Commercial / Botanical Gardens

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?  This Environmental Risk Assessment (eRA) offers a partial list of environmental exposures impacting the aviation industry.

Environmental Exposures Impacting Commercial / Botanical Gardens

A partial list of environmental exposures impacting Commercial and Botanical Gardens are:  

• Storage, use and disposal of fertilizers, pesticides, and herbicides
• Storage of fuels, antifreeze, oil and hydraulic fluids
• Above and/or underground storage tanks
• Air emissions from chemical applications
• Storm water runoff 
• Vapor intrusion 
• Spills from loading and unloading of chemicals and supplies
• Overuse of irrigation
• Compost piles
• Natural resource damages 
• Vandalism
• Language Barrier
• Easements on the property (pipelines, power lines, waterways) with potential environmental implications
• Waste handlers
• Adverse reactions and interactions of chemical compounds that accidentally commingle during a fire
• Siltation of nearby streams from erosion and runoff…. 

Environmental Loss Examples For Commercial / Botanical Gardens

1. Prior to selling his land a property owner had their water well tested.  Testing revealed that the well water contained petroleum hydrocarbons.  The source of the contamination was determined to be an unknown underground storage tank that used to be used for heating the neighboring commercial gardens greenhouses.   Other neighbors had their well water tested and contamination was discovered.  Disposal of the tank, contaminated soil and groundwater cleanup, along with bodily injury and property damage claims submitted by the neighboring property owners exceeded $3,000,000.
2. A commercial garden used treated waste water as a fertilizer in a land application process.  The wastewater tested prior to application.  After several months of application, heavy metals and high counts of e-coli were found in the soils.  The garden was required to pay remediation costs in excess of $265,000.
3. Over a period of years, storm water from a commercial garden entered a nearby stream.  Excessive algae and bacteria in the stream and lake the stream emptied caused riparian property owners to filed claims that exceeded $3,000,000 for property damage, loss of enjoyment, natural resource damages and perceived bodily injury.
4. A Garden hired a third party to apply chemicals to their plants.  The chemical applicator used a cheaper but unapproved chemical.  Testing revealed that a stream bank that ran through the garden was contaminated with the unapproved chemical.  Downstream from the garden more contamination was found on third party properties.  Cost to remediate the stream site was in excess of $300,000.  The chemical applicator did not have a pollution policy and so under Federal law, the garden owns the land that was the source of the contamination is responsible for clean up, third party bodily injury, third party property damage….
5. A municipality acquired property previously used for farming on which they planned to develop a community garden. A committee was formed which hired an environmental engineer to perform environmental due diligence.  The Phase I site assessment determined the property was “clean.”  However, when development of the garden began, drums of buried used oil, pesticides and herbicides used by the previous owner were discovered. The chemicals contaminated the soil and had to be removed at the municipalities expense which exceeded $75,000.   The municipality took legal action seeking reimbursement from the previous land owner and the environmental engineers professional liability policy.
6. 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.

Environmental Risk Transfer Strategies

Commercial gardens generally lack the financial strength to self insure their environmental liabilities.  Since every garden operation is impacted by 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.

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, .  
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 IMPAIRMENT LIABILITY (EIL) 

EIL is for commercial gardens susceptible to economic loss caused by pollution that actually or allegedly originated from their properties.  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/or 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.  You can cover multiple locations on a single policy.

PROPERTY TRANSFER COVERAGE 

Note:  This coverage is designed for buyers or sellers of real  properties.

When buying or selling property there can be unknown preexisting environmental conditions. Since environmental due diligence (All Appropriate Inquiry (AAI), a Phase I or Phase II survey, Baseline Environmental Assessment (BEA)….), 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.  You can cover multiple locations on a single policy.

TRANSPORTATION POLLUTION LIABILITY

Generally, Business Auto or Truckers policies will exclude pollution losses arising from spills or releases of transported 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.  You need to strategize on your exposure to transportation.  How are goods received?  FOB point of Shipment or FOB point of delivery?  Do not be confused by thinking the MCS-90 endorsement is auto pollution liability coverage.  

UNDERGROUND GROUND STORAGE TANKS 

Storage tank financial responsibility requirements ensure that owners/operators of underground storage tank systems have the ability to financially handle a release from the 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 tank system.  

Real estate developers/owners with a financial responsibility strategy dependent upon state UST funds need to regularly confirm fund solvency and length of time it will take to get reimbursed.  If part of your business strategy depends upon the state fund, this means just that, you are putting the future success of your business in the hands of the state.  You need to strategize on “just how strong is your business” if you are putting its future in the hands of your state government. 

CONTRACTORS POLLUTION LIABILITY 

Note:  Commercial Gardens have potential environmental exposures from the vendors they hire to perform services.  Should your vendors cause an environmental problem or exacerbate an existing environmental issue their general liability insurance policy typically will have either an absolute or total pollution exclusion.  In order to be protected you should make sure your vendors have this insurance coverage before they begin doing work.

CPL 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 contractors pollution liability (CPL) insurance coverage. This protects the insured for pollution conditions they may cause or exacerbate 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 in the field.

Secondly, standard contractors (i.e. general contractors, HVAC, plumbing, electrical, mechanical, janitorial, demolition, drilling, excavation, highway, street and paving contractors, rigging, utility, millwrights, artisan, etc.), for these contractors there is contingent contractors 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 

Note:  Commercial Gardens hire professionals to perform environmental site assessments, (mold, radon, asbestos or lead testing, Phase I, II, or III site assessments, tank testing, soil, waste water, air emissions…) you should make sure they have this coverage in force before they begin working for you.

Should an 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 surveys, environmental training….