Underwriters go to rather extreme lengths in attempting to avoid claims arising from hazardous materials or contaminants, due to judges' fondness for finding insurance where none was ever intended or expected. (These interpretations have financially impacted insurers perhaps more catastrophically than any other development in recent history.)

This has led to exclusions which attempt to anticipate every possible legal argument for covering pollution events. Policies may now contain language voiding insurance and defense for claims arising from fumes, irritants, waste or contaminants in any form, whether solid, liquid, or gaseous. Earlier generations of the exclusion made exceptions for certain "sudden and accidental discharge," however the legal machinery soon turned those against insurers in one way or another, and they were largely eliminated.

The unintended consequences of these measures have at times meant surprising denials of insurance. These were situations where the insured's operations and exposures clearly did not ordinarily involve any material which would be considered a pollutant. Common materials such as equipment lubricants, finishes, cleaners, fuels, liquid supplies and the like, even in very small quantities, can now void insurance in costly claim scenarios.

Another uninsured catastrophe can occur when you purchase or occupy property which has been previously polluted by as yet undiscovered material. Businesses have unknowingly assumed enormous liability in innocently occupying environmentally-impaired property. This means careful scrutiny of previous tenants before utilizing any property is a necessity.

Due to the predisposition of courts to find coverage for pollution events, underwriters generally avoid business where the exclusion is likely to come into play, or they apply heavy premium surcharges to offset the risk. This likelihood also means that if your claim is denied on the basis of a pollution or environmental impairment exclusion, there may be counter arguments available to you.


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