General Liability Insurance: Understanding the exclusions for recyclers & refurbishers

Aug. 23, 2014

By Ross Fields

(Ross is a risk management professional who specializes in the needs of the e-waste industry. He manages a national insurance program for e-waste processors and provides risk assessment surveys for e-waste certifications from his office in Carlsbad CA.)

A major problem facing the e-waste industry today is that many companies do not have an adequate understanding of the unique risk they face as a recycler, or how to properly manage this risk.   Most companies currently rely on commercial general liability (CGL) policies to address their insurance needs.   This type of policy is typically inadequate to protect many types of processors.  Unless a recycler has specifically obtained insurance that protects against such things as site pollution liability and products pollution liability, they may well find that their general liability policy will not adequately protect them or their customers.  In order to understand why this is the case, a recycler must understand some basic tenants of liability insurance language.

A majority of insurance companies use the same standard commercial general liability coverage form as the building block for their general liability policies.  Among other things, this form defines the policy language, outlines what is and is not covered, and assigns duties of the insured.  An insurance policy is a legal contract and this form contains very important details of the contract. The general liability policy lists “exclusions,” and specifically states that for these items, “this insurance does not apply.”   One of these exclusions is pollution.

The term “pollution” is defined in the policy to include “waste” and “materials to be recycled, reconditioned or reclaimed.”  This is important because what this is saying is essentially this:  any form of liability stemming from the recycling or refurbishing business will not be covered under this policy.   So, if recycling and/or refurbishing is your business and you didn’t specifically buy insurance to cover “materials to be recycled, reconditioned or reclaimed,” your policy has a very limited amount of coverage.  Recyclers also have an interest in making sure their downstream vendors are also adequately insured.   When events of environmental concern occur, such as the abandonment of a CRT facility, any recycler involved in the recycling chain might be held liable. It is important for recyclers to meet with a risk management professional who fully understands the industry and can properly address the potential risks they may face.