This competitive environmental intelligence will offer a brief overview of State Storage Tank Funds vs. Storage Tank Insurance so you can make sure you are offering what is best for your insureds while better protecting your E&O exposure.
Over the last few years we have observed an increase in the number of underground storage tank (UST) owners going with State Storage Tank Funds to meet their financial assurance requirements, versus UST Insurance. Most of this is due to aging tanks (25 years or older) which the private insurance industry does not want to insure due to poor claims experience.
What we have also learned, most agents in states with tank funds, believe State tank funds offer the same coverage as private insurance carriers. The reality is, State tank funds are generally designed to meet the bare minimum financial assurance requirements for regulated storage tank owners.
State funds that are still solvent, generally cover clean up but do not offer features included on storage tank insurance policies such as defense cost, third party bodily injury, third party property damage, third party business income and much more.
At ERMI, our strategy is to use State tank funds for troubled insureds, i.e. regulated underground storage tanks 25+ years or older.
Besides being a depository for troubled tank accounts, another benefit for state storage tank funds, involves UST owners when they are getting ready to pull or replace their tanks. If an insurance carrier becomes aware an insured is going to pull a tank/s they will suspend coverage until the tank/s have been pulled and replaced and all testing is completed. Insured’s must notify a carrier if they intend to replace their tanks and there is a question on the UST warranty application that asks if the insured is going to pull or replace any tanks during the policy period.
The fact State tank funds are used for troubled accounts is one reason why so many are financially stressed or have gone out of business. In Michigan, we are on the second version of our State tank fund because the original program ran out of money forcing a lot of tank owners to pay out of pocket for cleanups or go out of business. What is the financial stability of your States tank fund?
A few issues to look for with State Funds are:
•State funds are generally offered on a reimbursement basis so the insured could face large out of pocket expenses vs paying a deductible / SIR.
•Very few State funds offer third party liability (third party bodily injury, third party property damage, third party business income) like UST insurance policies so check to see if your state does.
•Most State funds have a set limit of coverage offered and you can’t buy higher limits, regardless of the number of tanks you have.
•State funds generally exclude loading / unloading.
It’s important you do not sacrifice coverage for your UST insureds by going with a state tank fund because that can create E&O claims for you.
For more information or to strategize on storage tank insurance please contact Angie Marsman at 269-792-1070 or angela@ermi.us.
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