A pollution insurance policy is a type of insurance coverage that business owners purchase to protect themselves from liabilities stemming from actions that harm the environment. Companies of all sizes, from large manufacturing concerns to small dry cleaning operations, may work with toxic materials that can pollute the air, soil and groundwater. Pollution insurance covers the costs of environmental remediation efforts stemming from any pollution for which the company may be held responsible.A major facet of the coverage provided by pollution insurance involves cleaning up the environmental damage the company’s actions may have caused. From the removal of asbestos from old buildings to the cleanup of oil spills, environmental remediation projects can be expensive and time-consuming efforts. When a company is found to be liable for such damage, federal and state environmental protection agencies will pass that cost onto the offending company. Pollution insurance covers some or all of these costs and protects the company’s assets.
Some pollution insurance policies also contain liability clauses, which protect the company from third-party claims attributed to the environmental destruction it caused. For instance, if a company releases toxic materials into a body of water, the local fish population could die off from the poisoned water. Local fisheries and seafood providers would be negatively affected by the loss of fish and could sue the polluter for lost income. Pollution insurance covers legal defense costs and judgment amounts for the polluting company.
Pollution insurance coverage comes with limits. Companies that commit multiple offenses or engage in a massive pollution incident can quickly exceed the limits of their pollution insurance coverage. When the company exceeds the limits of its coverage, it must make up the difference from its own revenues, so the business owner must take precautions to prevent such incidents while maintaining the policy.