Naturally Occurring Conditions Could Create Liability For Contractors, Insurers

The potential for NOA exposure is widespread throughout the United States. According to the U.S. Geological Survey, 27 of the 50 states include some form of minerals containing NOA. NOA can be found in mineral deposits from Maine to Alabama and in the West, predominantly in California.

In addition, while NOA is one of the most prevalent naturally occurring hazardous substances found in the United States, each region of the country has its own hazards, which can pose environmental risk if handled improperly during construction efforts.

Recognized by the U.S. Environmental Protection Agency as a human neurotoxin, mercury occurs in the environment as a result of natural processes, such as releases from volcanoes and hot springs, and human activities like mining, coal combustion and waste incineration.

According to the USGS, California has its share of environmental mercury. One of the better known naturally occurring minerals containing mercury is cinnabar–a mercury sulfide found in and around Santa Clara County.

Cinnabar is generally found in massive, granular, or earthy forms, and is bright scarlet to brick-red in color. This mineral is sometimes misidentified as weathered construction brick that has been buried underground.

In addition, another prevalent mineral that can adversely impact human health is silica, which is commonly known as a carcinogen. Overexposure to silica can cause silicosis, a disease that scars lung tissue and makes breathing difficult by impairing the lungs' ability to extract oxygen from the air.

Found in a variety of forms, crystalline silica can negatively affect the respiratory health of construction workers, who inhale silica dust created during various demolition, renovation and excavation activities. In fact, numerous cases have been confirmed where contractors have exposed grade school children to dust containing silica during poorly vented contracting and concrete-cutting efforts.

"Fool's Gold" may also be a well-recognized term, but few realize the environmental and human health dangers posed by pyrite. Because of its rather high sulfur content, pyrite forms low-grade sulfuric acid when exposed to the atmosphere (oxygen) or water.

Case in point–a highway in Pennsylvania was constructed through a pyrite deposit. Once the pyrite was exposed to the open air and weather, it produced runoff containing sulfuric acid, which then contaminated local freshwater streams. As a result, the local government spent millions of dollars to neutralize the situation.

Furthermore, arsenic and lead are two other naturally occurring substances that can create hazardous health issues. According to the EPA, arsenic has been linked to cancer of the bladder, lungs, skin, kidneys, nasal passages, liver and prostate.

In addition, non-cancerous effects can include thickening and discoloration of the skin, stomach pain, nausea, vomiting, diarrhea, numbness in hands and feet, partial paralysis and blindness.

Due to weathering, volcanic eruption, mining, smelting operations, agriculture, real estate development and construction activities, some levels of arsenic can be found in virtually all subsurface soils and bedrock throughout the country.

Lead is no different. Significant exposure to lead can cause problems with the central nervous, cardiovascular, reproductive and hematological systems, as well as kidney disease. Exposure comes primarily through inhalation of lead-contaminated dust or ingestion through handling with lead-contaminated hands.

Subsequently, preventative education offers the best method for minimizing exposures to these hazards and ensuring that construction firm employees thoroughly understand the techniques needed to safely manage the handling of potential environmental contaminants.

In addition, contractor's pollution liability insurance provides contractors with another excellent means of protecting their companies from environmental liability, in general, as well as the liability associated with the exacerbation of natural conditions.

That's because today's CPL policies provide numerous forms of coverage for protecting construction firms from the liability and financial loss that can result when covered operations cause a pollution incident. This includes coverage for:

o Disposal liabilities.

o Transportation.

o Emergency response costs (a first-party coverage).

o Real estate for owned locations, such as maintenance shops, quarries and batch plants.

However, when researching insurance options, it must be remembered that CPL coverage is primarily designed to cover bodily injury, property damage, cleanup costs and defense resulting from pollution caused by contracting or jobsite operations.

Furthermore, not all CPL policies provide affirmative coverage for naturally occurring hazards.

For example, one carrier may apply an outright exclusion for naturally occurring conditions, while another may exclude a pollution condition by definition.

Under these terms, pollution conditions would then be defined as the emission, discharge, dispersal, release or escape of pollutants, provided such are not naturally occurring.

In addition, the entirety of any such emission, discharge, release or escape, or any series of continuous, repeated or related emissions, discharges, releases or escapes shall be deemed to be one pollution condition.

Often, however, exclusionary wording like the definition cited above can be modified or removed completely. As a result, if you are a contractor or risk manager responsible for any type of intrusive work (whether self-performed or subcontracted), or serve as their agent or broker, it is imperative to address this CPL issue before on-site activities begin.

Despite your base of operations, the fact remains that your firm is likely to encounter some type of naturally occurring and potentially hazardous mineral or compound during the course of your business activities.

Depending upon the region where the work is performed, it would also be prudent to have a deep understanding of the problems that can exist on and under any given project site.

This knowledge, plus the coverage provided under a properly worded and termed CPL insurance policy, can then offer the optimal form of risk management and the surest means for protecting your company against the many liabilities associated with naturally occurring conditions.

Jeff Slivka is executive vice president of New Day Underwriting Managers in Bordentown, N.J., a specialty intermediary for agents and brokers with expertise in environmental insurance, environmental risk management and construction-related professional liability. He can be reached at jeff.slivka@newdayunderwriting.com.