Coverage for Limited Pollution Removal

In the business of self-storage, operators are like landlords who rent storage units instead of living space. What a tenant puts into his unit is not the operator’s concern—unless those contents violate certain contractual limitations and conditions.

Self-storage owners are obligated to provide space that is reasonably safe, dry and suitable for the storage of property. They must not, however, covet any of the three Cs: care, custody or control. This should be spelled out explicitly in the rental contract.

Most self-storage agreements also contain specific prohibitions about storing property that is dangerous or toxic in nature. Whether tenants follow these guidelines is strictly their business unless they’re caught in the act of placing contractually prohibited items in the space. To help relieve business owners of this threat, the insurance industry has developed limited pollution-removal endorsements.

Although this article is not intended to be an exhaustive legal treatise on the subject of insurance coverage for pollution-related issues, it should serve as a primer to introduce the subject in generic terms and foster a better understanding of three key issues:

• Why coverage is limited 
• What coverage includes and excludes 
• Why it is highly recommended that you have coverage 

If you have unanswered questions after reading this article, consult your insurance agent or your attorney for further information and recommendations regarding risks faced in your day-to-day business operation. In fact, such a discussion is a good idea even if you don’t have lingering questions.

If you examine the insurance policy covering your premises for property damage and liability matters, you will likely find a “total pollution exclusion.” This means the insurance carrier will not provide coverage for pollution-related claims.

The insurance industry has learned from years of experience that no premium amount can cover the risks to insurers when pollution is discovered at an insured site. Once a pollutant enters the soil or affects the water table in a particular area, effectively escaping any confinement to the insured premises itself, the cost of cleanup can be staggering, depending on the size of the area affected.

Many companies whose properties have been found to contain unregulated pollutants, even decades old, have gone out of business because of those costs; and many insurance companies whose policies have provided coverage for such risks have suffered a similar fate. That’s a key reason why the government established the Environmental Protection Agency (EPA) and the pollution Superfund, along with other remedies, to deal with catastrophic environmental damage. It’s also why such a limited coverage endorsement was developed by the insurance industry.