The pollution exclusion is one of the most overlooked and devastating exclusions in a Product Liability policy.
Many manufacturers and importers of equipment such as machinery, piping and hoses overlook the fact that chemicals pass through their products. They think that their Product Liability policy will cover them if a chemical is released causing property damage or bodily injury.
A defective product releasing chemicals into the environment can render business property completely unusable. There is also potential cause for far-reaching and long-lasting environmental damage. Large amounts of money may be needed to rectify the situation, easily reaching into the millions of dollars.
Particularly relevant is most General Liability and Product Liability policies specifically deny coverage for bodily injury or property damage caused by pollutants that arises of your work or product.
The next time you and your risk managers meet, I suggest you discuss your pollution liability exposure. You may agree that your pollution liability is roughly the same or higher than your Product Liability exposure.
Remember, the primary reason you buy insurance is to cover severe and catastrophic losses. Even a minor pollution spill may be too expensive to cover out of pocket. And such an event could possibly expose the officers and owners of the business to personal liability.
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