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.
Many trucking companies assume that claims arising from their operations are covered by their general liability policy or commercial auto policy. However, claims resulting from a “pollution incident” are typically excluded from general liability and commercial auto policies (except for fluids necessary to operate a vehicle). Policies that do provide pollution coverage, typically do so on a limited basis and with inadequate limits, which leaves trucking companies exposed to potentially uncovered claims. What pollutants are impacting your business?
Environmental Exposures Impacting Trucking Companies
May include, but are not limited to: Leaking fuel and waste oil storage tanks; PFAS Chemicals; Storm water runoff; Vapor intrusion; Loading and unloading of cargo; Parking equipment over unsealed surfaces allowing contaminants such as oil, fuel, anti-freeze, hydraulic fluids, asbestos… to pollute the ground & ground water; Pollution liabilities that occur while transporting cargo; Air Emissions from idling equipment; Pollution cleanup and liabilities that occur after a fire; Parts cleaning solvents; Accumulated old batteries which contain leached acidic liquids; Accumulated old tires and equipment; Unsealed truck ramps; Warehousing environmentally sensitive cargo; Contaminants flowing from service bays into the sanitary sewers, ground, neighboring properties; Paint residues from the body shop; Wash waters from truck wash; Inadequate or no auditing of hazardous and non-hazardous waste handlers, transporter and disposal companies; Poor information on the possible adverse reactions and interactions of chemical compounds that accidentally commingle during a fire….
Environmental Claims Scenarios
- A carrier had wash water and other cleaning solvents from their wash bay released into the soil and ground water after a pipe broke. The break was not detected for several months. Cost to remediate the soil and ground water was in excess of $175,000.
- A waste hauler was hired to transport its used motor oil. The waste hauler got into an accident which caused the contents of the tanker to be released on the ground. Under Federal law (CERCLA) you own your waste from cradle to grave, so the carrier had to pay their apportionment of the remediation costs which totaled $450,000.
- A carrier performed loading and unloading of equipment over unsealed truck ramps. Over a period of several years, ground water became contaminated from pollutants that were released from idling trucks and storm water runoff. Since the ground water was the only source of drinking water for surrounding residents and the state environmental regulatory agency designated the transportation company as the responsible party. The carrier paid $1,400,000 in cleanup costs and supply suitable drinking water until the local municipality could extend water services out to the surrounding residents.
- A delivery truck got into an accident and caught on fire. The burning cargo created toxic fumes and when the fire department put out the fire it created contaminant runoff that flowed into a nearby stream. Cost to remediate the site and claims from third parties for bodily injury and property damage due to exposure to toxic fumes exceeded $800,000.
- The concrete secondary containment of a 10,000-gallon diesel aboveground storage tank was cracked. A release from the tank spilled 2,000 gallons into the containment. The diesel seeped into the underlying soils. Total cost for investigation, removal and disposal exceeded $200,000.
- While transferring hazardous materials from one truck to another, a forklift operator cut a corner too tight causing the load to shift and spill. Cost to clean up exceeded $85,000.
- A milk delivery truck got into an accident, causing thousands of gallons of milk to escape from the tank and flow into a nearby stream. The milk depleted oxygen in the area of the stream, causing a notable fish kill. Total cost of remediation and natural resource damages cost the trucking company over $75,000.
Benefits of Environmental Liability Insurance
Unlike most liability exposures impacting trucking companies, pollution losses are not a frequency risk, but rather a severity risk. Since every trucking company 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.
Furthermore, most commercial insureds only consider the remediation costs associated with a pollution event. However, often times the clean-up costs are far less than other costs that can arise from the loss.
Overlooked Benefits of Environmental Liability Insurance:
- Defense Costs: Environmental liabilities are relatively new & very litigious. Even if you do nothing wrong you can still get named in a suit and must expense defense costs (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 for Trucking Companies
Transportation Pollution Liability (TPL)
Generally, Business Auto or Truckers policies will exclude pollution losses arising from spills or other releases of their cargo. Transportation pollution liability affords coverage during the loading, unloading and transportation, for a spill, release or sudden upset and overturn of transported cargo. Make sure you do not confuse the MCS-90 endorsement as being TPL coverage, it’s not, and the insurance carrier reserves the right to subrogate back against the insured for cost to clean up a release of the transported cargo.
Environmental Impairment Liability (EIL)
EIL is for transportation companies susceptible to economic loss caused by pollution that actually or allegedly originated from their fixed site 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.
Contractors Pollution Liability
Contractors Pollution Liability (CPL) insurance protects the insured should they cause or exacerbate an environmental condition while performing their contractor services. CPL protects the insured for covered operations performed by or on behalf of the insured, while operating away from any premises they own, rent, lease or occupy.
CPL can be offered on a claims made or occurrence basis. Coverage can be written on a job specific basis, or on a blanket basis to cover all the work performed by the insured. Most policies can be endorsed to cover transportation pollution liability, mold, lead, asbestos, defense outside the limits, off-site disposal coverage ….
Underground 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 tank system.
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.
Property transfer coverage assists to keep the property at its maximum value while allowing the insured to negotiate more favorable loan terms than property not supported by this coverage.