Pollution Legal Liability Insurance: Coverage, Claim & Exclusions

Updated: 27-06-2022 16:26:30 PM

Companies operating in the manufacturing units like chemicals, petrochemicals, construction and energy generate hazardous waste material, leading to pollution of varied degrees. Owing to the rise in environmental consciousness, pollution legal liability insurance has become important for business owners to protect their entity against environmental liability.

What is Pollution Legal Liability Insurance?

Pollution legal liability insurance offers comprehensive coverage against environmental risks which are involved with operating a manufacturing unit. This risk management solution will protect the financial interest of a policyholder against clean-up costs, bodily injury claims and property damage.

What all Pollution Legal Liability Insurance Covers?

Pollution Legal Liability Insurance covers the regulatory obligations of lenders, landlords, shareholders and Board of Directors. The policy covers the following situations:

• Third party claims for on-site (under the insured property) clean-up cost of pre-existing conditions
• Third party claims for on-site clean-up from new conditions
• Third party claims for on-site physical injury and property damage caused by pollution conditions
• Third party claims for off-site (beyond the boundaries) clean-up cost resulting from pre-existing conditions or started before the issued date of the policy
• Third party claims for off-site clean-up cost resulting from new conditions
• Third party claims for off-site  injury and property damage caused by pollution
• Third party claims for clean-up cost at the waste disposal sites; if lawfully deposited
• Third party claims for clean-up cost, injuries and property damage beyond the boundaries of waste disposal sites
• Loss of profit, rental value and additional expenses caused due to pollution

Read More: What is Commercial Insurance – Coverage, Claim & Exclusions

How Pollution Legal Liability Insurance Functions?

Pollution Legal Liability Insurance comes with a quick and easy application process.

• Policy seeker needs to submit the proposal form, along with environmental reports and details about site operation to the insurance company
• The above step should be taken after evaluating your business and the kind of pollution it can lead to and how will the insurance help
• The insurance company will go through the details and if the site is eligible for insurance, the proposal will be accepted
• The premium and sum insured will be calculated and agreed between the insured and the insurer before the issuance of the policy
• In case of any eventuality after buying the insurance, the insured notifies the insurance company about the claim by submitting the required documents
• Thereafter, someone from the insurance company will visit the site and verify the claim details
• If the claim is genuine, the compensation will be paid to the beneficiary account or else, they can terminate the policy if the claim is found to be false
• If the policyholder does not agree with the resolution, he/she might ask for an arbitration

Eligibility Criteria

Following are the business sectors which are eligible to apply for this insurance as their business involves risks to waste exposure and thus, needs proper liability protection:

• Mergers & acquisitions
• Manufacturing & industrial units
• Hospitals & pharmaceutical units
• Waste disposal and recycling units
• Real estate, warehouses, schools and universities
• Energy, power generation, oil and gas related facilities

Pollution Legal Liability Insurance Claim Process

The claim settlement process of pollution legal liability insurance is a hassle-free process. Let us look at the steps for this:

• The insured must inform the insurer as soon as possible about the incident
• The claim form along with the required documents should be submitted
• The investigator from the insurance company will visit the affected site
• All the details mentioned in the claim form must match with the site
• If the claim is genuine, the compensation is made to the insured
• If the claim is false, it is rejected and the insured is informed about the same
• If the insured wants, he/ she can raise a case in the court of law

Documents Required for Claim Process

Pollution legal liability insurance claim approval requires the following documents:

• Duly filled in claim form
• Details of the Third party claim
• Details of the damage caused due to pollution
• Medical certificates which prove the physical injury

How Long Does it Take to Pay Out a Claim?

It takes 30 working days to settle a pollution legal liability insurance claim. If there is any arbitration involved, it might take some more time.

Cases Where you Can’t Claim Pollution Legal Liability Insurance (Exclusions)

The pollution legal liability insurance offers comprehensive coverage to manage the risks due to industrial activities harming the environment. The Insurance claim is not available for the following risks:

• Pollution resulting from asbestos and lead
• Explosions caused due to war and terrorism
• Loss or additional expenses due to fine and penalties
• Claims or loss caused by pollution which is due to negligence or non- compliance to national or local regulations
• Pollution arising of maintenance, operation, loading, and unloading of vehicles outside the insured premises
• If there was prior intimation regarding the hazards, like pollution from underground storage tanks which was already known to the insured

 

Companies Offering Pollution Legal Liability Insurance in India

In spite of the fact that industrial pollution is on the rise in India, there is only one insurance company in India that is equipped to address concerns arising out of environmental liability. The one company offering pollution legal liability insurance in India is

• Tata AIG General Insurance

Important Aspects

Before purchasing pollution legal liability insurance, it is important to understand how it functions and bear certain points in mind about the coverage in order to get the best deal. Let us look at some  points:

• The insured must provide pre-written notice for the claim
• The insured should employ contractors for clean-up who are accepted by the insurance company
• To get the claim approval, the clean-ups should be as per environmental laws

Advantages of Buying Pollution Legal Liability Insurance

Pollution legal liability insurance comes with numerous advantages. Some of them include:

• Coverage in lieu of indemnities
• Provides coverage for both sudden and gradual pollution
• Some insurance policies include coverage for both pre-existing and new losses
• Improves business prospects as this policy covers creditor protections
• Can be tailor-made to suit the requirements of the policyholders
• Coverage for present, past and future environmental exposures
• Safeguards the insured from penalties which might be incurred due to government rules and regulations
• Safeguards the policyholders from unknown environmental liabilities which result from asset transactions
• Improves the reputation of the organisation; public and media are highly sensitive to incidents caused due to pollution

FAQs

Q1. What does bodily injury mean under pollution legal liability insurance?

It refers to physical injury, sickness, disease, mental stress or anxiety along with physical injury sustained other than insured.

Q2. What does the term pollution mean under pollution legal liability (PLL) insurance?

Pollution refer to discharge, release, dispersal or escape of any solid, liquid or gaseous substance which might cause contamination of the atmosphere or water body. 

Q3. Is restoration expenses included in the clean-up costs?

Yes, but the restoration cost shall not exceed the net present value of such property.

Q4. Under what conditions can the insurance company cancel pollution legal liability insurance?

The insurance company can terminate the policy for any of the following reasons:

• Material misrepresentation by the insured
• If the insured fails to comply with the material terms, obligations and conditions of the policy