Insurance for Cleantech Companies

It’s a delicate balance, deriving energy from natural resources while sustaining a thriving ecosystem. But cleantech companies are up for the challenge. While these businesses are watching over the environment, though, who is protecting them? In this post, we highlight some of the risks these companies face and how the right insurance policy can support long term growth for the cleantech industry.

What Risks Do Cleantech Companies Face?

In a booming industry, requiring trillions of dollars to keep momentum, two main types of cleantech companies exist. These include companies focused on eco-friendly endeavors not related to energy, and those aimed at efficient energy production. Unfortunately, cleantech doesn’t see mounds of venture capital flowing in, making startups even more challenging to launch.

Naturally, each cleantech sector will have different exposures and require specific coverage to maintain adequate funding. However, the following are a few widespread risks that most cleantech companies face. 

Pollution 

With so many organizations striving to uphold a multitude of environmental regulations, breaking even one rule is rarely a deliberate action. Whether by miscalculation, an oversight, or merely human error, it’s not unheard of for cleantech companies to pollute the environment. 

Property Damage 

Renewable energy insurance claims have increased over the past five years, establishing a new benchmark for risks in the cleantech industry. Mainly the exposure revolves around defective designs, changing original equipment manufacturers (OEM) warranties, and severe weather damage.

Cybersecurity

Aside from the finance, communications, and healthcare industries, cybercriminals target cleantech companies substantially more than any other. In the US alone, energy is one of the top five sectors that cybercriminals target for attacks. A data breach could compromise an entire project, subjecting its customers to other cyber threats and costing loads of money to mitigate the damage.

Regulations 

The cleantech industry is often tricky to navigate because of the plethora of ever-changing regulations—mostly because of emerging technologies. Plus, these rules not only cross state lines, but they function globally, as well. And they touch on all aspects of the company’s operations, making it even more confusing. Most cleantech companies don’t purposefully break the law; however, it’s easily done. 

Supply Chain Disruption

Globalization has shined a light on a growing area of vulnerability in the cleantech industry: supply chain risk. Nearly half of all cleantech companies depend on foreign businesses for their supply chain. Still, 70% of cleantech companies don’t voice any supply chain disruption concerns whatsoever. What this means is that most of these companies would be out in the cold if a disaster struck, interrupting their chain supply.

Real-life Claim Scenarios

• In April 2017, the Air Resources Board (ARB) of California put Cleantech Environmental, Inc. in the hot seat, accusing them of violating air quality regulations—seven diesel fuel trucks failed to comply with local laws. Cleantech was found guilty and forced to pay $25,000 in penalties for the mishap.
  Visit here for the full story: Cleantech Environmental, Inc. Case Settlement

• Protesters in Hawaii caused issues at a construction site that was erecting eight wind turbines. A blow torch cut through an anchor bolt, requiring over $400,000 worth of damage to the Na Pua Makani project.
  Visit here for the full story: 6 protesters arrested as more wind farm equipment transported to Kahuku

• In 2016, India filed a complaint against the US regarding provisions in Michigan’s clean energy laws first passed in 2008. Although other states were named in the case, a panel reported issues on Michigan’s renewable energy laws that violated international trade.
  Visit here for the full story: Brokers: are you clean tech clients prepared for a disaster?

What Is Cleantech Business Insurance? 

As more regulations come into play and lawmakers tighten up on current rules, cleantech companies must protect themselves adequately. That said, aside from the foundational general liability (GL) policy, here are some standard insurance policies that work to safeguard cleantech companies:

• Pollution insurance – Pollution claims are excluded from most GL policies, but this coverage responds to third-party lawsuits, alleging bodily injury or property damage.

• Directors & officers (D&O) insurance – Companies can indemnify their executives against covered claims and rely on a D&O policy for reimbursement. This coverage can defend the corporate entity as well as its leadership, too. 

• Property liability insurance – For any company that owns or rents property, this coverage works to protect your company by reimbursing you for any direct losses you experience on the property. 

• Intellectual property (IP) insurance – This coverage covers defense costs, judgments, and settlements against you if you’re held liable for infringing on a patent, trademark, copyright, or other forms of IP. 

• Cyber insurance – This policy works to protect companies against third-party lawsuits that arise from digital activity. It also helps to cover fines and penalties from regulators.

• Errors & omissions (E&O) insurance – Also known as professional liability insurance, this coverage steps in to protect you from lawsuits claiming that your product or service didn’t perform as expected according to the customer and industry standards. 

• Employee practices liability insurance (EPLI) – If employees file specific suits, alleging harassment, discrimination, retaliation, wrongful termination, etc., an EPLI policy pays defense costs in the lawsuits. 

• Workers’ compensation insurance – If an employee is injured while at work, and they can’t perform their job, this policy helps to cover the employee’s lost wages and medical expenses.

Remember, a customized insurance plan is your best bet as each cleantech company has its specialized needs and faces unique exposures. No matter if your business focuses on energy production or non-energy endeavors, working with knowledgeable insurance professionals can help to identify your specific vulnerabilities and create a tailored plan for your company.

Who Needs It? 

A myriad of companies exists that can benefit from a customized cleantech insurance policy. Responses from a recent Chubb and Cleantech survey display the most prominent cleantech segments. 

Although energy and power make up the most significant part of the cleantech industry, some other specific sectors which need cleantech insurance are:

• Solar
• Hydroelectric
• Wind
• Biodiesel 
• Geothermal
• Biomass
• Fuel cells
• Methane extraction

How Much Does It Cost?

While every cleantech company will have its own unique needs, some factors to consider when selecting an insurance policy include:

• Revenue
• Company size
• Claims history
• Risks in your particular sector
• Global exposure

That said, the price of premiums fluctuates depending on the tailored plan. Landing on a firm figure in a blog post is nearly impossible because of all the variables that factor into an insurance premium price. An excellent way to get the most bang for your buck is to work with insurance experts in your field. 

Understanding what coverages your cleantech company needs can be a confusing process. Founder Shield specializes in knowing the risks your business faces to make sure you have adequate protection. Feel free to reach out to us, and we’ll walk you through the process of finding the right policy for you. 

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