Debris Removal and Pollution Damage

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...insurance plus $10,000 might be inadequate to cover a property loss plus debris removal cost fully, the additional $10,000 debris removal limit can be increased by any amount desired, for additional premium, using ISO form CP 04 15 (or its equivalent), which is entitled Debris Removal Additional Insurance.

The limit shown on the endorsement is the amount to which the coverage is increased, with the $10,000 of basic coverage included. It can be applied in addition to the smaller of: a) 25 percent of the amount of the claim paid plus the deductible; or b) the limit of insurance when it is exceeded by the sum of the property loss and the cost of the debris removal.

To illustrate, assume a $100,000 limit of insurance (sufficient to comply with the coinsurance requirement) with an additional debris removal limit of $10,000.

With a property loss of $50,000, debris removal coverage of $12,500 (25 percent) plus $10,000, or $22,500 is available, for a total possible payment for property damage and debris removal of $72,500.

But with a $90,000 property loss, $22,500 (25 percent) plus $10,000, or $32,500 becomes $122,500, when added to the $90,000 property loss.

This is greater than the insurance limit plus $10,000 ($110,000). Payment is limited to $110,000 for property loss plus debris removal costs.

Claims for debris removal expenses are payable only “if they are reported” to the insurer within 180 days after the date of loss. Note that the expenses must be reported, but not necessarily incurred, within that time. A contractor’s estimate given to the insurer for work not yet completed will satisfy this requirement.

However, we have seen cases where an insurer has taken exception to this, insisting that the work must have been completed within this time for coverage to apply. So an insured, with the 180-day deadline approaching and unable to complete the debris removal within that time, is well advised—besides giving notice to the insurer—also to seek an extension rather than argue the point while the adjustment is in progress. Many insurers will grant such an extension, given a good reason for the delay. While debris removal coverage will pay for pollution cleanup and decontamination of covered buildings and personal property, it does not apply to the cost to extract “pollutants” from land or water, or remove, restore or replace polluted land or water. Pollutant cleanup and removal is a separate additional coverage, discussed later in this article.

Do Individual Limits Apply?

The following question frequently is raised: In a severe loss involving two or more items of property coverage, how does the debris removal coverage apply—separately, to each item of coverage, or collectively over all items involved in the loss?

In cases where the limit of insurance for one item of coverage is exhausted but coverage is available under a second item, adjusters will sometimes attempt to apply the debris removal limits separately to each item.

For example, assume $100,000 of building insurance and $50,000 of personal property insurance with no deductible. A fire totally destroys the personal property and causes $30,000 damage to the building. Cost of debris removal is estimated to be $26,000 for the contents (which includes toxic...


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