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.
Most commercial insureds assume that claims arising from their operations are covered by the general liability policy. However, claims resulting from a “pollution incident” are excluded from most general liability policies, which leaves commercial insureds with gaps in coverage. What pollutants are impacting your business?
Environmental Exposures Impacting Golf Courses
May include, but are not limited to: Natural Resource Damages; PFAS Chemicals; Over application of fertilizers, herbicides, pesticides (Glyphosate); Stormwater Runoff; Improper storage of batteries and raw materials/chemicals/fuels/lubricants/anti-freeze; Leaking underground or above ground storage tanks; Vandalism; Equipment storage areas where oils and other contaminants percolate into the soil and ground water; Bodily injury and property damage to neighboring properties; Absence of comprehensive and coordinated spill control plans; uncertainties about the historical use and conditions on the property; Contamination from neighboring properties migrating onto yours; Improper onsite waste storage; No auditing of waste handling and disposal companies; Use of fill materials which contain unknown contaminants; Pollution cleanup and liabilities as the result of a fire; Air emissions from onsite refrigeration systems; Sick building syndrome; Vapor Intrusion; Drums / totes… stored in unsecured areas with no secondary containment; Old septic systems; Nuisance odors; Spills and leaks from the storage and handling (loading/unloading) of material containers such as drums, totes or bags from vehicles; Corroded wastewater and storm water sewers; Failure or overflow from on site waste water treatment facilities; Failure of backup generator for waste water treatment facilities; Easements/utilities that cross the property that may leak or spill hazardous materials; Hazardous materials from adjacent roads or railways due to truck, train, barge accidents; Old, abandoned wells which are not properly closed and serve as an open conduit for soil and ground water contamination; Improper management of protected or sensitive areas such as wetlands; Excavation through and spreading of unknown pre-existing contaminated soil; Impacting ground water from drilling and excavation work; Impacting underground utility lines/services or other underground structures; siltation of nearby streams and other bodies of water from improper erosion control management; Legionella / mold….
Environmental Claim Scenarios
- A residential community located adjacent to a golf course received its water supply from groundwater wells. Over time, the application of herbicides, pesticides, and fertilizers caused groundwater contamination. Bodily injury claims were filed by residents for perceived injuries from drinking contaminated water. Property damage claims were filed because the groundwater system was no longer a suitable drinking source. Total claims exceeded $1,500,000.
- A convention taking place at a golf resort was disrupted and forced to relocate because of the odor from an onsite wastewater treatment plant. A suit in the amount of $100,000 was filed against the golf resort for loss of enjoyment and for costs to relocate the convention.
- The concrete secondary containment of a 10,000-gallon gasoline aboveground storage tank was cracked. A release from the tank spilled 8,000 gallons into the containment. The gasoline seeped into the underlying soils and required costly excavation and removal. The total cost for investigation and remediation exceeded $220,000.
- A golf course stored gasoline in steel underground storage tanks (UST’s) for use in tractors, lawn mowers and golf carts. Tank corrosion led to a discharge of petroleum products, which contaminated the surrounding soil and groundwater. Remediation expenses incurred for the investigation and cleanup of the site amounted to $350,000.
- A golf course sent all of its waste golf cart batteries to an off-site facility for disposal. Over a period of several years, the facility did not adhere too applicable federal and state environmental regulations, and the golf course was found jointly liable for pollution conditions caused by the battery disposal facility. The settlement for cleanup exceeded $175,000.
- A golf course was being constructed on a former municipal landfill. During construction, a subsurface methane gas vent pipe collapsed. The collapsed pipe caused a dangerous buildup of methane in the neighboring residential community. Neighbors were forced to evacuate their homes, and they submitted bodily injury, property damage, loss of value and trespass claims against the course owners in excess of $1,000,000.
- During excavation for a foundation, an unknown underground storage tank containing oil was ruptured. Hundreds of gallons poured out before the rupture was closed. Since the excavator did not have contractor’s pollution liability coverage, the property owner had to pay for remediation costs in excess of $80,000.
- An electrical contractor was hired to upgrade a buildings electrical system. During trenching operations, a backhoe hit a natural gas pipeline causing an explosion. Third parties filed bodily injury claims against the contractor, as well as the resort whose club house was destroyed in the explosion. Claims exceeded $4.5 million.
- A golf course used treated waste water as a source for irrigation. The waste water treatment plant did not comply with permitting regulations nor was the wastewater tested prior to releasing it to the golf course. After several months of irrigation, heavy metals and high counts of fecal coliform were found in the soils. The golf course was required to pay remediation costs in excess of $265,000.
- The presence of Legionella was detected in the hot water system of a resort. The state health department got involved and a consultant was hired to investigate and remediate the property. A claim was made immediately for the remediation and what could have been an extensive and lengthy remediation process was completed efficiently – significantly reducing the length of business interruption for the resort owners.
Benefits of Environmental Liability Insurance
Because environmental losses are a severity risk, rather than a frequency risk, the majority of golf courses lack the financial strength to self-insure their potential environmental liabilities. For this reason, golf courses should consider to the economies of scale afforded with environmental liability insurance as part of their risk transfer strategy, versus self-insuring.
Additionally, most commercial insureds only consider the remediation costs associated with a pollution event. However, often times the clean-up costs are far less than other costs often associated with a pollution event.
Three Overlooked benefits of Environmental Liability Insurance:
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- 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, etc.
- 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 Products
Environmental Impairment Liability (EIL)
EIL is for golf courses 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 cleanup costs, legal defense expenses, non-owned disposal sites, transportation and more. EIL can be offered on multiyear terms. Most EIL policies cover above ground storage tanks.
Underground Storage Tanks
Financial responsibility requirements ensure that owners and operators of regulated 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.
Transportation Pollution Liability (TPL)
Generally, Commercial Auto policies will exclude pollution losses arising from spills or other releases of their cargo. Broadened Transportation Pollution Liability affords coverage during the loading, unloading and transportation, for a spill, release or sudden upset and overturn of transported cargo.
Property Transfer Coverage
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. 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.
Contractors Pollution Liability (CPL)
Golf courses have potential indirect environmental exposures from the service vendors & contractors they hire to perform work on their behalf. CPL insurance protects real estate owners / developers should their vendors cause or exacerbate an environmental condition.