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. What pollutants are impacting your business?
The Need for Environmental Insurance
Nationwide, auto / equipment service stations & repair garages take care of the maintenance and repair of millions of vehicles every year. In every area of vehicle servicing, repair, and body shop operations there is potential for environmental risk. These insureds are responsible for proper storage and disposal of their hazardous waste on site and at off-site treatment, storage or disposal facilities. Environmental Insurance provides the financial assurance needed for sustainability in today’s social/business environment.
Environmental Exposures Impacting Auto Servicing & Repair Garages
Include, but are not limited to; Leaking underground fuel and waste oil storage tanks; Untested underground fuel & waste oil/solvent tanks and pipes; Underground tanks which were removed/abandoned; Lack of information on existing and former underground tanks (e.g. age, contents, size, construction, cathodic protection, etc.); Poor housekeeping resulting in oil, fuel, parts cleaning solvents, and paint being spilled on unpaved areas; Leaking grease traps or oil/water separators that seriously pollute the soils and/or groundwater; Leaks from elevator hydraulic fluid storage tanks; Accumulated old batteries which contain leached acidic liquids; Wastewaters flowing from service bays into the sanitary sewers; Electrical equipment containing PCBs; Paint residues from the body shop washed into storm drains; Wash waters from a car wash discharged into a storm sewer; No auditing of waste handling and disposal companies; Poor information on the possible adverse reactions and interactions of chemical compounds that accidentally commingle during a fire. Some of the pollutants these operations are impacted by include asbestos, lead, mercury, cadmium, oil, diesel, etc.
Environmental Loss Examples
- An auto service station had a waste hauler that was transporting its used motor oil overturn and spills its load into a nearby stream. Under CERCLA, the service station must contribute for their apportionment of the load for cleanup cost since federal law states that you own your waste from cradle to grave. Cost to settle the claim for the service station was $600,000.
- A waste system for an auto body shop released contaminates into a nearby neighborhood’s drinking water. The local regulatory agency designated the body shop as a responsible party. The contribution to settle the claim was $340,000.
- An automobile garage had a wash bay’s piping system that released a substantial amount of cleaning solvents into soil and ground water. The cost to remediate the cleaning solvents, soil and ground water cost $250,000.
- While working on renovations at an auto garage, an excavation contractor ruptured and unmarked natural gas pipeline. The contractor was liable for the costs associated with the cleanup, project delays, and two weeks of interrupted business sustained by the auto garage while the situation was being handled. The contractor did not have Contractors Pollution Liability insurance. Due to the size of the claim the contractor was forced out of business, leaving the auto garage with over $75,000 in lost revenue and clean-up costs.
- 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.
- An unknown party illegally placed drums of liquid waste into a dumpster at a behind an auto repair & service garage. The drums were not leaking, but had to be properly disposed of. Cost to dispose of the drums exceeded $20,000.
- While moving a large metal coil, a forklift operator hit a hydrofluoric acid aboveground storage tank releasing dangerous fumes into the neighboring community. Area residents and businesses were evacuated and several people were treated at the local hospital for fume inhalation. Claims for bodily injury and business interruption topped $94,000.
- An auto garage’s outdoor scrap yard routinely fills and stores on-site barrels of waste such as fuel, oil, anti-freeze, paint thinners, metal cutting oil, and solvents…. While loading about 1,000 pounds of potentially hazardous waste onto a truck, five barrels slipped off the fork lift releasing the contents. Fortunately for the scrap yard they had an emergency response plan in place and their emergency response team was able to contain the contaminants. Cost of clean-up $70,000.
Overlooked Benefits of Environmental Liability Insurance
Auto / Equipment Servicing & Repair Garages generally lack the financial strength to self-insure their environmental liabilities. Since every septic service provider is impacted by environmental liabilities, 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.
Three Overlooked Benefits environmental liability insurance offers:
- 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 Products
Environmental Impairment Liability (EIL)
EIL is for businesses that are 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. Most EIL policies cover above ground storage tanks.
Transportation Pollution Liability (TPL)
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.
Contractors Pollution Liability
Contractors Pollution Liability (CPL) insurance protects the insured while performing contracting services in the field should they cause or exacerbate an environmental condition. This coverage would be applicable for auto / equipment repair & service operations that provide “in the field” services at their customer’s locations.
Auto servicing and repair garages have potential indirect environmental exposures from the service vendors & contractors they hire to perform work on their behalf. CPL insurance protects real estate owners / developers should their vendors cause or exacerbate an environmental condition.
Underground Storage Tanks (UST)
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 system.