The following is a list of environmental exposures that can be faced by aviation operations or by the vendors they hire. After the description of the exposures we list actual environmental looses that have occurred and continue to occur due to reactive businesses.

Airport and Aircraft Maintenance Facilities

The most common environmental exposures at airport and aircraft maintenance facilities include: Inadequate secondary containment of aboveground fuel storage tank; Inadequate containment/control at fuel receiving/dispensing areas; No secondary containment/spill control at aircraft fueling sites; No spill containment at areas where filled fuel trucks are parked; Spills from pipelines carrying fuels onto the property and throughout the facility; Inadequate containment of areas where maintenance chemicals are stored and dispensed; Improper application of glycol solutions used for de-icing that cause potential impairment through contaminated storm water runoff; Poor maintenance and/or carelessness that results in chronic spills and leaks that cause non-sudden storm water contamination; Inadequate controls and containment for fire fighting water; History of past on-site spills and releases to the environment (especially with older facilities); Improperly maintained oil/water separator systems; Poor underground storage tank management programs; Extensive underground fuel dispensing pipeline networks that have inadequate cathodic protection and leak detection; Insufficient testing of bulk fuel storage tanks for corrosion through the bottom which causes leaks into underlying soils; Chronic spills and leaks that wash off paved areas and contaminate soils in unpaved areas; Past disposal of hazardous maintenance chemicals (such as trichloroethylene) on the property causing contamination; Volatile organic air emissions from fuel storage/dispensing sites; Storm water drains near the aircraft fueling locations; Inadequate spill control materials and emergency response contractor agreements; Inadequate auditing of hazardous and non-hazardous waste handling and disposal-contractors; Poor information on the possible adverse reactions and interactions of chemical compounds that accidentally commingle during a fire.

Airplane departures burn a tremendous amount of fuel. It is estimated that a loaded 747 uses over 10,000 pounds of fuel on a single take-off, spreading its emission over a 144 square mile area. Emissions include carbon dioxide, volatile organic compounds (VOC’s) and nitrous oxides (Nox). Both VOC’s and Nox can cause respiratory problems in humans.

Deicing procedures for airplanes uses ethylene glycol or propylene glycol to remove ice and snow from the wings and fuselages. They deplete oxygen from the waters they flow into and have toxic effects on those ecosystems. Few airports have containment traps, thus the material is allowed to run into the surrounding environment, i.e. ground, ground water, rivers, ponds, etc..

1. American Airlines, under threat of indictment, pleaded guilty to illegally storing hazardous waste at the Miami airport and transporting hazardous and poisonous material improperly on its passenger jest for the last five years. The company will pay $8 million in fines along with making changes to ensure its passengers are safe. They will also apologize in a full-page ad in the Miami Herald. An investigation of the company began after an illegally marked, undocumented bag of pesticide broke open in the cargo hold on a flight to Ecuador, releasing fumes that forced the evacuation of 53 passengers and crewmembers.

2. A federal Express cargo plane carrying hazardous materials crashed at the Newark International Airport. The airport, one of the nations busiest, was closed after the crash as authorities tried to clear the tarmac and put out the flames on the aircraft. After seven hours the airport was reopened but only for departures.

UNDERGROUND AND ABOVEGROUND STORAGE TANKS1. 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, an unregistered leaking underground storage tank (UST) was discovered on the site. The property developer 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 warehouse owner operated an underground storage tank (UST) for gasoline storage. The owner 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 containing groundwater. The gas station claimed that the warehouse owners UST was partly responsible for the contamination. The owner 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 manufacturer of whipped cream stored their nitrous oxide in an aboveground storage tank at their facility. The tank ruptured, resulting in an uncontrolled release of nitrous oxide, which overwhelmed several employees and forced the evacuation of a neighboring business. Neighboring employees experienced dizziness and nausea. Bodily injury and business interruption claims totaled $120,000.

6. A family operated gas station 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 owner whose building was destroyed in the explosion. Claims exceeded $2.5 million.

UNDERGROUND STORAGE TANK CONTRACTORS

The most common environmental and regulatory exposures encountered with UST removal contractors include: Failure to give proper notification to regulatory agencies and failure to obtain proper permits for UST removal; Failure to properly locate other underground pipelines and utilities; Failure to properly handle and dispose of liquids removed from USTS; Failure to properly prepare the UST and associated piping for removal, such as removal of residual liquids and purging of explosive vapors; Failure to provide proper health and safety measures to prevent accidents, sudden and releases or explosions; Improper handling, transport, and disposal of removed sludge’s, tanks and associated piping; Improper documentation of the tank condition upon removal and subsequent testing of soils and groundwater; Improper management and disposal of contaminated soil and groundwater; Inadequate control of sediment and contaminated storm water runoff.

Common regulatory exposures encountered with UST installation contractors: Lack of proper training and certification for UST installations to ensure manufacturer warranties; Failure to give proper notification to regulatory agencies and failure to obtain proper permits for UST installation; Failure to properly test UST’s integrity prior to installation; Improper handling of tank prior to installation resulting in a damaged UST or one susceptible to corrosion; Improper installation of leak detection systems, corrosion protection anodes, and spill prevention devices; Improper UST filling procedures, spill control plans, and spill control equipment; Inadequate control of sediment runoff.

Some regulatory exposures faced by UST Testing Contractors: Damaged UST’s or underground lines due to improper installation of test probes or borings; Inadequate oversight of tank filling which may result in a spill; The lack of proper training and certification for UST testing; Use of improper test methods which do not meet state or federal requirements.

1. An environmental contractor was hired by a retailer 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.

Risk Transfer Strategies

The majority of aviation operations operating today, lack the financial strength to self insure their environmental liabilities. Consideration should 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?

BROWNFIELD REDEVELOPMENT

Today, more than ever, Federal, State and local governments are creating incentives for redevelopment of Brownfield sites. These are areas that in the past have had a history of manufacturing, and due to actual or perceived contamination are sitting idle. Through Brownfield redevelopment these properties can be cleaned up and put back on the tax rolls. The advantages of Brownfield redevelopment are to numerous to discuss in this document. For any company that currently uses vendors to assist them in manufacturing their product, or are looking to expand operations, you owe it to the company and its investors to give Brownfield’s a serious look.

The basic purpose of this insurance is to protect the owners, purchaser or investors against known or unknown environmental conditions. Brownfield redevelopment insurance can be structured in a variety of ways. Besides the financial assurance mechanism, professional liability, contractors pollution liability, contingent contractors pollution liability, transportation, off-site disposal, cost cap insurance, post remediation coverage and much more can be addressed. The important thing to remember about Brownfield redevelopment coverage is that it is customized for each submission based upon your client’s unique needs.

Deals can head south if financial assurances are not addressed for the seller and buyer. As you can see Brownfield redevelopment insurance can be purchased to accomplish this goal and much more. Policy periods can go up to 10 years.

CONTRACTORS POLLUTION LIABILITY

Note: For aviation operations, you have potential 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 there is the standard contractors pollution liability (CPL) insurance coverage. This protects the insured for pollution conditions they may cause while performing remedial services or if they exacerbate an existing situation. 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.

Secondly, more and more standard contractors (i.e. general contractors, HVAC, plumbing, electrical, mechanical, demolition, drilling, excavation, highway, street and paving contractors, rigging, utility, millwrights, artisan, etc.) are realizing, in performing their regular services they may have exposure to environmental losses that are 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 coverage is substantially less. Another benefit to CCPL coverage is, they can list subcontractors on the policy and they will also be afforded coverage.

Typically, coverage for both types of insurance are rated based upon the Insured’s gross receipts or payroll. You can purchase coverage on a claims made or occurrence basis. Coverage can be broadened by combining general liability with the CPL or CCPL. By combining CPL / CCPL with the GL, you are eliminating potential gaps in coverage that may occur if you write them separately.

Coverage applies specifically to services / operations identified under the policy declaration page, that occur at the job site, not at premises the contractor owns or occupies. Coverage can be purchased on a job specific basis, or to cover all work performed by your clients on an annual basis. Coverage can also be purchased on an owner-controlled basis.

CLEANUP COST CAP COVERAGE

Note: This coverage is designed for an entity that must perform environmental remediation.

Cleanup Cost Cap insurance manages the economic risk when environmental remediation projects exceed the projected costs. This stop-loss insurance program caps the financial loss exposure of environmental remediation projects for owners, investors and stakeholders.

The policy attaches over a prescribed self-insured retention (SIR) equal to the expected cost of cleanup plus a buffer layer.

*Coverage indemnifies the insured for the cleanup costs, as defined in the remedial study, that are above the anticipated cost of cleanup.

*Coverage can be provided for cleanup costs at, adjacent to, or from the defined location.

*Coverage can address change orders required by governmental authorities that are incurred during the policy term. Also cleanup costs of new found contamination that is discovered while conducting the action plan.

Cleanup cost cap minimizes the risk and uncertainty that environmental remediation projects inevitably generate. This stop-loss mechanism is crucial to investors purchasing contaminated properties as well as to owners who are cleaning up non-operational assets or who have been designated as a potential responsible party (PRP). Cleanup cost cap can be a key component of an investment strategy – or of ongoing balance sheet management.

ENVIRONMENTAL IMPAIRMENT LIABILITY (EIL)

This coverage applies to all classes of business, which own, operate, lease, or have any other insurable interest in real property and their operations. Coverage can be written in a variety of ways addressing unknown preexisting conditions or new conditions that may happen in the future. EIL benefits business owners who are susceptible to economic loss caused by pollution that actually or allegedly originated from the property(s) they own or operate.

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, and much more. Coverage often times is used to meet financial assurance requirements of regulated facilities (i.e. treatment, storage and disposal facilities, refer to closure and post closure care insurance).

PROFESSIONAL LIABILITY

Note: For aviation operations that hire professionals to perform environmental sites assessments, (mold, radon, asbestos or lead testing, Phase I, II, or III site assessments, tank testing, etc.) you should make sure they have this coverage in force before they begin working for you.

The absolute pollution exclusion in a standard commercial general liability policy excludes sudden and accidental, and gradual pollution losses due to the release of “solid, liquid, gaseous, or thermal irritants or contaminants, including smoke, vapor, soot, fumes, acid, alkalis, chemicals and waste.” Engineering firms who work in solving environmental exposures faced by their clients need to have coverage for negligent acts, errors or omissions that may result in damages caused by pollution conditions.

There are various ways coverage can be written to protect the engineering firm and their clients. Professional liability on a standalone basis or professional liability including general liability (GL) is available. For engineering firms that may also get involved in doing hands on work at the job site, they can add to the coverage contractors pollution liability (CPL) insurance, (refer to contractors pollution liability insurance for more details). Coverage for the professional liability is done on a claims made basis. For the GL and CPL, coverage can be on a claims made or occurrence form basis.

You have to also keep in mind there are contractors that in the performance of their work may act in a consultants or engineers capacity. You need to make sure you offer your client the broadest program available to meet their needs. By combining the coverage’s under one contract you are eliminating potential gaps in coverage. You will also eliminate the minimum premiums that each coverage carries. Coverage can be purchased on a job specific basis or to cover all the work performed by your client on an annual basis.

Coverage applies specifically to services / operations identified under the policies declaration page. Coverage can be purchased on an owner-controlled basis. Each one of the coverage’s outlined can be purchased individually or in any combination your client desires to meet their needs.

PROPERTY TRANSFER COVERAGE

Note: This coverage is designed for buyers or sellers of real properties.

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.

Another coverage feature is change in government regulations. Basically, if a new purchaser is knowingly buying property that is contaminated but below government regulations to clean up, this will protect the insured, if during the policy period governmental regulations change so it now becomes necessary to clean up the insured premise(s).

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.

UNDERGROUND AND ABOVE GROUND STORAGE TANKS

In 1984, Subtitle I of the resource Conservation and Recovery Act (RCRA) imposed stringent technical and financial requirements on owners and operators of underground storage tank systems storing petroleum. In 1986, Subtitle I was amended by the Superfund Amendments and Reauthorization Act (SARA) setting financial responsibility requirements for tank owners.

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. Financial responsibility is determined based upon the type of tank owner, the monthly throughput and the number of tanks owned. The minimum requirement is $500,000 per occurrence, with a minimum aggregate of $1 million and a maximum aggregate of $2 million.

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 of petroleum from an underground system. If insurance is utilized, the policy must provide defense cost coverage outside the limit of liability.

Self-insurance, letters of credit and bonds are all RCRA approved ways to meet financial requirements. However, to self-insure, your corporation must show a net worth 10 times the required amount of coverage. Letters of credit and bonds require tank owners and operators to set aside assets as collateral against possible environmental incidents – funds that could be used instead to increase profits.

****This document does not express specific contract language, but is an overview in laypersons terms. For specific insurance coverage’s and definitions, you should always refer the individual insurance companies contracts. In the environmental liability insurance market, each carrier manuscripts their specific contracts. The insurance carriers, via endorsements to their policies, can also change policy language and definitions.