that addresses how the liability transfers from your underlying policy to the umbrella policy. It is far too common to see a Total Pollution Exclusion with give backs in the underlying policy and a Total Pollution Exclusion in the umbrella. That policy construction oversight reduces your available limits in the event of a catastrophic claim and can be devastating to the business you work so hard to protect.
The next time someone spills milk, think of us, Brown & Brown of Detroit, Inc. We are here and ready to help clean up the policy mess that someone else may have created. Please contact us at 586-977-6300 for a policy review and pollution coverage analysis.