In the building materials industry, handling and storing hazardous materials—like solvents, adhesives, and chemical-based products—is a common part of daily operations. But when it comes to insurance risk and liability, one seemingly small mistake can have major consequences: poor or missing labels on hazardous materials.
Improper labeling isn’t just a compliance issue—it’s a red flag for insurers. It can significantly increase your premiums, limit coverage in the event of an incident, or even lead to claim denial. Here’s what you need to know about how labeling mistakes can impact your insurance, and how to prevent them.
Why Labeling Matters for Insurance
Insurance providers assess risk based on how well your company manages safety and compliance. Poor labeling practices can lead to:
Worker injuries due to lack of hazard awareness
Environmental damage from improper storage or spills
Violations of OSHA’s Hazard Communication Standard (HCS)
Increased potential for regulatory fines or lawsuits
Any of these issues can trigger an insurance investigation or claim dispute, putting your business at financial risk.
Key Insurance Risks Tied to Improper Labeling
- Increased Liability Exposure
If a worker is injured while handling an unlabeled or misidentified hazardous material, your company could face a lawsuit. Insurance may only provide limited support—or none at all—if it’s found that labeling practices were negligent.
- Claim Denials or Reductions
Insurance policies often contain exclusions or conditions related to regulatory compliance. If an incident occurs and labels were missing, incorrect, or outdated, your insurer might argue that you failed to uphold basic safety standards, leading to partial or full denial of a claim.
- Higher Premiums
A history of safety violations, including labeling infractions, can drive up your insurance premiums. Underwriters view poor labeling as an indicator of broader operational risks.
- Limited Coverage for Environmental Incidents
Spills or leaks involving hazardous materials are often only covered under specific environmental policies. Improper labeling may be cited as a reason for denial if the event was deemed preventable.
Common Labeling Mistakes That Create Insurance Risks
Missing or faded hazard labels on containers
Using outdated or non-GHS-compliant labels
Lack of secondary container labeling (e.g., when transferring materials)
Failure to provide Safety Data Sheets (SDS) alongside products
Inconsistent labeling across locations or departments
These issues not only violate regulatory standards—they undermine your ability to demonstrate due diligence in the event of a claim.
How to Reduce Insurance Risk Through Proper Labeling
- Use GHS-Compliant Labels
Ensure all hazardous materials are labeled according to the Globally Harmonized System (GHS), including:
Pictograms
Signal words (“Danger” or “Warning”)
Hazard and precautionary statements
Product identifiers
Supplier contact information
- Keep Labels Legible and Durable
Use materials that can withstand the environment they’re in—whether that means moisture, heat, or abrasion. Inspect and replace labels regularly.
- Train Staff on Labeling Protocols
Employees should understand what the labels mean, how to use secondary containers, and where to find Safety Data Sheets.
- Maintain a Labeling Policy
Document your procedures for labeling, inspecting, and updating hazardous materials. This shows insurers and regulators that your company takes safety seriously.
- Conduct Regular Compliance Audits
Periodic internal audits can catch labeling issues before they lead to incidents or insurance complications. Include label checks as part of your broader safety inspections.
Conclusion
In the eyes of an insurance provider, poor labeling of hazardous materials isn’t a small oversight—it’s a warning sign. It suggests lapses in training, safety culture, and operational control. By improving your labeling practices, you’re not only ensuring compliance with OSHA and environmental regulations, but also protecting your business from legal, financial, and reputational damage.
Investing in proper labeling is a smart move that can lower your insurance risk and give you peace of mind across your entire operation.
