Today is what we call Misconception Monday, and we are hearing from our commercial team at Cluett about pollution claims.
Do all commercial property policies cover for pollution claims, such as oil tank spills?
No, most commercial property policies do not cover anything to do with onsite or third party claims against a property owner because of a pollution event. This could be an event such as an oil spill on their property whether accidental or by malicious acts.
The reason is that most of these policies carry what is called “pollution exclusion”. This would exclude any losses, but may include items such as fire or acts of vandalism. A total pollution exclusion can be worded so that there would be no coverage at all including normal perils such as fire or vandalism that may be covered.
Some policies may also lead an insured to think they might have some coverage such as some onsite pollution coverage frills. These can be very deceiving. Most of these are low limits such as $25,000, and they will only cover on your property. It will not cover third party liability exposures such as your neighbour’s property, a near by river, lake, etc. The majority of oil spill claims are WELL OVER $100,000 to clean up. Some claims even result in a building taken down to clean up the property! A basic $25,000 limit may not even be enough to start digging up the spoiled soil….
What is the best way to protect your property?
The best way to fully protect your property from any pollution claim exposures is to buy a full pollution policy for your property. These policies will cover spills for onsite and third party liability exposures. Most of these policies will cover your property for a minimum limit of $1,000,000. They do carry a larger deductible on the policy or even a self insured retention clause of $10,000 though. This means you would be responsible for the first portion of the claim.