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.
Golf & Ski Resort owners should be aware that pollutants (such as mold) are excluded from coverage on most General Liability policies. And General Liability policies that do provide pollution coverage, typically do so on a limited basis, with inadequate limits and/or strict discovery and reporting requirements for there to be coverage. If you experience a pollution loss, will your insurance provide adequate coverage?
Environmental Exposures Impacting Golf & Ski Resorts
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
- Maintenance workers at a resort were unloading 400-gallon totes of muriatic acid, which is used as a pool chemical. One of the totes was dropped, releasing 150 gallons of the acid which ran into a nearby storm sewer. The acid caused aquatic life to die and other natural resource damages. Remediation costs and natural resource damages exceeded $400,000.
- While remodeling rooms at a hotel resort, contractors discovered mold within the building’s walls and ceilings. After further investigation, mold was also found throughout the property. Cost to remediate the mold and lost rental revenues during remediation cost the resort over $600,000.
- 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 & ski 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.
- During the night, a fire broke out and the fire department’s high-pressure hoses forced melting plastics, metals, insulation, roofing, drywall, chemicals, and other materials to build up inside the building’s foundation, creating a toxic “sludge”. Some of the toxic “sludge” escaped the building and migrated into the surrounding soils and a nearby stream. The property owner was responsible for clean-up costs and natural resource damages, which totaled over $2,000,000. NOTE: fire departments are immune to pollution claims arising from their work while putting out fires.
- A ski resort unknowingly used contaminated water for its snow making resulting in hundreds of thousands of gallons of contaminated water being spread across the lower part of the mountain. Old mining tailings from a closed down mine in the area was the source of the contamination and had been contaminating the water for some time. The resulting claim was for over $500,000 for the cleanup and remediation of the contaminated soil.
- A golf and ski resort 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 its waste golf cart batteries to an off-site facility for disposal. Over a period of several years, the facility did not adhere to 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.
- 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 maintenance employee of a hotel could speak English but could not read English. The employee accidentally mixed a hazardous chemical with a cleaning solvent which created a hazardous vapor cloud. The hotel had to be evacuated and several people were treated for inhalation of the toxic fumes. Remediation and bodily injury claims exceeded $1,000,000.
- 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.
Overlooked Benefits of Environmental Liability Insurance
Unlike most liability exposures impacting Golf & Ski Resorts, pollution losses are not a frequency risk, but rather a severity risk. Because all Golf & Ski Resorts have notable environmental exposures, consideration needs to be given to the economies of scale afforded with environmental liability insurance as part of your risk transfer strategy, versus self-insurance.
Furthermore, most commercial insureds only consider the remediation costs associated with a pollution event. However, often the clean-up costs are far less than other costs that often arise from the loss.
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, etc.
- 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: Most 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 Coverages
Environmental Impairment Liability (EIL)
EIL is for golf and Ski Resorts 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.
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 environmental due diligence (Phase I, Phase II, BEA…) 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 & Ski Resorts 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.
Underground and Above Ground 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. Several states offer tank funds. It’s necessary to make sure if your state has a tank fund that is financially sound and the time it takes to get reimbursed.