From PFAS, to micro-plastics and nuclear verdicts, the steady pricing in the environmental insurance market of late appears to be under threat by a host of emerging risks. In the face of a more complex marketplace, the role of the broker takes on added importance – ensuring their clients not only get an attractively priced policy, but one that genuinely addresses their needs.
Yet that can be made all the more complex if the insured is carrying misconceptions about what’s needed from a policy – and one industry expert believes there is a serious issue that brokers need to address.
Shawn Alavi (pictured above), senior vice president and national practice leader of environmental at Gallagher, highlighted a common and costly misconception regarding environmental insurance: many businesses assume that their general liability (GL) policies cover environmental risks, including pollution and contamination, when in fact they do not.
“One of the biggest misconceptions is that GL coverage includes environmental coverages, particularly pollution incidents,” Alavi explained. “When people rely on GL policies for these types of claims, they often don’t receive the settlement they expected, or their claims aren’t adjusted as anticipated.”
GL insurance primarily addresses bodily injury and property damage stemming from general business operations—not from pollution or contamination incidents. Environmental hazards, such as soil and groundwater contamination, air pollution, or toxic spills, often require specialized and costly remediation efforts. Since these incidents can have complex, long-lasting impacts, GL policies typically exclude them, leaving companies without financial protection if they occur.
For clients aiming to cover all their bases, brokers can recommend incorporating integrated casualty products— those that include Contractors Pollution Liability (CPL) or Pollution Legal Liability (PLL) with GL policies. These products are gaining popularity in the environmental insurance space, providing comprehensive coverage against pollution and contamination risks alongside traditional liability. With this market segment becoming increasingly competitive, clients can often secure favorable rates with their broker’s guidance.
Yet, environmental risks still encompass a wide range of risks - beyond what many business owners may realize. Alavi noted that many, particularly in low-risk industries like office operations, often believe they have minimal environmental exposure. However, he emphasized the importance of highlighting the broader risk landscape to clients: “There's a lot of different avenues to consider when looking at environmental risk that might not necessarily be attached directly to a client’s operations,” he said. “Off-site sources or activities can contribute to the contamination of a property, and environmental risk transfer products are designed to cover any contaminants migrating on to a client’s facility.
“There’s a significant need for education on the part of brokers to explain how these coverages differ from market to market and what is insurable versus what is not.”
In addition to educating clients about integrated casualty products and the limitations of GL coverage, brokers can employ several strategies to enhance clients' understanding of the value of environmental insurance:
