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? And is your General Liability policy providing adequate coverage?
Environmental Exposures Impacting Educational Institutions
May include, but are not limited to; storm water runoff; pollution from neighboring property migrating onto yours; vapor intrusion; mold and bacteria in air conditioning and heating systems; sick building syndrome; lead paint; asbestos; spills or leaks from underground and/or above ground storage tanks; easements that cross the property that may leak or spill hazardous materials; exposure to automobile and bus support services such as fuel, antifreeze, oil, hydraulic fluids, batteries, old tires; acidic laboratory, and maintenance chemicals; ground and water contamination from use of pesticides and fertilizers on grounds and athletic fields; natural resource damages; unsealed truck ramps; improper maintenance of laboratory hood filters; insufficient pretreatment of wastewater discharge to municipal wastewater treatment plant; corroded wastewater and storm water sewers; property donated with unknown pollution conditions; No auditing of waste handling and disposal companies; janitorial cleaning compounds; adverse reactions and interactions of chemical compounds that accidentally commingle during a fire; Halon release from fire suppression equipment; spills and leaks from the storage and handling (loading/unloading)of material containers such as, drums, totes, bags from vehicles; temporary onsite storage of hazardous materials, etc.
Environmental Loss Examples
- In the chemistry lab of a high school, experiments were being conducted under an old hood. The hood filters failed and released toxic fumes into the community-several residents had to be evacuated and others rushed to the hospital. The school was sued for several third party claims, along with a $215,000 property damage claim for contingent business loss.
- While constructing a new sports facility at a local high school, a contractor ruptured two abandoned 10,000-gallon underground storage tanks full of gasoline and diesel fuels. Since a private company donated the land to the school and the contractor did not have pollution insurance, the school was charged $200,000 for the environmental cleanup.
- A school district decided to place a new building on the site of a former parking lot. During excavation, petroleum hydrocarbon contamination was discovered. The school district had no idea of the historical use of the area. Investigation and sampling pinpointed the source and extent of contamination. On-site treatment and/or cleanup costs will exceed $300,000.
- 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 $320,000.
- A middle school student stole several vials of mercury from the science room. Mercury was spilled in the school and on three school buses. The student washed his hands in the drinking fountain. The middle school was shut down so it could be decontaminated. The schools 2 floor sweepers ($1,800 each) and one buffer ($5,000) had to be disposed of. The three buses had to be decontaminated. Cost and lost school time has not been calculated.
- A public school 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 school who had a building destroyed in the explosion. Claims exceeded $2.5 million.
- A HVAC contractor was hired to upgrade a high school’s heating system. While working in the building, the contractor failed to vent the system properly, causing a release of carbon monoxide. Several student and teachers began complaining of headaches and nausea, and were rushed to the local hospital. As a result, several bodily injury suits were filed against the school district, in excess of $700,000.
- After a weekend, a janitor at a local high school discovered several piles of unidentified waste that had been illegally dumped on the property. The school had the piles tested, at a cost of several thousand dollars. The piles were determined to contain hazardous waste, and the cost to dispose of it exceeded $250,000.
- While working at a nearby grade school, a commercial janitorial service contractor accidentally mixed non-compatible chemicals for cleaning. The fumes from the chemicals forced the evacuation of at the school. Third party bodily injury claims were filed against the janitorial service company and the school district, which exceeded $1,000,000.
Overlooked Benefits of Environmental Liability Insurance
Because environmental accidents/conditions are a severity risk rather than a frequency risk, most educational institutions lack the financial strength to self-insure their environmental liabilities. Since every educational institution 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 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
- 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 create an environmental loss.
Environmental Liability Coverages for Educational Institutions
Environmental Impairment Liability (EIL)
EIL is for educational institutions 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.
Property Transfer Coverage
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. 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 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.
Underground & Aboveground 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 system.
Contractors Pollution Liability (CPL)
Educational institutions 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 typically will have an absolute or total pollution exclusion. In order to be protected you should make sure your vendors have CPL insurance coverage before they begin doing work.
As the owner of the property you have 2 options
- Option #1: Require all contractors performing work on your property to carry Contractors Pollution Liability insurance. Most policies will contain language that includes blanket additional insureds.
- Option #2: Buy an Owner Controlled CPL policy for your project. This works the same as option #1, except you are the named insured and control the policy. Unfortunately, it’s common for a contractor to purchase CPL coverage to close the contract, only the cancel the policy shortly thereafter. By purchasing an owner controlled CPL policy, you