DEFINITION of 'Absolute Pollution Exclusion'

A commercial liability insurance policy clause that removes coverage of pollution that results from regular business operations. Absolute pollution exclusions to comprehensive general liability insurance policies became common after 1986, when standard pollution exclusions no longer contained “sudden and accidental” pollution incidents.

BREAKING DOWN 'Absolute Pollution Exclusion'

Absolute pollution exclusions came about in response to government regulations of environmentally harmful materials. Perhaps the most well-known case involved the Montrose Chemical Corporation of California, which produced dichlorodiphenyl- trichloroethane, commonly known as DDT. The company discharged waste into the Pacific Ocean for decades, and a federal lawsuit required the company to pay for the environmental cleanup costs resulting from the waste it produced.

In response to claims made against Montrose, insurers brought a number of lawsuits, including Montrose Chemical Corp. v. Admiral Insurance Co., in an effort to push responsibility for the claims to Montrose. After several cases left the insurance companies responsible for cleanup coverage, insurers began excluding coverage of pollution as a standard coverage item.

Absolute pollution exclusions are not true absolute exclusions in that they do allow coverage for incidental pollution events, such as those caused by events not related to normal business operations. Because it may provide coverage in certain situations this type of clause is sometimes referred to as a broad form pollution exclusion. A clause that denies coverage for all pollution events would be considered a total pollution exclusion, and may exclude liability coverage for bodily injury or property damage caused by a pollution event.

The use of an absolute pollution exclusion may still leave the definition of what is considered pollution moot. Courts may address the issue of what is considered pollution. Insurers have an incentive to consider a broad range of events as related to pollution, including lead paint and asbestos damage, to be excluded because they do not want to pay for claims.

RELATED TERMS
  1. Filthy Five

    A series of power plants located in Massachusetts. The Filthy ...
  2. Absolute Exclusion

    An insurance policy clause that eliminates coverage of certain ...
  3. Water Quality Insurance Syndicate ...

    An American company that provides water pollution liability insurance ...
  4. Liability Insurance

    Any type of insurance policy that protects an individual or business ...
  5. Carbon Trade

    An exchange of credits between nations designed to reduce emissions ...
  6. Coordination Of Coverage

    A review or modification of an individual's or business’ insurance ...
Related Articles
  1. Investing

    The Big Play In Pollution Control

    As the world grapples with growing pollution and environmental concerns, the mitigation industry stands to profit. For investors, this often ignored subsector of cleantech could be the way to ...
  2. Small Business

    Make Sure Your Business Complies with These 3 Environmental Laws

    Discover why 1970 is considered the year of the environment, and learn about several major environmental laws with which businesses must comply.
  3. Small Business

    Understanding Externality

    An externality is a consequence of an economic activity that is experienced by unrelated third parties.
  4. Insurance

    Do You Need Casualty Insurance?

    Find out how different types of coverages can protect you and which policy is right for you.
  5. Insights

    Save The Earth: Become A Capitalist

    Who says that capitalism and environmentalism have to be mutually exclusive?
  6. Insurance

    How Much Car Insurance Do I Need?

    Find out to determine how much car insurance you actually need with this overview of the different types of coverage available in your policy.
  7. Insurance

    An Advisor's Guide to Prof. Liability Insurance

    A guide to what financial advisors need to know about professional liability insurance.
  8. Insurance

    Top Tips for Cheaper, Better Car Insurance

    Accident, theft, vandalism - make sure your coverage will protect you when you need it most.
  9. Financial Advisor

    Group Term Life Insurance: What You Need to Know

    Is group term life insurance really a good deal? What you need to know about employer-sponsored group term life insurance coverage.
RELATED FAQS
  1. How does the 80% rule for home insurance work, and how do capital improvements affect ...

    The 80% rule refers to the fact that most insurance companies will not fully cover the cost of damage to a house due to the ... Read Answer >>
  2. Can my insurance company refuse me coverage?

    Insurance isn't always as straightforward as other products. Insurers can deny coverage in many different instances:Non-Renewal ... Read Answer >>
  3. Does renters insurance cover dog bites?

    Learn how a renters insurance policy can provide liability coverage for dog bites and how coverage may vary by state and ... Read Answer >>
  4. What are cleantech stocks?

    Clean technology, commonly referred to as cleantech, is a term used to describe environmentally-friendly technologies that ... Read Answer >>
Hot Definitions
  1. Retirement Planning

    Retirement planning is the process of determining retirement income goals and the actions and decisions necessary to achieve ...
  2. Drawdown

    The peak-to-trough decline during a specific record period of an investment, fund or commodity. A drawdown is usually quoted ...
  3. Inverse Transaction

    A transaction that can cancel out a forward contract that has the same value date.
  4. Redemption

    The return of an investor's principal in a fixed income security, such as a preferred stock or bond; or the sale of units ...
  5. Solvency

    The ability of a company to meet its long-term financial obligations. Solvency is essential to staying in business, but a ...
  6. Dilution

    A reduction in the ownership percentage of a share of stock caused by the issuance of new stock. Dilution can also occur ...
Trading Center