Common environmental exposures faced by wastewater treatment plants include: Discharges of contaminated effluent, (resulting from a treatment process breakdown, untreatable contaminants, excess volume from combined sewer overflows….); contaminated effluent which causes soil, surface water and/or groundwater contamination (the effects of improperly treated effluent entering a surface water body might include, natural resource damages, fish kills, harm to human health if the surface water is used for recreational purposes or contamination of drinking water supply), pump/lift station failure; backup generator failure; nuisance odor claims; leaks, ruptures, spills from underground or above ground storage tanks used to process materials and wastes; improper storage of sludge causing soil or groundwater contamination; No auditing of waste handling and disposal companies; historic site conditions; lagoon failures; sewer line ruptures….
Environmental Liability Claims For Wastewater Treatment Plants:
1. A chlorine release at a wastewater treatment plant resulted in toxic air emissions. Area residents and businesses were evacuated and several people were hospitalized for inhalation of fumes. Claims against the facility for bodily injury and business interruption, combined with defense costs, exceeded $460,000.
2. A liquid wastewater treatment plant utilized sulfuric acid in their process and stored it on-site in a 20,000-gallon aboveground storage tank. The storage tank was contained by two foot high, chemically sealed masonry walls. Overnight, an area high on the wall of the storage tank ruptured, releasing the sulfuric acid. The leak squirted beyond the containment walls, releasing approximately 3,000 gallons of tank contents into the soil and into an adjacent stream. Government mandated costs for clean up of on-site soils, the stream and the stream bank exceeded $1 million.
3. A manufacturer operated its own on-site wastewater treatment facility. Seals on the bottom of the treatment system leaked and wastewater overflowed from the top of the system. This caused numerous discharges of contaminated effluent to enter the soil and migrate off-site to neighboring businesses. The business owners had environmental testing performed on their properties, confirming that elevated levels of contaminants existed at their properties. In addition, The EPA cited the manufacturer for various discharge violations and issued an administrative order finding the manufacturer responsible for contamination of the adjacent properties. Government mandated cleanup costs exceeded $250,000. In addition, business owners filed claims against the manufacturer for property damage, business interruption and trespass of pollutants. The combined total of the civil suits exceeded $500,000.
4. An industrial user of a wastewater treatment plant sent a sudden surge of contaminants, often called a slug, through the plant. The slug upset the treatment process and killed off the population of microorganisms. As a result, untreated effluent was discharged into a river – a source of both drinking water and recreation. The adjacent town discovered contamination in their municipal water supplies and were forced to close their wells. The town sued the treatment plant and settled for $780,000. A local environmental group filed a class action suit (under the Clean Water Act) in the amount of $750,000 for loss of enjoyment of the stream. Additionally, the plant had to shut down temporarily to clean treatment tanks and reestablish its capabilities.
5. A convention taking place at a park was disrupted and forced to relocate because of the odor from a wastewater treatment plant. A suit in the amount of $100,000 was filed against the plant for loss of enjoyment and for costs to relocate the convention.
6. Dalton Utilities, a municipal company that provides electricity, sewage treatment, natural gas, and drinking water for the city of Dalton, Ga., has been sentenced in Northern Georgia U.S. District Court for falsifying wastewater analysis in monthly operating reports. Dalton was fined $1 million.
7. The city of Ketchikan, Alaska, reached a $39,000 settlement with the EPA. The city owns and operates a wastewater treatment facility that discharges treated wastewater into the Tongass Narrows. The wastewater treatment plant is part of a sanitary sewer system that receives domestic wastewater from residential and commercial sources. The facility serves a population of approximately 8,000. The discharge from the city’s facility exceeded the fecal coliform bacteria, copper, biochemical oxygen demand, total suspended solids, pH and total residual chlorine effluent limits on numerous occasions.
Risk Transfer Strategies
The majority of waste water treatment plants operating today, lack the financial strength to self insure their environmental liabilities. Consideration needs to be given to the economies of scale afforded with environmental liability insurance as part of your risk transfer strategy.
Consider the three main benefits environmental liability insurance affords:
- Coverage includes defense cost. 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 dollars to get released. At one time, Superfund had .83 cents of every dollar going to legal fees, and only .17 cents for actual cleanup. When you realize the average Superfund site cost in excess of $30,000,000 to clean up, you can begin to understand just how big of a factor defense costs play in your risk transfer strategy.
- All policies come with experts to assist you in handling the claim. Anytime you can have the EPA, state and local environmental officials along with the press pounding on your door, this is not a fender bender, you need experts to assist you in running damage control central.
- 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, mainly for business interruption. You need to look at the customers and neighbors that can be impacted should an environmental loss occur. Who can you impact should you or a sub-contactor/vendor cause an environmental liability?
Three risk transfer products for wastewater treatment plants:
ENVIRONMENTAL IMPAIRMENT LIABILITY (EIL)
EIL is for waste water treatment plants 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 first party on-site cleanup, 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. Strong consideration should be given to first party business income and extra expense.
CONTRACTORS POLLUTION LIABILITY
This coverage can be purchased to meet two specific exposures. First, contractors that perform remedial activities (asbestos, lead, mold, soil or ground water remediation, emergency response) or land application at non-owned or leased property. There is the standard Contractors Pollution Liability (CPL) insurance coverage for the non-environmental construction services necessary for the operation and proper maintenance of waste water operations. CPL protects the insured for pollution conditions they may cause or exacerbation of an existing situation while performing their covered construction services. The loss must occur away from any premises the insured owns, rents, leases or occupies, in other words while they are performing remedial services at a hospital or medical facility.
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.
Vendor Insurance Coverage’s:
If you contract engineering/laboratory or contracting services, you should confirm the vendor has professional liability including pollution and/or contractors pollution liability coverage. If the vendor is a transporter refer to transportation pollution liability above. If you use a vendor for land applications, either EIL or contractors pollution liability, depending upon the insurable interest where the land application is taking place.