...been anticipated and enough insurance was carried to provide for the full loss of property plus the cost of debris removal. One of the compelling arguments for blanket insurance over two or more locations was that coverage would be available at each location for the full property value plus debris removal costs whenever the amount of insurance over all locations was high enough to cover the loss (including debris removal) at any one location, and to meet the coinsurance requirement.
In recent years, as the cost of cleaning up and disposing of debris increased substantially and environmental laws imposed progressively stricter and more costly rules on disposal— particularly of hazardous materials—insurers have been forced to build restrictions into the basic policy forms regarding both debris removal and pollutants. Unfortunately, these restrictions as included in most policy forms are complex and difficult to interpret, giving rise to frequent questions and misunderstandings.
A typical case leading to the more restrictive coverage was a 1977 Georgia court of appeals case, Lexington Insurance Co. v. Ryder Systems, Inc., 234 S.E.2d 839 , which found that the cost of removing and replacing oil-soaked ground around an oil storage tank that had developed a below-ground leak was covered as a cost of debris removal. The policy involved was an “all risks” policy that did not exclude accidental leakage. The oil was “covered property” and its escape and contamination constituted “debris of covered property.”
The discussion that follows is based on Insurance Services Office (ISO) commercial buildings and personal property form CP 00 10 06 07. Most commercial property forms have somewhat similar debris removal and pollution provisions. Homeowners policies also have a debris removal clause, with some significant differences from the commercial form, but these are outside the scope of this discussion.
For commercial property insurance under form CP 00 10 06 07, debris removal coverage is offered as an “additional coverage” rather than a part of the basic property coverage. In this section of the form the coverage is limited to 25 percent of the insurer’s liability for the direct property loss by a covered cause of loss, plus any applicable deductible (unless an additional debris removal limit is shown in the declarations).
An additional $10,000 per occurrence of debris removal coverage is made available whenever: a) the sum of direct physical loss plus debris removal exceeds the limit of insurance, or b) the debris removal expense exceeds the 25 percent limitation in the debris removal, additional coverage.
When there is concern that the 25 percent of loss limitation plus $10,000 or the total limit of...