PFAS and other “forever chemicals” may dominate environmental headlines, but Canadian environmental insurers are still paying their largest claims on much more mundane exposures - especially when pollution reaches water, said Brian Ashton (pictured) of SWG Insurance.
The senior underwriter for security and pollution said brokers and clients are understandably interested in high-profile substances such as PFAS, ethylene oxide and emerging additives like 6PPD-quinone, which has been linked to impacts on salmon, trout and other fish. Lawsuits in the United States against tyre manufacturers underscore the potential stakes.
But, he argued, those issues are “not really front of mind” for underwriters handling day-to-day Canadian risks.
“They always want to talk about PFAS, ethylene oxide, phthalates and [6PPD-quinone],” he said. “All those things get a lot of attention, but they don’t really impact the day-to-day client.”
Those exposures matter for large-scale manufacturers and certain specialised contractors. For most SMEs, Ashton said, the bigger concern is far more prosaic: spills, leaks and construction errors that end up contaminating soil and, especially, water.
He pointed to plumbers as one area where claims are starting to surface, with sewer backup incidents leading to mould or E. coli contamination. In one case, incorrectly installed drainage caused a sewer backup that led to contamination and two weeks of business interruption, resulting in a claim of about $275,000.
General construction work can create similar problems. A siding contractor who botched a job caused mould damage that generated a six-figure payout, he said.
Contractors spreading contaminated soil between sites are another emerging source of loss. Ashton described situations where firms work on a site with known contamination, fail to properly clean their equipment, and then inadvertently transfer pollutants to a clean location.
“There was one case of that was $250,000,” he said.
Transport and logistics add further complexity. Many operators assume that standard auto policies will fully respond to pollution arising from accidents, but the reality can be more nuanced depending on the circumstances and jurisdiction.
“I was led to believe that auto policies included pollution and would cover that, but I was mistaken,” Ashton said. “It’s true auto policies do include pollution … but it’s only covering for the operation of the vehicle itself."
If a truck crashes and its own fuel leaks, the auto policy typically responds. But where a waste hauler overturns and spills toxic cargo onto the road or into the ground, coverage may depend on how “use and operation” is interpreted, and dedicated pollution coverage may also be required.
“If you are transporting hazardous waste or hazardous substance of any kind, you really do need a CPL policy or a premises policy that includes transported cargo coverage,” he said.
On fixed sites, Ashton said long-term, low-profile leaks can turn into large claims. An auto repair shop with a corroded underground pipe that leaked gradually over years produced a loss of around $850,000 once contamination migrated toward water.
Lithium-ion battery fires at waste-handling facilities have also generated costly runoff claims when fire-fighting water carries asbestos and other contaminants off-site.
He said even traditional “low hazard” occupancies like warehouses and simple real estate can generate severe losses when fire or stormwater runoff makes its way into watercourses or drinking water systems.
“Even small pollution events by a small contractor can become a massive claim if it gets into drinking water,” Ashton said. “It seems like lately that’s what’s driving many severe losses; they often involve pollution getting into drinking water.”
Regulatory shifts could shape the claims picture in the coming years. Ashton pointed to federal efforts to fast-track large civil construction projects, which may lead to fewer geotechnical and hydrogeological studies and reduced community engagement. That, in turn, could increase uncertainty for underwriters and fuel future litigation.
He expects stricter scrutiny and potentially tougher pricing on those select megaprojects, although any impact on loss ratios will take time to emerge given long construction periods and multi-year claims development.
“We probably won’t start seeing losses until two, three, five years, when we’ll really know what the impact was of this change,” he said. “This could be something we’re talking about 10 years from now.”
