Newsletter

Pollution Program – Pollution Coverage Explained

By Jim Thyden, Insurance Programs Manager

The California JPIA provides pollution coverage as an optional insurance program for members. The program may be of interest to members as it covers some of the pollution losses that are excluded under the liability program. Pollution program coverage includes:

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• Both first- and third-party claims for pollution conditions on-site, as well as those that migrate off-site, including:
  • Bodily injury
  • Property damage
  • Remediation on-site and off-site
  • Business interruption
  • Extra expense
  • Image restoration
  • Emergency expense costs
• Additional protection for claims from non-owned disposal sites, transportation, illicit abandonment, contracted operations, and storage tanks are also included.

Pollution incidents do not occur often, but they can be catastrophic when they do. It is important to note that the liability program aims to provide members with third-party claims of bodily injury or property damage when a sudden, unexpected event results in a pollution loss. However, the liability program is not designed to cover ongoing, continuous pollution-related losses. Instead, the pollution program is a solution to that dilemma as it covers incidents occurring on a sudden and accidental basis (new conditions) as well as losses that occur over an extended period without the member’s knowledge (pre-existing conditions). Coverage for new conditions is July 1, 2014, or when the insured joined the program, whichever is later.

It is important to understand that pollution coverage is schedule-specific, and member locations must be scheduled for coverage to apply. The program provides coverage for unintentional mistakes in reporting and is automatic when acquiring new locations. For new locations, “new conditions” coverage is provided, but carriers must review appropriate environmental reports before providing “pre-existing conditions” coverage. Limited coverage for pollution from current or former landfills may apply, but only if they have been properly scheduled.

The pollution program also has strict claim reporting requirements. Before engaging remediation or legal specialists, members must receive the insurance carrier’s consent for the expenditure. The exception is acting in an emergency after a pollution incident. Members should report claims or known incidents to the Authority immediately, or coverage may not apply. Agencies must inform the Authority of a claim or known incident within 30 days of discovery, and then report on the claim within 90 days of the incident.

While the master program provides coverage for scheduled underground storage tanks, it does not offer financial assurance as required by the State of California. However, for those members wishing to meet the state obligation through risk transfer of insurance, the Authority offers an optional program for Financial Guarantee for Underground Storage Tanks.

If you have questions about the pollution program, please contact Insurance Programs Manager Jim Thyden.

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