Superstorm Sandy’s recent strike hit the most densely populated area of the country, causing loss of life, destruction and dislocation on a massive scale. Recovery efforts are still in their infancy, and the storm’s economic impact will be felt by businesses and individuals across the country for some time. Many businesses have suffered direct damage to property and lost income due to the resulting interruption of their operations, while others may face environmental-contamination claims stemming from Sandy. For those businesses facing potential liability from environmental-contamination claims, liability insurance may be an important asset to help offset defense costs and remediation payments.
The government is seriously assessing potential environmental threats in Sandy’s aftermath. The U.S. Coast Guard, Environmental Protection Agency, National Oceanic and Atmospheric Administration, oil-spill removal organizations, New York Department of Environmental Conservation and New Jersey Department of Environmental Protection have joined efforts to create a Hurricane Sandy Pollution Response Unified Command. The unified command has created branches, divisions and task forces, totaling 137 personnel, to assess and respond to impacted areas. The unified command is currently identifying environmentally sensitive areas for pollution and hazardous materials.
For example, an Energy Pollution Liability Extension Endorsement states that the pollution exclusion does not apply to “bodily injury,” “property damage” or “remediation costs” caused by a “pollution incident,” meaning a discharge of “pollutants” into the “environment,” provided that:
- the discharge is both unexpected or unintended from the standpoint of the “insured”; and
- the discharge commenced abruptly and instantaneously and can be clearly identified as having commenced entirely at a specific time on a specific date during the policy period; and
- the discharge commenced at or from a site, location or premises:
- owned by or occupied by, or rented or loaned to, any “insured” at the time the discharge commenced; or
- at which any “insured,” or any contractor(s) or subcontractor(s) working directly or indirectly on any “insured’s” behalf, was performing operations at the time the discharge commenced; and
- the discharge was known by any “insured” within 30 days of the commencement of the discharge of “pollutants”; and
- the discharge was reported to us within 60 days of the commencement of the discharge of “pollutants.”
This endorsement incorporates insurance coverage concepts that insureds and insurers have litigated for decades, including the fight over what is unexpected or unintended and abrupt or instantaneous. Insureds, however, should immediately report any circumstances or occurrences for which they may be liable. In light of the short reporting period, insureds should report now even if they do not presently know if they will face potential liability.