Pollution Insurance Is a Small Price for Big Peace of Mind

Some property managers advise co-op and condo boards that there’s no such thing as too much insurance coverage. Given the times we live in, many boards are now considering – and buying – policies to protect themselves against dangers that were unimaginable even a few years ago, such as cyber-theft or sexual harassment claims. And then there’s pollution insurance, also known as environmental insurance. 

“The main reason I advise boards to buy such a policy is to protect themselves in the event of an oil spill,” says Michael Schwarz, president of the brokerage SYMS Insurance Agency. “It could be any type of accident with the oil tank, such as a crack in the tank. And some general liability policies exclude coverage for claims resulting from lead exposure. Pollution insurance covers it, though there’s usually a $50,000 deductible.” 

That shouldn’t be a deterrent to boards, in the opinion of Josh Koppel, president of HSC Management. “A $50,000 deductible is nothing if you’re getting sued for $5 million,” Koppel says. “Pollution insurance is not expensive and it’s another layer of protection. In New York City, boards should get all the coverage they can get.” 

The policies typically cost about $1,000 to $1,500 a year for $1 million of coverage per incident, with a $2 million aggregate, Schwarz says. It’s possible to buy coverage as high as $50 million. The policies help cover the costs associated with pollution clean-up, and they cover liability claims for pollution-related injuries, illnesses or deaths. Pollution policies can cover any type of small-scale pollution that causes contamination of soil, groundwater or property.  They can also provide coverage for air-borne contaminants, such as smoke, dust, emissions, and chemicals. 

Schwarz cites a claim that resulted when chlorine leaked from a container at a condo’s swimming pool and mixed with other detergents, creating poisonous gas.  Remediation was undertaken by specialists, including treatment of contaminated surfaces. Clean-up costs totaled $75,000, which were covered by the pollution policy. 

Such clean-up costs may be the best reason to buy a pollution insurance policy, according to Michael Wolfe, president of Midboro Management. “Suppose you have a pristine building,” he says, “and your next-door neighbor’s oil tank leaks into your basement. Your pollution policy will cover the clean-up. That’s where the main cost is, and that’s the main reason I advise boards to carry a pollution policy. Yes, there’s a big deductible, but the policies are not expensive, and clean-ups cost a fortune.” 

Pollution insurance may not be right for every building. “We recommend it – if the building has exposure,” says Eric Eggert, an insurance broker with Mackoul Risk Solutions. “The main exposure in the city is oil tanks. Another is swimming pools with lots of chemicals. If oil leaks and goes into the ground, the clean-up can cost hundreds of thousands of dollars, easily. We don’t recommend it for all boards, but I’ve seen cases where we recommended it, the board didn’t buy it, and then they had an oil leak. They were on their own.”