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 Contractors Performing Underground/Aboveground Construction Services
Some of the common environmental exposures impacting contractors doing excavation, site preparation, drilling, utilities, include: Stormwater runoff; completed operations exposures including incomplete line hookup or improper system construction causing spills or emissions; fumes, lubricant oils and other fluids leaking from field equipment; release of oils/fuels as a result of vandalism; site preparation/excavation work through preexisting unknown contaminated soil; air emissions from dust and debris, impacting abandoned underground storage tanks, spreading of unknown preexisting contaminated soil as fill, impacting groundwater from drilling and excavation work (i.e. cross contamination of aquifers, etc.); impacting underground utilities and other underground structures; no auditing of waste handling and disposal companies; release from portable storage tanks; natural resource damages; vapor intrusion, Silica….
Environmental Loss Examples
An excavation/grading contractor unknowingly spread petroleum-contaminated soil across a project site during fill operations for a commercial office building. The contractor was named in a lawsuit for exacerbating the extent of contamination. After lengthy deliberations, the contractor was eventually removed from the lawsuit. However, they incurred $90,000 in defense costs.
- While replacing an AST, a tank contractor employee inadvertently hit the temporary AST holding the contents of the tank being replaced. By the time the contractors employees were able to set up barriers to contain the spill, the tanks contents migrated into the ground, ground water and nearby by sewer system. Clean up costs and business interruption claims were in excess of $150,000.
- A family operated gas station hired a UST contractor to remove two underground storage tanks and associated contaminated soil. A backhoe hit a natural gas pipeline causing an explosion. This parties filed bodily injury claims against the contractor, as well as the owner whose building was destroyed in the explosion. Claims exceeded $2,500,000.
- 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.
- Faulty Pump Contaminates Local Creek and Pond. During routine transfer of diesel fuel from a fuel truck to an onsite job fuel storage tank, a pump malfunctioned releasing approximately 4,500 gallons of diesel fuel. The product migrated along the edge of the tanks into a culvert, spilled into an adjacent creek, and pooled in a pond. The state department of environmental management was notified, and the company’s spill response plan was initiated. Approximately 644,300 gallons of contaminated water was removed from the creek and pond at a cost of $63,000.
- During excavation a contractor was subject to cleanup costs and business interruption expenses in excess of $500,000 when they ruptured and unmarked petroleum pipeline.
Benefits of Environmental Liability Insurance
Tank contractors generally lack the financial strength to self-insure their environmental liabilities. Since every tank contractor is impacted by environmental liabilities and in most cases required by law to evidence environmental financial assurance 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:
- 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 cause an environmental loss.
Environmental Liability Insurance for UST and AST Contractors
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 ….
Contractors incorporating CPL coverage as part of their risk transfer strategy, drive their growth and profits by marketing the benefits CPL coverage affords in reducing job interruption due to environmental issues.
A major environmental liability exposure faced by all contactors lies in who they are doing business with. If there is an environmental loss at a job site, innocent contractors can and do get named in lawsuits. Do your subs/vendors have CPL insurance if they cause an environmental loss?
ENVIRONMENTAL IMPAIRMENT LIABILITY (EIL)
EIL is for contractors that own, rent, lease, operate or have any other insurable interest in real property (a fixed site facility such as a shop, batch plants, cement manufacturing/mixing plant….) that can be susceptible to pollution liabilities that actually or allegedly originated from the insured property.
Coverage can include: Pre-existing unknown pollution, new pollution conditions, first party on-site clean up, third party bodily injury, property damage, business interruption and extra expense, off site clean up costs, legal defense expenses, transportation pollution liability, off site disposal coverage…. Multi year term policies can be negotiated.
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 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 tank system.
PROPERTY TRANSFER LIABILITY
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.