Water Pollution Liability

Water pollution liability refers to the financial and legal responsibility for causing contamination to oceans, rivers, lakes, streams and underground aquifers. Businesses and other organizations that cause water pollution sometimes must pay for cleanup, as well as any damage to third-party property. Water pollution liability also includes third-party loss of revenue, loss of public services and damage to natural resources.

Water pollution liability applies to owners and operators of all sorts of commercial and recreational boats, as well as owners and operators of marinas and shipyards. Water pollution liability sometimes results in financial ruin for smaller businesses.

Entities sometimes responsible for water pollution include barges, fishing boats, marine cargo, vessels, yachts, tugboats, ferries and others that operate on or adjacent to bodies of water.

However, farmers often have water pollution liability, as well, due partly to the use of fertilizer runoff that gets into lakes and streams, causing algae blooms that kill aquatic life and foul drinking water. Similarly, fertilizer pollution has potential to harm infants and the elderly.

To protect themselves, business owners often purchase some type of water pollution liability insurance. For example, a cargo operator typically buys marine cargo insurance, which provides protection in the event a ship's cargo spills into the water and causes contamination. Similarly, owners of small marinas sometimes have water pollution liability insurance, in case they are sued for a fuel leak.

Other industrial firms also have potential water pollution liability, such as metals and mining companies.

Water pollution liability insurance generally got its start in the late 1980s. Similar to other insurance types, water pollution liability insurance sometimes has exclusions that leave policyholders uncovered for particular risks, as well as high fees for individuals who need coverage the most. For example, some insurance companies won’t offer policies to owners of farmland near bodies of water or underground aquifers used to supply drinking water. The ones that do might charge very high premiums.

However, many farmers, even ones growing crops or with cattle or dairy operations far from lakes, rivers or streams, have potential pollution liability. For example, some courts find animal waste from farms to be pollution.

Other liabilities stem from crop overspray, leaky fuel-storage tanks, the improper storage of pesticides and fertilizer runoff.

As with any other type of insurance, getting the right policy without significant coverage gaps requires either a lot of shopping on the part of the customer, or a good agent. The trick is to tailor coverage water pollution liabilities to a specific business, keeping in mind local, state and federal laws.