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Pollution & Debris Removal: How They Affect Your Property Insurance Claim

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When calculating the many costs involved in repairing or restoring property following a disaster, it’s important to remember that costs of removal of the debris from the damaged property and the cleanup of possible pollution resulting from the property damage are in addition to — rather than a part of — the value of the damaged property.

As such, their possible impact on the total amount of the loss, and the coverage limitations on these costs in most standard property insurance policies are frequently overlooked in arranging the coverage initially. Often the result in such cases is disappointment with the recovery made under the policy after a loss occurs.

Debris Removal Limitations

For commercial property insurance under form CP 00 10 06 07, debris removal coverage is offered as an “additional coverage” rather than a part of the basic property coverage. In this section of the form the coverage is limited to 25 percent of the insurer’s liability for the direct property loss by a covered cause of loss, plus any applicable deductible (unless an additional debris removal limit is shown in the declarations).

An additional $10,000 per occurrence of debris removal coverage is made available whenever:

  1. the sum of direct physical loss plus debris removal exceeds the limit of insurance, or
  2. the debris removal expense exceeds the 25 percent limitation in the debris removal, additional coverage.

When there is concern that the 25 percent of loss limitation plus $10,000 or the total limit of insurance plus $10,000 might be inadequate to cover a property loss plus debris removal cost fully, the additional $10,000 debris removal limit can be increased by any amount desired, for additional premium, using ISO form CP 04 15 (or its equivalent), which is entitle Debris Removal Additional Insurance.

The limit shown on the endorsement is the amount to which the coverage is increased, with the $10,000 of basic coverage included. It can be applied in addition to the smaller of:

  1. 25 percent of the amount of the claim paid plus the deductible; or
  2. the limit of insurance when it is exceeded by the sum of the property loss and the cost of the debris removal.

Do Individual Limits Apply?

The following question frequently is raised: In a severe loss involving two or more items of property coverage, how does the debris removal coverage apply—separately, to each item of coverage, or collectively over all items involved in the loss? In cases where the limit of insurance for one item of coverage is exhausted but coverage is available under a second item, adjusters will sometimes attempt to apply the debris removal limits separately to each item.

Pollution Coverage

The debris removal coverage of the commercial building and personal property form includes the extra cost of cleanup and disposal of hazardous materials following an insured loss, but, the coverage does not apply to the cost to extract “pollutants” from land or water, or to remove, restore or replace polluted land or water. Instead, pollutant cleanup and removal from land or water, when caused by or resulting from a cause of loss covered by the policy, is covered separately as additional coverage with its own limit.

Unlike debris removal coverage, this is a separate amount of insurance, apart from the property insurance limit. It applies to the sum of all covered expenses for each 12-month period of the policy, rather than per occurrence.

For added premium, the amount can be increased according to the assessed needs. “Pollutants” is a defined term in the policy. It means “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.”

Any insured handling or exposed to any materials that fall within any of these categories should look closely at this exposure, evaluate the possible extent of potential loss, and consider the possible need to increase the limit to a more appropriate figure for their possible exposure.

Not covered are costs to test for, monitor, or assess the existence, concentration or effects of pollutants, but testing performed in the course of extracting pollutants is covered. To be paid, expenses must be reported to the insurer in writing within 180 days of the date of loss. As with the debris removal expenses, they need not be incurred within this time; contractors’ estimates of expenses to be incurred will suffice, but if these are not available or further delay is unavoidable, the insurer should be asked for an extension.

Have questions about your property insurance claim? Feel free to contact Stark Loss for more information about how a Public Adjuster can help.

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