1. Forms
2. FP
3. FP-04-22

What the form is

The FP 04 22, titled "Pollutant Clean Up and Removal Additional Aggregate Limit of Insurance," is an endorsement to a farm property insurance policy. Standard farm policies typically provide a basic aggregate limit (often $10,000) for expenses related to the clean up and removal of pollutants from land or water at the insured location when the discharge is caused by a covered peril. This endorsement allows the insured to purchase an additional, higher aggregate limit for these specific costs for each scheduled location. It essentially provides a way to customize and increase coverage for potentially expensive pollution incidents.

Classes of business it applies to

This endorsement is specifically designed for agricultural businesses and farming operations covered under a Farm Program policy. It is particularly relevant for farms that:

• Store or use significant quantities of potential pollutants such as fuels, fertilizers, pesticides, herbicides, or animal waste.
• Have operations that pose a higher risk of accidental spillage or release of pollutants (e.g., large fuel storage tanks, chemical mixing areas, extensive livestock operations).
• Are located near sensitive environmental areas, such as water bodies, where cleanup costs could be substantial.

Real-world example: A large commercial farm with underground fuel storage tanks and extensive pesticide application might opt for this endorsement to secure higher limits for potential cleanup costs if a tank were to leak or a significant pesticide spill occurred due to a covered event like a tornado damaging the storage facility.

Special considerations

• Base Coverage Prerequisite: This endorsement increases an existing coverage; the base policy must already provide some level of pollutant clean up and removal coverage (typically $10,000).
• Per Location Basis: The increased limit applies per scheduled location, meaning different limits can potentially be set for different insured properties if applicable.
• Deductible: The endorsement may specify its own deductible for the additional coverage, or a deductible may be required by the insurer, especially for higher limits. This deductible would apply to the costs exceeding the base policy's pollutant cleanup limit.
• Reporting Requirement: Expenses for pollutant clean up and removal typically must be reported to the insurer within a specific timeframe, often 180 days from the date of the covered loss.
• Covered Cause of Loss: The pollution incident itself must result from a cause of loss covered by the underlying property policy for this endorsement to apply.

Real-world example: If a farm has a $10,000 base limit for pollutant cleanup and purchases an FP 04 22 endorsement for an additional $40,000 with a $1,000 deductible on the endorsement, and a covered windstorm causes a $35,000 pollutant cleanup, the base policy would pay $10,000. For the remaining $25,000, the endorsement would cover $24,000 after its $1,000 deductible is met.

Key information for agents and underwriters

• Risk Assessment: Underwriters should carefully assess the farm's specific pollution exposures. This includes the types and quantities of pollutants stored, handling and storage practices, secondary containment measures, proximity to waterways or wells, and the farm's history of spills or environmental incidents.
• Limit Adequacy: Agents should discuss with clients the potential costs of pollutant cleanup, which can be very high, to help them select an adequate additional aggregate limit. The standard $10,000 is often insufficient for significant events.
• Deductible Options: Discuss available deductible options and how they impact premium and retained risk. Some insurers may mandate a minimum deductible for higher limits.
• Coverage Gaps: While this endorsement enhances property coverage for cleanup costs at the insured's location, it does not typically cover third-party liability for pollution, which would require separate pollution liability coverage. Agents should clarify this distinction.
• Pricing: The premium for this endorsement will depend on the limit selected, the deductible, and the underwriter's assessment of the farm's pollution exposure.