Every educational institution operating today faces numerous environmental exposures. The following is a list of environmental exposures faced by educational institutions or by the vendors they hire. This is by no means a complete list.

After the environmental exposures list you will find a list of actual environmental looses that have occurred and continue to occur due to environmentally reactive educational institutions. If an educational institution is interested in transferring some of their environmental exposures to a third party, you will find an overview of potential environmental risk transfer products available.

Potential Direct and Indirect Environmental Exposures

Environmental exposures faced by educational institutions include: Air emissions form boilers and ovens; spills or leaks form underground and above ground storage tanks; no storage tank management program; no secondary containment for above ground storage tanks; improper waste storing/handling procedures; exposure to automobile and bus support services such as fuel, antifreeze, oil, hydraulic fluids, batteries, old tires; Absence of comprehensive and coordinated spill control plans; acidic laboratory, X-ray and maintenance chemicals corroding on-site and off-site sewer pipes; ground and water contamination form use of pesticides and fertilizers on grounds and athletic fields; unknown abandoned landfills and lagoons onsite; unsealed truck ramps; exposed asbestos; historical disposal practices for hazardous, infectious and radioactive waste; improper maintenance of laboratory hood filters; improper maintenance of PCB containing electrical equipment; inadequate backflow prevention devices to keep harmful chemicals and microorganisms from siphoning back into the municipal water supply; incomplete records of former on-site industrial/commercial activities; insufficient chemical pretreatment of wastewater discharge to municipal wastewater treatment plant; lack of an overall hazardous waste and/or infectious waste management program; lack of an underground tank management program; mold and bacteria in air conditioning systems causing sick building syndrome; lack of a good manifest record tracking system for waste generated; property donated with unknown pollution conditions; No auditing of waste handling and disposal companies; Poor information on the possible adverse reactions and interactions of chemical compounds that accidentally commingle during a fire; air emissions form onsite refrigeration systems; no emergency response training for employees; Halon release form fire suppression equipment; spills and leaks form the storage and handling (loading/unloading)of material containers container’s such as, drums, totes, bags from vehicles or rail cars; temporary onsite storage of hazardous materials; natural resource damages.

1. A large university disposed of its science lab wastes in a 53-year-old, 20,000-gallon underground storage tank. The underground tank ruptured and contaminated the soil, the private wells and the groundwater that flowed into a nearby reservoir. Several third parties sued the university, with claims totaling $450,000. In addition, costs to clean up the reservoir amounted to $1.1 million.

2. In the chemistry lab of a small university, 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 college was sued for several third party claims, along with a $215,000 property damage claim for contingent business loss.

3. A university was discharging liquid lab waste to the campus wastewater treatment plant. When the plant failed, toxic liquids contaminated the publicly owned treatment works (POTW), forcing its temporary closure. The university was charged with $65,000 environmental cleanup and contingent business loss that resulted from the contamination of the POTW.

4. While constructing a new sports stadium at a university, 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 university and the contractor did not have pollution insurance, the university was charged $200,000 for the environmental cleanup.

5. A large university decided to place a new building on the site of a former parking lot. During excavation, petroleum hydrocarbon contamination was discovered. The university 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.

6. A large college contracted plumbing work on one of its science labs. While dismantling laboratory piping, the contractor discovered an existing mercury spill that resulted in mercury contamination throughout the building. Costs to clean up the contamination and restore the building to its original condition were $350,000.

7. 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.

8. In the chemistry lab of a small Southern college, 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 college was sued for several third party claims, along with a $215,000 property damage claim for contingent business loss.

UNDERGROUND AND ABOVEGROUND STORAGE TANKS

1. A contractor was hired to remove a leaking underground storage tank. During the excavation they discovered they were not dealing with one tank but two. They also realized these were not actually UST’s but rather two complete rail road tanker cars that had been buried and used to store petroleum based products. The cost of the job more than tripled from the original estimate.

2. An environmental consultant performed a Phase I site assessment at a site that had been used for industrial purposes. The consultant submitted a report stating that negligible contamination had been found. The property was subsequently sold. During excavation for a new school building, an unregistered leaking underground storage tank (UST) was discovered on the site. The school sued the consultant for $1.2 million for remediation expenses, lost profits and diminution in value.

3. Poor secondary containment; 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 and required costly excavation and removal. The total cost for investigation, removal and disposal exceeded $320,000.

4. A school district operated an underground storage tank (UST) for gasoline storage. The school tested the tank annually and found a minimal leak this past year. The tank was removed and given a clean closure. In the meantime, a neighboring gas station discovered that their tanks were leaking and contaminating groundwater. The gas station claimed that the school district UST was partly responsible for the contamination. The school district hired a consultant to conduct further tests and paid a lawyer to defend him in court. These additional professional fees exceeded $250,000.

5. A college 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 college who had a building destroyed in the explosion. Claims exceeded $2.5 million.

Environmental Risk Transfer Strategies

ENVIRONMENTAL LIABILITY INSURANCE PRODUCTS APPROPRIATE FOR EDUCATIONAL INSTITUTIONS

The majority of educational institutions 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:

1. 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.
2. 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.
3. 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?

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 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.

PROPERTY TRANSFER COVERAGE

When buying or selling property their 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 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 AND ABOVE GROUND 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.

CONTRACTORS POLLUTION LIABILITY

Note: For educational institutions, you 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 generally will have either an absolute or total pollution exclusion. In order to be protected you should make sure your vendors have this insurance coverage before they begin doing work.

This coverage can be purchased to meet two specific exposures. First, contractors that perform remedial activities (asbestos, lead, mold, soil or ground water remediation) there is the standard contractors pollution liability (CPL) insurance coverage. This protects the insured for pollution conditions they may cause or exacerbate an existing situation while performing remedial services. This is for covered operations performed by or on behalf of the insured. 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 an educational institution.

Secondly, standard contractors (i.e. general contractors, HVAC, plumbing, electrical, mechanical, janitorial, demolition, drilling, excavation, highway, street and paving contractors, rigging, utility, millwrights, artisan, etc.), in performing their services may cause an environmental liability that is generally excluded from their general liability coverage. For these contractors there is contingent contractors pollution liability (CCPL) coverage. Basically they are afforded the same coverage as remedial contractors but the cost to purchase this insurance is substantially less.