Convenience Stores / Gas Stations

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 Convenience Stores / Gas Stations  

May included, but are not limited to: Leaking underground fuel and / or oil storage tanks; Historical contamination; Contamination caused by inventory stored on site; Contractors / engineers hired to perform services on your owned property; Spills during unloading of petroleum products; Storage of waste materials waiting to be transported for recycling / disposal; Unknown abandoned underground tanks; Storm water runoff; Vapor intrusion from neighboring properties; No auditing of waste handling and disposal companies; Poor information on the possible adverse reactions and interactions of chemical compounds and / or inventory that accidentally commingle during a fire; Customers accidentally driving off while pump is still running; Natural resource damages; Vandalism; and more…

Environmental Claim Scenarios 

1. A convenience store was subject to clean up cost in excess of $300,000 created while the local fire department was extinguishing a fire at the convenience store.  The fire started in the inventory storage room.  While the fire department was extinguishing the fire, inventory comingled creating a hazardous substance than ran offsite and into the storm water system releasing the hazardous substance into a nearby creek.  
2. A gas station had a waste hauler that was transporting its used motor oil overturn and spills its load into a nearby stream.  Under CERCLA, the gas 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.
3. Poor secondary containment; 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. 
4. A family operated convenience store / gas station hired a contractor to remove two underground storage tanks and associated contaminated soil. During the course of storage tank removal, the contractor’s backhoe hit a natural gas pipeline causing an explosion. Third parties filed bodily injury claims against the contractor, as well as the owner whose building was destroyed in the explosion. Claims exceeded $2.5 million.
5. During construction of a new convenience store an unknown leaking underground storage tank was discovered.  Cost to remediate the site was $125,000.
6. An excavation contractor was subject to cleanup costs and business interruption expenses when they ruptured an unmarked petroleum pipeline while doing street and road work next to a gas station.  The loss of more than $700,000 forced the contractor out of business so the property owner had to pay the bill.
7. While excavating for a foundation for a new convenience store, an unknown underground storage tank containing oil was ruptured. Hundreds of gallons poured out before the rupture was closed. Settlement costs for bodily injury, property damage, business interruption and cleanup costs totaled $1,500,000.
8. An environmental contractor was hired by a convenience store to conduct an underground storage tank compliance inspection.  During the soil-gas survey process, the contractor punctured a diesel fuel line with a probe, causing 11,655 gallons of diesel to spill of which only 4,000 gallons were recovered.  Total claims for cleanup and business interruption exceeded $400,000.

Overlooked Benefits of Environmental Liability Insurance 

Unlike most liability exposures impacting gas stations, pollution losses are not a frequency risk, but rather a severity risk. For this reason, most gas stations lack the financial strength to self-insure their environmental liabilities.  Since every gas station 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.

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 Liability Insurance Coverages

Environmental Impairment Liability (EIL)

EIL is for gasoline/service stations 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 multiyear terms.  Most EIL policies cover above ground storage tanks and some can cover underground tanks.

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.  

Underground 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.  

Contractors Pollution Liability (CPL) 

Note:  For convenience stores / gas stations, you have potential environmental exposures from the service vendors you hire.  Should your vendors cause an environmental problem or exacerbate an existing environmental issue their general liability insurance policy probably will have either an absolute or total pollution exclusion.  

CPL coverage can be purchased to meet two specific exposures. First, contractors that perform remedial activities (leaking tanks, 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 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, street and paving contractors, 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.