Every hospital and medical facility operating today faces numerous environmental exposures. The following is a partial list of environmental exposures faced by hospitals and medical facilities 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 hospitals and medical facilities. 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 hospitals and medical facilities include: Air releases from faulty medical waste incinerators, spills or leaks from aboveground/underground storage tanks and piping, sick building syndrome, carbon monoxide, bacterial or infectious air releases from faulty HVAC systems, air release from on-site refrigeration systems, sewer and septic system contamination from the disposal of laboratory wastes and chemicals into sinks, improper maintenance of laboratory hood filters, incomplete records of former on-site industrial/commercial activities, exposed asbestos and lead, improperly maintained PCB-containing electrical equipment, lack of an overall hazardous and infectious waste management program, absence of incinerator stack emission monitoring to confirm that noxious emissions are not migrating off-site, halon release from fire suppression equipment, property donated or purchased, insufficient chemical pretreatment of wastewater discharges to municipal treatment plants, inadequate segregation of incompatible chemicals (e.g., flammables, acids, bases), inadequate housekeeping practices within the facility, spills and leaks from the storage and handling (loading and unloading) of material containers (e.g., drums, cylinders, boxes), improper laundry practices, acidic laboratory, x-ray and maintenance chemicals corroding on-site and off-site sewer pipes, absence of comprehensive and coordinated spill control plans; No coordinated or formal waste management program; Illegal disposal practices for hazardous and, radionuclide wastes; Incomplete incineration of harmful biological materials; Incineration on-site of plastic bags, petri plates, tubing; Poor information on the possible adverse reactions and interactions of chemical compounds that accidentally commingle during a fire; radioactive material in equipment and medications, mercury in fluorescent lights….

ENVIRONMENTAL LOSS EXAMPLES FOR HOSPITALS AND MEDICAL FACILITIES

1. A mechanical contractor removed ductwork from a hospitals HVAC system. It was later determined that the ductwork was home to a dangerous fungus. The dismantling activities and the on-site storage of dismantled ductwork caused the fungus to spread into the hospital. Patients became infected with the fungus some were even critically infected. The contractor was found liable for the spread of the fungus and had bodily injury and property damage claims in excess of $1 million.

2. A hospitals 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.

3.. A medical laboratory experienced an unknown release of mercury. The mercury was discovered several years later, after the laboratory was no longer in use, and the building had been converted to offices. Under CERCLA (Comprehensive Environmental Response, Compensation and Liability Act), the medical lab was responsible to perform the cleanup. university faced a costly cleanup, adverse publicity, and potential bodily injury claims from the building’s current occupants. Cost of remediation totaled more than $300,000.

4. A dental office for years let old silver fillings go down the drain that went to an onsite septic system. Testing of a nearby stream revealed high levels of contaminants. The source was determined to be the silver fillings in the septic system. Cost of remediation exceeded $250,000.

5. A medical facility hired a consultant that failed to delineate wetlands on property, which was to be developed into a new medical professional building. As a result, the medical building had to be re-engineered, thus delaying its opening. The settlement amounted to $2 million.

UNDERGROUND AND ABOVEGROUND STORAGE TANKS

1. A hospitals maintenance staff was performing a routine check of the emergency back up power system. The back up power generator was located on the roof of the hospital and the diesel fuel to run the generator was in a 5,000 gallon underground storage tank. After testing was completed the generator was shut off but a faulty valve allowed for diesel fuel to continue to be pumped from the underground storage tank. 3,000 gallons of fuel was pumped from the tank, flowed onto the roof and down drain spouts before it was discovered. Since there were several drain spouts the diesel fuel had several contaminated areas that had to be cleaned up. Remediation of the ground and neighboring stream exceeded $400,000.

2. 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.

3. 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 hospital 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 hospital, claims exceeded $2.5 million.

Environmental Risk Transfer Strategies

ENVIRONMENTAL LIABILITY INSURANCE PRODUCTS APPROPRIATE FOR HOSPITALS AND MEDICAL FACILITIES

The majority of hospitals and medical facilities 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 hospitals and medical facilities 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. 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. Note: An MCS 90 is not pollution coverage. Since CERCLA states you own your waste from cradle to grave it is critical to know who you are doing business with and if there is a spill or release of your waste, you need to have a strategy in place to address the potential liabilities.

If you buy your products or materials FOB point of shipment, you need to give serious consideration to making sure you or the transporter is covered for a pollution loss during transit or loading and unloading of the vehicle. Many hospitals and medical facilities deal with radioactive medicines and other environmentally sensitive material’s, these can be shipped by air and not vehicle. Side track agreements with railroads need to address this issue.

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. Several states offer tank funds. It is necessary to make sure if your state has a tank fund the it is financially sound and the time it takes to get reimbursed.

Note: For hospitals and medical facilitiess, 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.

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) 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 a hospital or medical facility.

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.

PROFESSIONAL ERRORS AND OMISSIONS (E&O) COVERAGE

Hospitals and medical facilities will hire environmental engineers or consultants to perform a variety of services from air quality testing, mold, lab packing, waste brokering, All Appropriate Inquiry (AAI), Phase I or Phase II studies, emergency response, training…. You need to make sure if the engineer or consultant should make a professional error or omission in performing their services for you that they have the proper insurance in place to address the potential liabilities that can result.