What is a Pollutant?
Any material, substance, liquid, product, etc… which is introduced into an environment for other than its intended use / purpose. In other words, something that ends up where it doesn’t belong. Fresh water, cheese, and milk have all been classified as pollutants by Insurance Carriers under various circumstances.
Most commercial insureds assume that claims arising from their operations are covered by the general liability policy. However, claims resulting from a “pollution incident” are excluded from most general liability policies, which leaves commercial insureds with gaps in coverage. What pollutants are impacting your business?
Environmental Exposures Impacting Gravel Quarries
May include, but are not limited to: Silica; Stormwater runoff; Release of oils/fuels from equipment; Spills mobile storage tanks; No auditing of waste handling and disposal companies; Natural resource damages; Vapor intrusion; Storage and/or transportation of raw materials; Business interruption expenses from pollution loss (1st & 3rd party); Leaks from hydraulic fluid; Products pollution liability; Raw materials stored onsite; Uncertainties about the historical use and conditions of property; Obsolete and remote equipment storage (bone) yards where contaminants percolate into the soil/groundwater; Nuisance odors; No emergency response training for employees; Spills and leaks from the storage and handling (loading/unloading) of materials from vehicles, rail cars, barges…; Improper characterization of hazardous waste… And more
Environmental Claim Scenarios
- A gravel quarry provided material for a jobsite, which contained unknown pollutants. The excavation contractor unknowingly spread the contaminated material across a project site. Later during the project, the contamination was discovered and determined to have originated from the material provided by the gravel mine. Project delays, cleanup costs, and 3rd party property damage claims exceeded $600,000.
- A waste hauler was hired to transport used oil and fluids to a 3rd party recycling facility. The waste hauler got into an accident which caused the contents of the tanker to be released directly into a creek. Under Federal law (CERCLA) you own your waste from cradle to grave, so the generators of the waste had to pay their apportionment of the $2,000,000 expense for remediation.
- Over the weekend a major thunderstorm destroyed the storm water runoff control system at a quarry, causing the material to flow down grade through neighboring properties, roads, and into a nearby lake. The quarry was responsible for cleanup costs, natural resource damages, and 3rd party property damage claims, which exceeded $3,500,000.
- 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. Total cost for investigation, removal, and disposal exceeded $275,000.
- During a particularly dry spell in the summer, heavy winds allowed silica dust to drift from a quarry into a neighboring community. The liable quarry filed a claim with their GL carrier for the resulting property damage and bodily injury, but the insurer denied the claim, due to the policy’s pollution exclusion. The quarry was ultimately responsible for coving 100% of the loss, which totaled over $1,000,000.
- A quarries tailings piles over several years of being exposed to the elements and rain, percolated into the ground and ground water. The soil contamination plume impacted numerous third parties and the ground water contamination plume impacted both private and municipal water wells. Costs for remediation and other expenses had not been calculated but will be in the millions of dollars.
Benefits of Environmental Liability Insurance
Because environmental losses are a severity risk, rather than a frequency risk, most commercial insureds lack the financial strength to self-insure their environmental liabilities. Since every gravel quarry has notable environmental exposures, consideration should be given to the economies of scale afforded with environmental liability insurance as part of your risk transfer strategy, versus self-insuring.
Three Overlooked Benefits of environmental liability insurance:
- 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.
- 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….?
- 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 Liability Insurance Coverages
Environmental Impairment Liability (EIL)
EIL is for gravel mining operations susceptible to economic loss caused by pollution that actually or allegedly originated from their owned or leased location (mine). 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 clean-up 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.
Transportation Pollution Liability
Generally, Business Auto or Truckers policies will exclude pollution losses arising from spills or other releases of transported cargo. Transportation pollution liability affords coverage during the loading, unloading and transportation, for a spill, release or sudden upset and overturn of transported cargo.
Contractors Pollution Liability (CPL)
Contractors Pollution Liability (CPL) is for gravel mining operations that perform contracting work away from any premises they own, rent, lease or occupy, should they cause or exacerbate an environmental condition while performing their contractor services.
Coverage can be written on a job specific basis, or on a blanket basis to cover all the work performed by the insured. Most policies can be endorsed to cover transportation pollution liability, mold, lead, and asbestos, defense outside the limits, off-site disposal coverage, and more. Contractors incorporating CPL coverage as part of their risk transfer strategy, drive their growth and profits by marketing the benefits CPL coverage affords in reducing job interruption due to environmental issues. A major environmental liability exposure faced by all contractors lies in who they are doing business with. If there is an environmental loss at a job site, innocent contractors can and do get named in lawsuits. Do your subs/vendors have CPL insurance if they cause an environmental loss?
Underground Storage Tanks
Financial responsibility requirements ensure that owners and operators of underground storage tank systems can financially handle a release from an underground storage tank. 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 tank system.
Property Transfer Liability
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.
Property transfer coverage assists to keep the property at its maximum value while allowing the insured to negotiate more favorable loan terms than property not supported by this coverage.