Real estate developers can easily be drawn into claims for damage caused by pollutants and can find themselves paying hundreds of thousands of dollars in fines, remediation costs, repairs, and third-party damages. Pollution Liability coverage is usually seen as necessary only for businesses that remove, transport, or store hazardous substances. In fact, any substance released into the environment for other than its intended purpose can be considered a pollutant.
Here are a few examples of how a developer could be held liable for damages caused by a pollutant:
- A real estate developer placed a new building on the site of a former parking lot. During excavation, petroleum hydrocarbon contamination was discovered. The developer is now responsible for the considerable cleanup costs.
- A developer owns a tract of land in a remote area that has been sitting dormant for some time. When they finally visit the site with their contractor to start the building process, they find piles of hazardous waste which were dumped illegally on the lot. The developer ends up paying thousands of dollars for removal, cleanup, and testing.
- A developer leases space in their development to a dry cleaner. Municipal workers discover hazardous chemicals used in dry cleaning in the soil and groundwater near the development. The dry cleaner is forced out of business and the developer is forced to pay for investigation, remediation, third party claims, and their own defense.
These claim examples show how easy it is for real estate developers to be drawn into pollution claims, even if the damages were not caused by their own negligence.
An environmental liability policy can help developers pay defense costs, manage claims, and cover third party liability costs caused by a pollution accident. The most common environmental liability coverages used by developers are Environmental Impairment Liability, Contractors Pollution Liability, and Property Transfer Coverage.
Environmental Impairment Liability covers losses caused by pollution that actually or allegedly originated from the developer’s property. This is best suited for parties who own, rent, lease, or have any other interest in real property and/or operations.
Contractors Pollution Liability covers the indirect exposure developers have when they hire contractors or vendors to perform work on their behalf. This coverage protects developers in the event one of their contractors causes or exacerbates an environmental loss.
Property Transfer Coverage protects developers from preexisting environmental conditions that existed prior to the transfer of ownership. Even diligent investigation before purchasing the real estate property cannot uncover all existing pollution exposures.
The Real Estate and Hospitality Industry Group at Hausmann-Johnson Insurance can help you identify your environmental risk exposure and make sure you have the proper liability coverages in place.
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