Port Authorities

What is a Pollutant? 

Any material, substance, liquid, product, etc… which is introduced into an environment for other than its intended use / purpose. Fresh water, cheese, and milk have all been classified as pollutants by Insurance Carriers under various circumstances. 

Many contractors assume that claims arising from operations are covered by the general liability policy. However, claims resulting from a “pollution incident” are excluded from most general liability policies, which leaves most contractors exposed to potentially uncovered claims. What pollutants are impacting your business?

Environmental Exposures Impacting Port Authorities 

Include, but are not limited to:  Spills/releases during loading/unloading process;  Pollutants being shipped through the port;  Illegal / midnight dumping of pollutants, fuels, waste from tenants, ships, rail road, over the road transporters, aviation operations….;  Dust & vehicle emissions;  Spills from fuels and hazardous materials stored in above ground or underground storage tanks;  Pollution from neighboring properties migrating onto Ports (Vapor Intrusion);  Tennant operations causing a pollution exposure;  Storm water runoff;  Loading and unloading of pollutants over unsealed areas;  Natural resource damages;  Acid wash for boats; Leaks from elevator hydraulic fluid storage tanks; Equipment maintenance services;  Corroded wastewater and storm water sewers;  Sick building syndrome;  Impacting underground utilities on Port property;  No auditing of waste handling and disposal companies;  Tenants using or storing environmentally sensitive materials, chemicals, waste….;  Obsolete and remote equipment storage (bone) yards where contaminants percolate into the soil/groundwater;  Releases from refrigeration systems;  Wastewater treatment plants/ lift stations/ pumping stations;  Vandalism;  Mold; Asbestos;  Lead;  Past/present use of septic systems;  Adverse reactions and interactions of chemical compounds that accidentally commingle during a fire;  Janitorial cleaning compounds;  No emergency and spill control plans;  nuisance odors;  Storage and use of pesticides and herbicides;  Transfer and recycling facilities;  Painting and sanding; De-icing operations;  Brownfield’s….  Some Port’s also have golf courses, airports…. that create a variety of environmental exposures.

Environmental Claim Examples

1. A chemical storage area sparked a fire that forced the evacuation of neighboring businesses.  Businesses and residents within a two mile radius had to evacuate because of fumes from the chemical fire.  Local residents from miles away could hear the ‘popping sound’ of the 55-gallon chemical drums as they exploded. The hazardous nature of the chemicals, and the fumes created by the fire, necessitated the evacuation of more than 20 businesses.  Businesses remained barred from their facilities for several days while the fire was extinguished and chemicals were cleaned-up.  The Port was sued by several business and third parties for business interruption as well as property damage, clean up costs and third-party bodily injury.  Costs to settle the claims exceeded $30,000,000.
2. A new building was built on the site of a former equipment storage area.  During excavation, petroleum hydrocarbon contamination was discovered.  Cleanup costs exceeded $400,000.
3. A Port owned several parcels of vacant land.  When the Port visited the site to begin construction of a new building they discovered that several piles of unidentified waste had been illegally dumped on the property. The Port had the piles tested and test results showed the piles contained hazardous waste.  Cost for the Port to dispose of the waste exceeded $650,000.
4. A Port acquired property previously used for manufacturing.  The port planed to expand their warehousing operations.  When excavation began an abandoned on site lagoon waste treatment lagoon was discovered.  The soil and had to be removed at the Ports expense.  Remediation and disposal costs exceeded $750,000.
5. An excavation/grading contractor unknowingly spread petroleum-contaminated soil across a project site during fill operations.  The contractor and Port were named in a lawsuit for exacerbating the extent of contamination.  After lengthy deliberations, the contractor and Port were eventually removed from the lawsuit, however, they had invested $150,000 in defense.
6. An excavation contractor was subject to cleanup costs and business interruption expenses in excess of $500,000 when they ruptured and unmarked petroleum pipeline.  The contractor was forced out of business so the property owner a Port had to pay the bill.
7. A HVAC contractor was hired to upgrade an office buildings heating system. While working in the building, the contractor failed to vent the system properly, causing a release of carbon monoxide.  Building occupants complaining of headaches and nausea were rushed to the local hospital.  As a result, several bodily injury suits were filed against the building owner in excess of $1,000,000.
8. The concrete secondary containment of a 10,000-gallon diesel aboveground storage tank was cracked. A release from the tank spilled 8,000 gallons into the containment. The diesel seeped into the underlying soils and required costly excavation and removal. The total cost for investigation, removal and disposal exceeded $320,000.
9. At a Ports wastewater treatment plant pumping station, a faulty valve malfunctioned.  As a result, a ruptured pipe released 2.8 million gallons of raw sewage into a local river.  The river was used by local fisherman, recreational boaters and marinas.  Numerous boats were damaged by the sewage and marinas were forced to close temporarily while cleanup of the raw sewage took place.  The total cost of property damage and loss of income claims totaled $400,000.
10. A Port tenant stored hazardous waste in an uncovered dumpster over an unsealed area.  Whenever it rained storm water would take some of the waste and deposit it across the land.  When the Port began building a new structure high levels of the hazardous waste was discovered in the soil.  Costs for the Port to remediate the site exceeded $450,000.
11. An asphalt paving contractor paved a parking lot for a new commercial structure.  At the end of the day, the tack coat was sprayed onto the sub-base prior to paving. During the evening, a major thunderstorm caused the tack coat to wash off and flow into a nearby stream. The contractor was responsible for cleanup costs and natural resource damages which exceeded $200,000.  The damages caused for the contractors bankruptcy thus leaving the Port as the property owner the responsible party to pay for the damages.
12. After performing routine engine maintenance on a tug boat used to move ships for a port, the boat mechanic accidentally attached the automatic bilge pump to the fuel line.  By the time the problem was detected more than 500 gallons of diesel fuel had been pumped into the bay.  Cost to the Port for clean up and third party property damage claims exceeded $100,000.

ENVIRONMENTAL LIABILITY INSURANCE BENEFITS

The majority of Port Authorities lack the financial strength to self insure their environmental liabilities.  Consideration needs to be given to the economies of scale afforded with environmental liability insurance as part of your risk transfer strategy.

The Three Main Benefits environmental liability insurance offers:  

1. Defense Costs: Environmental liabilities are relatively new and very litigious.  Even if you do nothing wrong you can still get named in a suit and have to expense defense costs i.e. legal fees, environmental investigations, etc.  
2. Claim Management: All policies come with specialists to assist you in handling a claim.  Who is in charge of communications, public relations, emergency response, government compliance, financial management, third party claims for bodily injury, property damage, natural resource damages….?
3. Third Party Liability: The majority of the time the cost to clean up the environmental problem/s is far less than the associated claims that come in from third parties for bodily injury, property damage and business interruption.  You need to look at your client’s and neighbors that can be impacted if you or a sub-contractor/vendor cause an environmental loss.          

ENVIRONMENTAL RISK TRANSFER PRODUCTS

ENVIRONMENTAL IMPAIRMENT LIABILITY (EIL)

EIL is for Ports susceptible to economic loss caused by pollution that actually or allegedly originated from their operations.  Sometimes referred to as pollution legal liability this coverage is for those who own, operate, lease, or have any other insurable interest in real property and the operations.  Coverage can be written in a variety of ways addressing unknown preexisting conditions or new conditions.  Coverage can include third party bodily injury and property damage along with business interruption and extra expense, on and off site cleanup costs, legal defense expenses, non-owned disposal sites, transportation and more. EIL can be offered on multi year terms.  Sewer lines and pump/lift stations can be covered by EIL.  Most EIL policies cover above ground storage tanks and some can include underground storage tanks. EIL coverage can also be used to protect for environmental losses from tenants.

PROPERTY TRANSFER COVERAGE

When buying or selling property there can be unknown preexisting environmental conditions. Since a Phase I or Phase II survey cannot guarantee uncovering all potential environmental liabilities, insurance companies have created property transfer insurance. This coverage protects the new owner or any party with an insurable interest, against unknown environmental conditions that may be discovered during the policy period, that were not caused by the new owner.  This coverage not only helps to keep the property at its maximum value, it will assist the purchaser in being able to secure the necessary financing to complete their transaction.

TRANSPORTATION POLLUTION LIABILITY

Generally, business auto or truckers policies will exclude pollution losses arising from spills or other releases of their cargo. Broadened auto pollution liability (typically Form CA 9948) affords coverage during the loading, unloading and transportation, for a spill, release or sudden upset and over turn of transported cargo.  Note:  An MCS-90 endorsement is not pollution coverage. Coverage can also be acquired to protect against losses from water craft, rail or aircraft.

UNDERGROUND AND ABOVE GROUND STORAGE TANKS

Financial responsibility requirements ensure that owners and operators of underground storage tank systems have the ability to financially handle a release from an underground storage tank system. The responsibility encompasses the ability to pay funds for corrective action and third party bodily injury and property damage from non-sudden and sudden and accidental releases from a regulated underground system.

Note:  Ports have potential indirect environmental exposures from the vendors you hire to perform services.  Should your vendors cause an environmental loss or exacerbate an existing environmental issue their general liability insurance policy generally will have either an absolute or total pollution exclusion.  In order to be protected you should make sure your vendors have the proper environment insurance coverage before they do any work on your behalf.

CONTRACTORS POLLUTION LIABILITY

This coverage can be purchased to meet two specific exposures. First, contractors that perform remedial activities (asbestos, lead, mold, soil or ground water remediation) there is the standard contractor’s pollution liability (CPL) insurance coverage. This protects the insured for pollution conditions they may cause or exacerbate an existing situation while performing remedial services. This is for covered operations performed by or on behalf of the insured.  The loss must occur away from any premises the insured owns, rents, leases or occupies, in other words while they are performing remedial services at an educational institution.

Secondly, standard contractors (i.e. general contractors, HVAC, plumbing, electrical, mechanical, janitorial, demolition, drilling, excavation, street and paving contractors, rigging, utility, millwrights, artisan, etc.), in performing their services may cause an environmental liability that is generally excluded from their general liability coverage. For these contractors there is contingent contractor’s pollution liability (CCPL) coverage. Basically they are afforded the same coverage as remedial contractors but the cost to purchase this insurance is substantially less.

PROFESSIONAL LIABILITY (E&O)

Should a environmental engineer/consultant or analytical laboratory make an error or an omission in performing professional services for you they will need a E&O policy including pollution for there to be coverage.  Some professional services could include Phase I or Phase II site assessments, All Appropriate Inquiry (AAI), air monitoring, lead and asbestos assessments, waste characterization, remedial action plans, water testing, mold survey’s, environmental training….