PONDER THIS.
Your company or your client has purchased a Site Pollution Liability Policy. Since coverage is written on a Claims-Made basis, the policy includes an Optional Extended Reporting Provision (OERP) whereby for an additional premium, the insurer will permit reporting of Claims subsequent to the expiration of the active policy term. So far so good.
Essential components of the OERP are:
(i) The time period options for the OERP;
(ii) The premium charge for each of the options; and
(iii) The conditions applicable to the carrier’s acceptance of a Claim reported during the OERP.
It is item (iii) above that is the subject of this writing.
A claim example:
1. You or your client have a Site Policy that covers both Pre-Existing and New Pollution Conditions; and during the OERP you or your client receives a Third-Party Claim from an adjoining property owner alleging Property Damage originating from a Pollution Condition migrating from a Covered Location. To simplify this discussion, let’s assume that the Third-Party Claim alleges that the migration commenced during the active policy term, and that this is the first that you or your client is aware of such an actual or alleged Pollution Condition.
2. Since we are discussing a Claims-Made policy, it would be natural for a broker or a purchaser of a Site Pollution Policy to assume that the OERP is designed to provide coverage for Claims first made against the Insured during the OERP that would have otherwise been covered if the same Claim was first made against the Insured during the active policy period. But alas, not all OERPs are created equal. Some Site insurers, including many first tier carriers, have surprisingly restrictive OERP conditions that can result in a total lack of coverage.
3. These restrictive OERP conditions will typically specify for a Claim first made during the OERP, coverage will apply, if and only if, the Claim involves a Pollution Condition that was “first discovered and reported in writing to the carrier during the active policy period”. Because of such a significant restriction, coverage for the claim example in paragraph 1. above would be denied as the Pollution Condition was not discovered and reported to the insurer during the active policy period.
4. Many carriers do not have such restrictions; and some carriers that do have been known to modify its OERP provisions on a case-by-case basis.
5.
Contact us if you or your client’s Site Pollution policy has such a restrictive OERP provision. We can provide guidance and assistance.