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.
Ski Resort owners should be aware that pollutants (such as mold / Legionella) are excluded from coverage on most General Liability policies. And General Liability policies that do provide pollution coverage, typically do so on a limited basis, with inadequate limits and/or strict discovery and reporting requirements for there to be coverage. If you experience a pollution loss, will your insurance provide adequate coverage?
Environmental Exposures Impacting Ski Resorts
May include, but are not limited to: Storm water runoff, Natural Resource Damages; Wastewater treatment plants/pumping stations exposures from nuisance odor claims, raw sewage rupture, chlorine gas emissions; Unknowingly using contaminated water for snowmaking, Sick building syndrome; Asbestos; Lead; Mold / Legionella; Environmental cleanup and liabilities that result after a fire is extinguished; Historic site conditions (i.e. old underground tanks, surface impoundments, lagoons, clarifiers, unknown/old landfills); Sewer lines; Maintenance/Service garages; Aboveground and/or underground storage tanks; Leaks from elevator hydraulic fluid storage tanks; Inadequate or no secondary containment for above ground storage tanks; Equipment and Parts washer solvents; Storage and use of pesticides and herbicides; Air emissions from refrigeration equipment; Petroleum waste products; Vehicle and equipment storage/parking over unsealed surfaces; Transfer and recycling facilities; Incinerators (i.e. airborne particulates, heavy metals (airborne and in residual ash), airborne volatile organic compounds); Spills/releases during loading/unloading process; Waste handling and disposal operations; No auditing of waste handling and disposal companies; Possible adverse reactions and interactions of chemical compounds that accidentally commingle during a fire; Leaking fluids and fuels from maintenance and grooming equipment; Contamination from neighboring properties migrating onto your property….
Environmental Claim Scenarios
- A ski resort unknowingly used contaminated water for its snow making resulting in hundreds of thousands of gallons of contaminated water being spread across the lower part of the mountain. Old mining tailings from a closed down mine in the area was the source of the contamination and had been contaminating the water for some time. The resulting claim was for over $500,000 for the cleanup and remediation of the contaminated soil and mine area.
- A chlorine release from a wastewater treatment plant resulted in toxic air emissions. Area residents and businesses were evacuated, and several people were hospitalized for inhalation of fumes. Bodily injury claims amounted to $70,000 and business interruption claims totaled $120,000.
- Maintenance workers at a resort were unloading 400-gallon totes of muriatic acid, which is used as a pool chemical. One of the totes was dropped, releasing 150 gallons of the acid which ran into a nearby storm sewer. The acid caused aquatic life to die and other natural resource damages. Remediation costs and natural resource damages exceeded $400,000.
- While remodeling rooms at a hotel resort, contractors discovered mold within the building’s walls and ceilings. After further investigation, mold was also found throughout the property. Cost to remediate the mold and lost rental revenues during remediation cost the resort over $600,000.
- During the night, a fire broke out and the fire department’s high-pressure hoses forced melting plastics, metals, insulation, roofing, drywall, chemicals, and other materials to build up inside the building’s foundation, creating a toxic “sludge”. Some of the toxic “sludge” escaped the building and migrated into the surrounding soils and a nearby stream. The property owner was responsible for clean-up costs and natural resource damages, which totaled over $2,000,000. NOTE: fire departments are immune to pollution claims arising from their work while putting out fires.
- An electrical contractor was hired to upgrade a buildings electrical system. During trenching operations, a backhoe hit a natural gas pipeline causing an explosion. Third parties filed bodily injury claims against the contractor, as well as the resort whose club house was destroyed in the explosion. Claims exceeded $4.5 million.
- A maintenance garage used solvents for parts washing performed the work over a drain leading to an on-site septic system. Over time, the septic system leach field migrated into the surrounding soils and groundwater. At the time of the septic system closure and conversion to a public sewer system, the contamination was discovered. Site remediation involved soil removal and installation of a groundwater recovery system. The costs exceeded $720,000.
- The facilities department for a ski resort hired a licensed hazardous waste transporter to deliver and pick-up three barrels of spent solvents, used for cleaning their boiler, to a treatment plant. While loading on the ski resort grounds, one barrel fell and spilled its contents, which seeped into the ground. After a period, neighbors notified the state health department that their well water smelled odd. Health officials determined that chemicals from the accident had seeped into their wells. The ski resort paid $1.2 million in damages and clean-up costs.
- A fiber optics company was hired to install a network of data and voice cables. The job included directional drilling under several roads. While drilling, the contractor hit a fuel line and did not report it. After about 2 years, residents in the area smelled gas in their well water. During investigation, the damaged fuel line was discovered and determined as the source of contamination. Since the fiber optics company was no longer in business, the ski resort was held liable for damages and clean-up costs in excess of $2.7 million.
Benefits of Environmental Liability Insurance
Unlike most liability exposures impacting Ski Resorts, pollution losses are not a frequency risk, but rather a severity risk. Because all Ski Resorts have notable environmental exposures, consideration needs to be given to the economies of scale afforded with environmental liability insurance as part of your risk transfer strategy, versus self-insurance.
Furthermore, most commercial insureds only consider the remediation costs associated with a pollution event. However, often the clean-up costs are far less than other costs that often arise from the loss.
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 must 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 oversees communications, public relations, emergency response, government compliance, financial management, third party claims for bodily injury, property damage, natural resource damages….?
- Third Party Liability: Most 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 ski resorts 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 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.
PROPERTY TRANSFER COVERAGE
When buying, selling or condemning property their 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. Transportation pollution liability 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.
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. 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: For Ski Resorts, you have potential indirect environmental exposures from the vendors you hire to perform services. Should your vendors cause an environmental problem 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
Ski Resorts have potential indirect environmental exposures from the service vendors & contractors they hire to perform work on their behalf. CPL insurance protects Ski resorts should their vendors cause or exacerbate an environmental condition.