Pollution Coverage for Demolition, Abatement and Remediation Work

Under the federal asbestos NESHAP, EPA requires a thorough inspection where a demolition or renovation will occur, and the owner or operator must notify the delegated agency before any demolition. Notification applies to any demolition and to renovations above a threshold amount of regulated asbestos-containing material. The rules are enforced locally, and local agencies add their own steps.

In the South Coast Air Quality Management District, the district's Rule 1403 instructions state that asbestos surveys by Certified Asbestos Consultants are required before all demolitions, that asbestos must be removed before structure demolition and that notifications are due 10 working days before demolition begins. The notice also asks for a contingency plan if unexpected asbestos is found, the company hauling the waste and the receiving landfill. Underwriters ask for the same survey, removal records and contingency plan, so the regulatory file and the insurance submission are largely the same file.

Texas runs its asbestos program through the Department of State Health Services. DSHS states that notification is required before the demolition of a building or facility even when no asbestos is present, and that it must be made no less than 10 working days before the start of demolition or any other activity that will disturb asbestos, except for emergencies or ordered demolitions. A developer clearing an older strip center in Houston or Dallas should expect the notice to be part of the demolition permit sequence, whatever the survey found.

In the Phoenix area, the Maricopa County Air Quality Department regulates all renovation and demolition activity within the county. The county requires an asbestos NESHAP notification at least 10 business days before a regulated project starts, and demolition projects require notification regardless of the presence of asbestos. Revised notices follow when a schedule slips, and an insurer reviewing a claim may ask whether the notices on file matched the work performed.

Lead adds a second set of rules when the building is older housing. EPA's Renovation, Repair and Painting Rule applies to work that disturbs painted surfaces in homes, childcare facilities and preschools built before 1978, and firms paid to do that work must be certified in lead-safe work practices. A multifamily repositioning that guts units while other units stay occupied is the kind of project where lead dust, tenant claims and certification questions meet.

The insurance question is whether each policy responds to the hazard in the place it occurs. A general contractor's CPL may include lead only for scheduled operations, and the abatement subcontractor's policy may be the one written for the hazard. Mold is often handled separately again, and partial demolition can open wall cavities with moisture damage. For occupied renovations, ask how each form treats lead and mold and whether bodily injury claims from residents fall inside the pollution form or the general liability policy.

A typical redevelopment has four parties with pollution exposure, and their policies should be written for different things. The asbestos consultant who surveys and monitors air carries professional exposure: a missed material in the survey is a professional error, not a contractor's release. The abatement contractor removes regulated materials and needs a CPL that includes asbestos and lead for its operations. The demolition contractor may disturb what remains and needs a form that addresses the materials it may encounter. The GC coordinates them all and needs its own program to stand behind the subcontract chain.

Write subcontract requirements to match those roles: pollution coverage without asbestos or lead exclusions for the abatement sub, professional coverage for the consultant, additional insured status for the owner and GC where the forms allow and a reporting tail suited to how long these claims take to appear. Claims-made pollution forms are common in abatement, so check retroactive dates and what happens if a sub's policy lapses after the job.

On a remediation project, removing contamination is the scope of work, so the cost of planned removal is usually treated as the contract price rather than an insured loss. What a remediation contractor's CPL may address is a release the work causes: impacted groundwater pumped to the wrong place during dewatering, contaminated dust leaving the site or spreading impacted soil into a clean area. The distinction is between the contamination the job was hired to remove and the new or worsened condition the job created.

Design elements add professional exposure. A vapor intrusion barrier, a soil management plan or a dewatering design may be prepared by an environmental consultant, and a failure in the design is a professional question. Waste leaving the site carries its own exposure, because federal law can reach a person who arranged for disposal and a transporter who selected the site. Ask whether the remediation contractor's form includes transportation and non-owned disposal sites, and whether the receiving facilities are approved in the policy.

An owner redeveloping a site with known contamination faces exposure no contractor caused. Under the federal Superfund statute, a current owner and operator of a facility can be liable for response costs, and the owner's site pollution legal liability policy is the form designed to address conditions at a scheduled property, depending on its terms. Known conditions identified in the Phase I or Phase II are often excluded or scheduled with specific terms, so disclosure and negotiation before binding shape what the policy does.

Some owners also buy a project pollution policy that insures the GC and enrolled subcontractors for the build. On demolition-heavy jobs, ask whether abatement operations are inside or carved out of that policy, because some project forms exclude abatement and expect the abatement sub to carry its own. Then line up the owner's PLL, the project policy and each trade's CPL so that discovery, disturbance and disposal each have a policy that responds.