A construction project does not have to involve building oncontaminated land in order to be subjected to potentialenvironmental claims. Most environmental exposures stem fromroutine construction activities and often are not visible untilthey become costly problems. It is the responsibility of thegeneral contractor to have an all-inclusive vision of the entirebuilding project and prepare for any environmental concerns thatcould affect their employees, the public, and the environment.

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General contractors often try to shift their environmentalliabilities onto their subcontractors by ensuring that they areadded onto their subcontractors’ insurance policies as additionalinsureds. In the case of environmental claims, subcontractorGeneral Liability policies often have sublimits for environmentalincidents or time element restrictions, which mean that if there isa pollution event at a construction site, that pollution event mustbe discovered within a certain time period (ex. 7 days) andreported to the insurance carrier within a certain time period (ex.30 days). Because many environmental incidents at constructionsites take place below ground and are not visible until they impactoff-site properties or may not be discovered until workers havecompleted work at the job site (as in the case of mold, forexample), time element restrictions may hinder a generalcontractor’s ability to access coverage for pollution events. Inthe worst case scenarios, subcontractor policies may not includeany pollution coverage at all.

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Environmental management

Because general contractors (as well as property owners) areoften brought into claims, lawsuits, or regulatory actions for theactivities of their subcontractors, they have to be aware of theenvironmental problems that might stem from subcontractoractivities.

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The following are some of the potential environmental hazardsthat general contractors should be aware of:

  • Job site - clearing/site grading/excavation activities- Underground storage tanks could be punctured, materialsbelow ground containing pollutants could be broken open which couldresult in pollution spills below ground incurring cleanup costs,bodily injury (from contaminated drinking water wells, forexample), or third party property damage claims. Storm water may bedischarged which often contains pollutants such as sediment,debris, or chemicals transported to local storm sewers, surfacewaters, or drinking water wells. This can kill fish or adverselyaffect drinking water quality.
  • Job site – releasing contaminants at a job site orbrought to a job - Air emissions such as fumes fromchemicals (sealants, curing compounds, adhesives, etc.); spillsfrom fuels or lubricants associated with construction equipment;air emissions from construction activities, such as welding(manganese), concrete cutting (silica dust), or combustion engines(carbon monoxide, nitrogen oxides, particulates); release ofasbestos particles from asbestos containing materials (ACM) such asinsulation, floor tiles, or ceiling tiles; release of leadparticles from lead-based paint; release of mold or mold sporesfrom areas where water intrusion has occurred, such as broken pipesor inadequate drainage; releases of chlorofluorocarbons (CFC’s) inair conditioners or refrigeration units; spills of oil used,transferred or stored at construction sites in bulk quantities mayresult in spills; moving soil that contains hazardous chemicalsfrom one part of the construction site to another or off-site.
  • Transportation of waste or materials to or from a jobsite - Spills may occur while chemicals, waste, debris, orequipment are being transported to or from the job site, or duringloading/unloading.
  • Disposal of waste at non-owned facilities -Construction debris may be inadvertently mixed with hazardous wasteand then disposed of improperly; causing contamination at thelandfill or disposal facility they have been taken to. This mayresult in claims against the landfill or disposal facility whichcould come back to the original generator (construction entity orconstruction site owners/operators) of the waste.
  • General Contractors Owned premises -Contamination at an owned premises caused by the maintenance orstorage of heavy equipment, mobile equipment, or vehicles.

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In spite of having the most robust environmental managementsystem, things can still go wrong and written procedures are onlyas good as the ability of employees/subcontractors to implement,monitor, and continually upgrade those procedures for each jobsite. Exposures will depend on the experience level of thesubcontractors, the surrounding environment (including sensitivereceptors such as hospitals or protected water sheds, for example),the historical site uses, and potential for there to be pollutionconditions at the jobsite already that may be exacerbated bycontractor activities.

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Environmental insurers have developed insurance productsdesigned to respond to pollution incidents. These productswill protect general contractors if they are held responsible for apollution condition that is created or exacerbated at a job site ifthey are brought into an action. Most environmental insuranceproducts for general contractors can be enhanced by theaddition of endorsements that provide coverage for pollution eventsduring transportation of waste or materials to or from jobsites anddisposal of waste or materials from job sites. Exposures couldinclude asbestos, lead, or mold-contaminated components. Someenvironmental insurers even offer coverage for fines and penaltiesrelated to jobsites. In addition, coverage may be enhanced toprotect general contractors for pollution conditions created attheir own facilities.

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Even when general contractors have implemented environmentalmanagement programs and have people assigned to overseeenvironmental management that includes training for theiremployees, unforeseen pollution events can still happen. A robustenvironmental management program, combined with environmentalinsurance, can provide protection against environmental claims,ensuring that projects are brought in on time and withinbudget.

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Ursula Knowles joined Beacon Hill in June 2014 as AssistantVice President, Information Development. She is responsible forcreating informational resources for the company and providingcustomized educational solutions for partner retail and wholesaleagents. Ursula has worked in every aspect of environmentalinsurance; from risk control, claims, and managing engineers whoprovide technical support, to underwriting accounts for three majorenvironmental insurers. She has developed an extensive network ofbrokers, clients, and prospects to collaborate on solutions tovarious environmental risk issues. Ursula is based in New Jerseywhere she lives with her husband and twin sons.

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