Tag: dairy

  • Dairy Distributors

    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. 

    Many commercial insureds assume that claims arising from their operations are covered by their general liability policy or commercial auto policy. However, claims resulting from a “pollution incident” are typically excluded from general liability and commercial auto policies. Policies that do provide pollution coverage, typically do so on a limited basis and with inadequate limits, which leaves trucking companies exposed to potentially uncovered claims. What pollutants are impacting your business?

    Environmental Exposures Impacting Dairy Distributors 

    May include, but are not limited to; Pollution liabilities that occur while transporting cargo;  Air emissions from refrigeration equipment;  Uncertainties about the historical use and conditions of property;  Spills from underground and/or aboveground storage tanks;  Pollution that results from a fire;  No secondary containment for above ground storage tanks;  Vapor intrusion;  Spills or leaks from the storage and handling (loading/unloading) of material containers from vehicles;  Parking equipment over unsealed surfaces allowing contaminants such as oil, fuel, anti-freeze, hydraulic fluids, asbestos… to pollute the ground;  No emergency response training for employees;  Accumulated old tires, batteries, equipment…;  Raw materials stored;  Inadequate or no auditing of hazardous and non-hazardous waste handlers;  Poor information on the possible adverse reactions and interactions of chemical compounds that accidentally commingle during a fire;  Stormwater runoff;  Utilities that cross your property;  Corroded wastewater and storm water sewers;  Natural resource damages;  Asbestos or lead containing materials;  Silica;  Mold;  Illegal dumping of waste on your property by unknown 3rd parties;  Pollutants from neighboring properties migrating onto yours and more…

    Environmental Claims Scenarios

    1. A milk delivery truck got into an accident, causing thousands of gallons of milk to escape from the tank and flow into a nearby stream. The milk depleted oxygen in the stream, causing a notable fish kill.  Total cost of remediation and natural resource damages cost the trucking company over $75,000. 
    2. Loading/unloading of products and material was conducted  over unsealed truck ramps.  Over a period of several years, ground water became contaminated from pollutants that were released from idling trucks and storm water runoff.  Since the ground water was the only source of drinking water for surrounding residents and the state environmental regulatory agency designated the distributor as the responsible party, the distributor had to pay over $1,400,000 in cleanup costs and supply suitable drinking water until the local municipality could extend water services out to the surrounding residents.  
    3. A facility began expansion of a production line. During excavation, oily soils with a petroleum odor were discovered. Further investigation uncovered an old, undocumented sludge-drying pit, which the previous owner used back in the 1940’s. The property owner had to remove and remediate the soils at their expense. Cleanup costs exceeded $400,000. 
    4. During the night, a distribution facility caught on fire. As the fire department put out the fire, their high-pressure hoses forced melted plastics, metals, stored products, 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 onto to neighboring properties. The building owner was responsible for all clean-up costs, 3rd party property damage, and 3rd party business interruption, in addition to 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.  
    5. An employee discovered several totes of unidentified waste that had been illegally dumped into the facilities dumpsters. The owner had the contents tested, at a cost of several thousand dollars. The totes were determined to contain hazardous waste, which were placed in the dumpster by an unknown 3rd party. The distributor’s cost to properly dispose of the waste exceeded $100,000. 
    6. A 1,000-gallon diesel aboveground storage tank used for the backup power generator for a distribution facility was in a concrete secondary containment that was cracked. A rupture of the tank spilled 700 gallons into the containment that seeped into the ground causing excavation and disposal of the contaminated soils along with engineering and legal fees exceeding $90,000.  
    7. A distributor hired a waste hauler to transport its used motor oil. The waste hauler got into an accident which caused the contents of the tanker to be released directly into a creek.  Under Federal law (CERCLA) you own your manifested waste from cradle-to-grave, so the distributor had to pay their apportionment of the remediation costs which totaled $450,000.

    Overlooked Benefits of Environmental Liability Insurance

    Unlike most liability exposures impacting dairy distributors, pollution losses are not a frequency risk, but rather a severity risk. Since every dairy distributor has numerous environmental liabilities, 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 times the clean-up costs are far less than other costs that can arise from the loss.

    Three 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 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 food distributors susceptible to economic loss caused by pollution that actually or allegedly originated from their properties.  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/or 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.  You can cover multiple locations on a single policy.

    Transportation pollution Liability 

    Generally, Business Auto or Truckers policies will exclude pollution losses arising from spills or releases of transported cargo. Transportation pollution liability affords coverage during the loading, unloading and transportation, for a spill, release or sudden upset and over turn of transported cargo.  You need to strategize on your exposure to transportation.  How are goods received?  FOB point of Shipment or FOB point of delivery?  Do not be confused by thinking the MCS-90 endorsement is auto pollution liability coverage.  

    Underground Storage Tanks

    Storage tank financial responsibility requirements ensure that owners/operators of underground storage tank systems can financially handle a release from the tank system. 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 tank system.  

    Real estate developers/owners with a financial responsibility strategy dependent upon state UST funds need to regularly confirm fund solvency and length of time it will take to get reimbursed.  If part of your business strategy depends upon the state fund, this means just that, you are putting the future success of your business in the hands of the state.  You need to strategize on “just how strong is your business” if you are putting its future in the hands of your state government. 

    Property Transfer Coverage

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

    When buying or selling property there can be unknown preexisting environmental conditions. Since environmental due diligence (All Appropriate Inquiry (AAI), a Phase I or Phase II survey, Baseline Environmental Assessment (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.  You can cover multiple locations on a single policy.

  • Dairy & Cattle Operations

    What is a Pollutant? 

    Any material, substance, liquid, product… 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 and courts under various circumstances. 

    Commercial livestock operations should be aware that pollutants (such as manure, herbicides, fertilizer, etc.) are excluded from coverage on most GL policies. And GL 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. In the event of a pollution loss at one of your properties, does your insurance provide adequate coverage?

    This Environmental Risk Assessment (eRA) offers a partial list of environmental exposures livestock operations may face.

    Environmental Exposures Impacting Dairy & Cattle Operations

    Include, but are not limited to; Storage, use and disposal of fertilizers, pesticides (Glyphosate), and herbicides;  Animal waste management;  Disposal of liquid wastes in septic or leach systems;  Storage of fuels, antifreeze, oil and hydraulic fluids;  Leaking above and/or underground storage tanks;  Air emissions from chemical applications and animal waste;  Storm water runoff; Vapor intrusion;  Spills from loading and unloading of farm equipment and supplies;  Faulty refrigeration units;  Overuse of irrigation;  On-site disposal of trash, garbage and other waste materials;  Old equipment storage yards; On-site compost piles, Wastewater lagoons or injection wells;  Historical contamination;  Natural resource damages;  Old or abandoned wells not properly closed allowing contamination into the soil and ground water;  Improper management of protected or sensitive areas like wetlands;  Vandalism;  Easements on the property (rail/roadways, pipelines, power lines, waterways) with potential environmental implications;  Uncontained floor drains;  In-ground sumps and pits;  Inadequate or no auditing of hazardous and non-hazardous waste handlers;  Spills and / or air emissions from emergency power generator systems;  Adverse reactions and interactions of chemical compounds that accidentally commingle during a fire;  Siltation of nearby streams from improper erosion control management; Silica;  Pollution cleanup and liabilities that occur after a fire is put out….

    Environmental Loss Examples

    1. During an unusually heavy rainstorm, the wall of a farms on site lagoon used to treat cattle wastes collapsed.  More than 150,000 gallons of fecal waste flowed offsite, onto neighboring properties and into a river.  Waste cleanup costs exceeded $350,000, while third party damage claims exceeded $75,000.
    2. A property owner had his drinking water well tested prior to selling his land.  Testing revealed that the well contained an alarmingly high concentration of total petroleum hydrocarbons, further investigation revealed that the source of the contamination were several dozen drums of waste oil and maintenance fluids buried on a neighboring farm.  Though the drums were buried by the previous farm owner, the current owner was nevertheless responsible for disposal of the drums, soil and groundwater cleanup, and bodily injury and property damage claims submitted by the neighboring property owner.  Total cost exceeded $1,000,000 and caused the farmers bankruptcy.
    3. A dairy farmer was using treated wastewater as a fertilizer in a land application process.  He did not comply with permitting regulations nor did he have the wastewater tested prior to application.  After several months of application, heavy metals and high counts of e-coli were found in the soils.  The farmer was required to pay remediation costs in excess of $265,000.
    4. Over a period of several years, storm water from a livestock operation entered a nearby stream and lake.  Due to excessive algae and bacteria in the lake, nearby residents and businesses filed claims that exceeded $2,000,000 for property damage, loss of enjoyment and perceived bodily injury. 
    5. Phase I and Phase II environmental assessments involve limited sampling of a property and cannot guarantee that the property is clean. For example, a real estate limited partnership, acquired property previously used for farming on which they planned to build a mall. The firm hired a consultant to conduct a Phase I Environmental Assessment. The property was determined to be “clean.” However, when excavation for the mall began, 100 drums of buried pesticides and herbicides were unearthed. The chemicals contaminated the soil and had to be removed at the firm’s expense. Remediation and drum disposal costs exceeded $750,000 
    6. 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.  

    Overlooked Benefits of Environmental Liability Insurance

    Since pollution losses tend to be a severity risk, versus a frequency risk, most cattle and dairy operations lack the financial strength to self-insure their environmental liabilities.  Since every Cattle & Dairy operation is impacted by environmental liabilities, 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. 

    • 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:  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 livestock operations susceptible to economic loss caused by pollution that actually or allegedly originated from their properties.  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/or 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.  You can cover multiple locations on a single policy.

    Transportation Pollution Liability 

    Generally, Business Auto or Truckers policies will exclude pollution losses arising from spills or releases of transported cargo. Transportation pollution liability affords coverage during the loading, unloading and transportation, for a spill, release or sudden upset and overturn of transported cargo.  You need to strategize on your exposure to transportation.  How are goods received?  FOB point of Shipment or FOB point of delivery?  Do not be confused by thinking the MCS-90 endorsement is auto pollution liability coverage.  

    Underground Storage Tanks

    Storage tank financial responsibility requirements ensure that owners/operators of underground storage tank systems can financially handle a release from the tank system. 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 tank system.  

    Real estate developers/owners with a financial responsibility strategy dependent upon state UST funds need to regularly confirm fund solvency and length of time it will take to get reimbursed.  If part of your business strategy depends upon the state fund, this means just that, you are putting the future success of your business in the hands of the state.  You need to strategize on “just how strong is your business” if you are putting its future in the hands of your state government. 

    Contractors Pollution Liability (CPL)

    Note:  livestock operations have potential environmental exposures from the vendors they hire to perform services, i.e. co-op services, mechanical, plumbing, HVAC, electrical, refrigeration, animal waste land application, herbicide / pesticide application, harvesting…).  Should your vendors cause an environmental problem or exacerbate an existing environmental issue their general liability insurance policy typically will have either an absolute or total pollution exclusion.  In order to be protected you should make sure your vendors have Contractors Pollution Liability (CPL) coverage before they begin doing work.

    CPL provides coverage should an insured, while performing their covered operations, cause or exacerbate a pollution liability while working at a 3rd party location.  For these contractors there is contractor’s pollution liability (CPL) coverage. 

    Property Transfer Coverage

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

    When buying or selling property there can be unknown preexisting environmental conditions. Since environmental due diligence (All Appropriate Inquiry (AAI), a Phase I or Phase II survey, Baseline Environmental Assessment (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.  You can cover multiple locations on a single policy.

  • Virginia Dairy Settles With EPA on Alleged Environmental Violations

    environmental Strategist®, between the lines:  As an environmental Strategist®, the number one pushback we hear from a business with regard to strategizing on managing and transferring their environmental exposures is, “We do not have any environmental exposures in our business.”

    We know every business is impacted by environmental exposures, but instead of getting confrontational, I have found the best comeback to anyone who believes they do not have any environmental exposures impacting their business is to agree with them and then ask, do you have any neighbors that have environmental exposures associated with their business?  What if a neighboring business had an environmental loss and it impacted you?  When they do a Phase I site assessment they do a minimum of a 2 mile radius search to determine if there are any properties within a 2 mile radius that could cause an environmental loss and impact neighboring properties.

    The story below is just one simple example of how vapor intrusion / air emissions from a neighboring property can impact businesses causing sick building syndrome.

    eS Risk Management Strategies: 

    1. When meeting with a business that does not believe they have any environmental exposures, explain to them that in a Phase I site assessment they do a minimum of a 2 mile radius search to see if any neighbors could contaminate their property.  Ask them to pull up Google maps satellite and type in their address.  Now ask them scan back to a 2 mile radius from their property.  Lastly, ask them how confident they feel that no neighbors within that two mile radius will contaminant their property?  What is their strategy should a third party contaminate their property?  Pollution liability insurance can protect property owners should neighboring third parties contaminate their property.
    2. In preparation for a meeting to strategize on managing and transferring environmental exposures go to the EPA website: https://echo.epa.gov/.  At the EPA ECHO website you can type in a street address, a city, a county / perish… and it will give you a list of businesses / property owners that have or currently are involved in a cleanup or environmental violations.  Sharing a list of the neighboring properties is a great way to show that a credible source, the government, has identified contaminating neighbors and if the government knows about it, shouldn’t it be of concern to them.  What is their strategy?

    Epa-Logo

    News Releases from Region 03

    PHILADELPHIA (July 21, 2016) – The U.S. Environmental Protection Agency announced today that Sunshine Pride Dairy, Inc. will pay a $179,074 penalty to settle alleged federal environmental violations at its former cheese processing facility in Winchester, Va.  The dairy shut down cheese processing operations in December 2011, but left anhydrous ammonia, a hazardous substance, stored in its refrigeration system with only a skeleton maintenance crew at the facility.

    EPA alleged that in July 2012, the facility did not properly notify emergency response agencies about two instances when anhydrous ammonia was released into the air.  These included one release of between 100-500 pounds and another of more than 1,500 pounds. After the second release, Sunshine Pride Dairy had the remaining anhydrous ammonia drained from the system.

    EPA cited the company for not updating its operating procedures to reflect current conditions at the facility, failing to document proper training of its operators, and failing to maintain its ammonia processing equipment.  In addition, EPA also alleged that the dairy did not report the ammonia to the state, county and local fire department as required on its annual chemical reporting forms for the years 2012 and 2013.

    The settlement resolves alleged violations under three federal statutes: failing to maintain risk management obligations required under the Clean Air Act Section 112(r); failing to comply with community right-to-know reporting requirements; and failing to report releases to the National Response Center, as required by the Comprehensive Environmental Response, Compensation, and Liability Act.

    These requirements help to ensure safeguards are in place to protect the health and safety of workers, local residents and the environment.  It’s also essential that local, state and national emergency response authorities are notified immediately when a release of hazardous substances occurs, so they can respond quickly and effectively.

    As a part of the settlement, the company did not admit or deny EPA’s allegations.

    The applicable federal statutes are:

    CERCLA and EPCRA release reporting and annual inventory reporting:
    https://www.epa.gov/epcra
    Clean Air Act Section 112(r): https://www.epa.gov/rmp

  • Dairy Farm Turning Waste Into Energy

    environmental Strategist, between the lines:  Studies have stated agriculture accounts for 80% of the worldwide fresh water consumption and contaminates 70% of our waterways.  However, each and every one of us depend upon agriculture.  Understanding that just by their very existence agricultural operations are polluters, the question becomes how can agricultural operations pollute in a way that has the least amount of impact upon human health and the environment?

    The article below highlights a growing trend in the livestock industry.  As you go through the article, I have highlighted in red the pollution insurance coverage appropriate for the various environmental exposures.

    Cows
    Cows eat at Scenic View Dairy in Fennville on Tuesday, April 19, 2016. The farm produces its own electricity with an anaerobic digester which runs on methane from manure. (Neil Blake | MLive.com)

    Dairy Farm Produces Electricity From Manure

    FENNVILLE, MI – Brian Geerlings estimates his 2,000 cows produce enough milk (milk has been classified as a pollutant so Environmental Impairment Liability (EIL) site pollution coverage for the dairy farm and transportation pollution insurance to get the milk to the producer / consumer) each day to supply each resident of Grand Rapids with an 8-ounce glass of milk.

    But that’s not all his cows produce. Thanks to three “anaerobic digesters” that process the manure on the “back end” of the farm, the Scenic View Dairy also generates enough electricity to power more than 700 homes.

    “We’re able to produce our milk with a negative carbon footprint,” says Geerlings, a 36-year-old farmer who moved his Scenic View Dairy to Allegan County from the Zeeland area in 2000 to escape the urban sprawl that inhibited expansion.

    The cows are milked three times a day (Before a cow can be milked they must be washed which produces contaminated waste water.  Washing consumes approximately 40 gallons per cow per day.  Waste water from washing cows accounts for the majority of waste in manure lagoons.  EIL coverage will address these exposures) eating from a carefully blended mix of silage designed to give them the optimal amount of protein, fiber and nutrients. “It’s calculated to produce milk,” says Geerlings, who estimates each cow eats about 110 pounds each day.

    Housed in open-air barns (Air emissions from cows methane, which makes up 10 – 15% of global methane emissions.  EIL coverage for this exposure) designed to keep them comfortable and out of the weather, each cow’s milk output is individually weighed and recorded.

    “We have records from the day she’s born until the day she dies,” said Geerlings, who said the herd produces about 18,000 gallons of milk each day – about 75 pounds per cow.

    After it leaves the cow, the milk is piped into a chiller (Many agricultural products, like milk, need to be kept cold which involves refrigerant chemicals that can release air emissions or spill fluids.  EIL coverage.) and transported within 24 hours by truck to a milk processing plant in Reed City, where it is converted into Yoplait yogurt, or Coopersville, where it dried and used in the food processing industry or sent overseas.  (Products pollution exposure.  Generally, the environmental liability insurance market does not like to offer this coverage on consumable products.)

    That’s on the front end. What makes Geerlings’ farm unusual is his handling of the cows’ manure, which has historically been treated as a smelly nuisance (EIL coverage).

    At Scenic View Dairy, the manure is treated like gold. While the cows are in the milking parlor, their manure is scraped into holding tanks and sent to one of three large green silos (EIL coverage for the storage), where it is heated over a 22-day period.

    The heating process causes the slurry to emit methane gases that are captured by the large cones. As a bonus, capturing the methane gas also eliminates much of the smell associated with the farm. (EIL coverage for air emissions)

    The captured methane is used to fuel two 12-cylinder Caterpillar motors that run round-the-clock (EIL for air emissions) to drive electrical co-generators that supply electricity for the farm and are fed back into the grid operated by Consumers Energy.

    Besides eliminating an electrical bill that could reach up to $15,000 a month, Geerlings estimates he sells about two-thirds of the electricity generated by the farm back to Consumers Energy. “We just renewed our 20-year contract with Consumers,” he said.

    The farm’s negative carbon footprint also allows Geerlings to sell “carbon credits” to companies who need to offset their carbon consumption. While the market price of carbon credits fluctuates, Geerlings estimated he pockets about $50,000 a year from their sale.

    After the methane is extracted, liquid is expelled from the manure and returned to the barns for bedding. Some of the “bio-mulch” also is sold to landscape companies for mulch or soil conditioners. (Depending upon how the bio-mulch is stored you can have a storm water runoff exposure along with the transportation pollution liability exposure to get mulch to landscape companies and consumers.  EIL and transportation pollution liability coverage.  Potential products pollution exposure.)

    The liquid from the manure is stored in lagoons (EIL coverage) and injected back into the 3,200 acres (EIL coverage) which Geerlings owns or rents (Depending upon the rental agreement this could be site pollution coverage or Contractors Pollution Liability (CPL).) in the area to raise corn, soybeans, wheat and rye (EIL coverage for the storage and application of other agricultural chemicals used in order to grow these crops.). Much of those crops are fed back to the herd.

    The digesters not only add cash to Geerlings’ bottom line, but also stabilizes his balance sheet when dairy prices fluctuate.

    “There are times in the past year when the digester has made more than the cows,” says Geerlings, who employs 35 full-time workers. “It takes dedication and it takes focus to make it pay.”

    Jim Harger covers business for Mlive Media Group. Email him at jharger@mlive.com 

    *Link To The Article and Video*