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 does not belong. Fresh water, cheese, and milk have all been classified as pollutants by Insurance Carriers under various circumstances. What pollutants are impacting your operation?
Environmental Exposures Impacting Wastewater Treatment Plants
May include, but are not limited to; Forever chemicals in waste water such as PFAS, PCBs; Stormwater runoff after land application or from treatment plant grounds; Discharges of contaminated effluent, (resulting from a treatment process breakdown, untreatable contaminants like pharmaceuticals, 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; storage of raw materials such as Chlorine; improper storage of sludge causing soil or groundwater contamination; Backflow of contents from septic tanks, grease traps and other connected structures; No auditing of waste handling and disposal companies; historic site conditions; lagoon failures; sewer line ruptures;….
Environmental Loss examples
- 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.
- 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.
- A fishing camp 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.
- 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.
- 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.
- 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.
- 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.
- 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. A total of 12 businesses were forced to shut down for the better part of a day. Bodily injury claims amounted to $70,000 and business interruption claims totaled $120,000.
- A wastewater treatment plant that was 25 years old had been upgraded several times over the years. Improper closure of an old clarifier and on-site surface impoundment had allowed gradual seepage into groundwater. These constituents contaminated the underlying groundwater, which was a potable water supply for the neighboring community. The costs for groundwater cleanup and emergency water supply for residents totaled $550,000.
- A wastewater treatment plant maintained its own sewer lines. Due to the age of the lines, several cracks had developed over the years. These cracks had continuously leaked liquid raw sewage over many years and eventually polluted a nearby stream. Residents in the area sued the treatment plant for the cost to remediate the stream as well as loss of enjoyment of the stream. Claims exceeded $350,000.
- A process tank at a wastewater treatment plant malfunctioned. The tank discharged a large volume of untreated wastewater into a nearby stream, causing damage to aquatic life. Several residents and environmental groups filed property damage lawsuits.
Overlooked Benefits of Environmental Liability Insurance
Most wastewater 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.
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 must expense defense costs i.e. legal fees, environmental investigations
- Claim Management: All policies come with specialists to assist you in handling a claim. Who oversees 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 Insurance Coverages
Risk transfer products for wastewater treatment plants:
ENVIRONMENTAL IMPAIRMENT LIABILITY (EIL)
EIL is for wastewater 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, off site cleanup 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 environmental remedial / service activities (day to day plant operations, 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 wastewater 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 contracting services in the field.
TRANSPORTATION POLLUTION LIABILITY
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 over turn of transported cargo.
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 system.
Vendor Insurance Coverages:
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 contractor’s pollution liability, depending upon the insurable interest where the land application is taking place.
