Tag: property owners

This Competitive Environmental Intelligence (CEI) will arm you with the resources to successfully educate Condo & Apartment owners on the value pollution insurance can add in protecting their investment.  Since environmental losses tend to be a severity versus frequency issue, as part of “Best Practices”, Condo & Apartment owners must have a financial assurance instrument in place to address environmental liabilities or face potentially serious devaluation of their investment.

A simple example involves a fire loss:  As a general rule, Condo & Apartment owners purchase fire insurance to finance a potential loss and / or to meet a requirement of the financial institution holding the mortgage on the subject property.  A fire occurs and the fire department puts out the fire.  Now in the aftermath the water and chemicals used by the fire department along with the burned building and its contents mix and create a pollution liability.  The fire department by law is immune from prosecution.  However, under Federal law the property owner is ultimately responsible for the environmental condition of their property, regardless of who caused the pollution liability.  

Here’s the problem, most fire polices offer a token expense to address clean up after a fire that can fall significantly short of the environmental liability created by the fire.

So, any business with a fire policy, that experiences a fire, has an excellent chance of being impacted by environmental liabilities.  What is your financial assurance strategy for environmental liabilities created by a fire?  

What is a Pollutant? 

Any material, substance, liquid, product… which is introduced into an environment for other than its intended use / purpose.  In other words, something that ends up where it does not belong.  Fresh water, cheese, and milk have all been classified as pollutants by Insurance Carriers under various circumstances. 

Commercial real estate owners should be aware that pollutants (such as mold) are excluded from coverage on most GL policies. And GL policies that do provide pollution coverage typically do so on a limited sudden and accidental 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? 

Environmental Exposures Impacting Condo & Apartment Owners

May include, but are not limited to;  Historical contamination from agriculture, mining, lagoons, landfills, manufacturing, Brownfields;  Pollution cleanup and liabilities that result after a fire is put out;  Herbicides and Pesticides (Glyphosate) used for landscaping;  Pollution from neighboring properties migrating onto yours;  Storm water runoff;  Natural resource damages; Vapor Intrusion;  Easements (i.e. oil, fuel, natural gas…) that cross the property which may leak or spill hazardous materials;  Contamination from fertilizers or pesticides used for landscaping;  Leaks from elevator hydraulic fluid storage tanks;  Impacting sensitive areas such as wetlands or endangered species;  Corroded wastewater and storm water sewers;  Excavation through and spreading of unknown preexisting contaminated soil;  Impacting groundwater from drilling and excavation work (i.e. cross contamination of aquifers, etc.);  Old and/or unknown leaking underground storage tanks;  Impacting underground utilities during construction;  Collapse and/or or explosion during and after construction;  No auditing of waste handling and disposal companies / facilities;  Tenants using or storing environmentally sensitive materials, chemicals, waste….;  Spill of oils/fuels/chemicals brought onsite;  Vandalism;  Sick building syndrome;  Mold / Legionella;  Asbestos;  Lead;  Past/present use of septic systems;  Above ground or underground storage tanks;  Adverse reactions and interactions of chemical compounds that accidentally commingle during a fire;  Wastewaters generated from human septage;  Janitorial cleaning compounds;  No emergency and spill control plans;  nuisance odors; Storage & use of pool / spa chemicals, meth labs; and more…

Environmental Claim Scenarios

1. During remodeling of an apartment once used for a meth lab, contractors discovered mold within the unit’s walls and ceilings. After further investigation, mold was also found in other areas of the property.  Cost to dispose of the chemicals used to make meth, remediate the mold, lost rental revenues, and temporary housing for residential tenants while the mold was being remediated cost the property owner over $1,500,000. 
2. A fire erupted at an apartment building.  The burning building and its contents sent dangerous fumes throughout the surrounding community.  Fire suppressing liquids / foam used to extinguish the fire were now contaminated and went into the surrounding soils.  Hundreds of community members filed suit citing health problems from inhalation of toxic fumes and property damage from hazardous firewater runoff.  The state environmental regulatory agency determined that the site and surrounding properties must be cleaned up, resulting in expensive remediation costs.  The total costs for citizen suits and remediation topped $550,000.
3. Residents of an apartment building became ill from legionella.  The cause of the legionella was the improper sealing of the ducts during the installation of a new HVAC unit which allowed condensation to build up.  Suits have been filed against the property owner and contractor.
4. Mold contamination caused by water intrusion in apartment building cost $10,079,000 to remediate. The seven story building houses apartments and retail space. The building owners have filed suit against the general contractor and sub-contractors.  The contractor has filed suit against the subcontractor who installed the EIFS and interior dry wall. 
5. New construction commenced on a previously undeveloped parcel of land.  During excavation and dewatering activities, contaminated ground water was discovered.  The developer was required by State regulatory authorities to collect, test and treat groundwater pumped out during the excavation process.  Contaminated soils we also discovered at the site.  Construction delays and additional expenses totaling over $1,000,000 were incurred by the developer.  It was determined the contamination had migrated from a nearby by manufacturing facility that had been shut for years due to bankruptcy of the manufacturer.   
6. A commercial real estate owner was subject to defense costs exceeding $25,000, in addition to property damage and bodily injury claims exceeding $400,000 from a neighboring residential community. During sewage installation, a subcontractor improperly tied in piping. This caused raw sewage to migrate into the underlying groundwater and contaminate residential wells.
7. A landscape contractor working for a condominium association applied fertilizer to the lawn.  Later in the day rain caused the fertilizer to wash off into a neighbor’s pond.  Cost to remediate the pond was $55,000.  
8. While cleaning out an apartment unit in preparation for a new tenant, the cleaning company discovered a meth lab in the unit. Since meth labs create toxic material, emergency cleanup contractors were called to handle the situation. Total cost of the cleanup for the property owner was over $75,000.  
9. A commercial janitorial contractor accidentally mixed non-compatible chemicals for cleaning.  The fumes from the chemicals forced the evacuation of all of the building residents while clean up took place.  Third party bodily injury, property damage and business interruption claims were filed against the property owner and janitorial contractor, which exceeded $750,000.
10. A tenant was very proud of her collection of tropical plants and orchids.  Unfortunately, the high temperatures and humidity levels kept the plants healthy got carriedaway and resulted in significant mold growth behind the unit’s wallpaper.  The mold eventually contaminated the entire buildings HVAC duct work with mycotoxins.
11. A condominium association had several residents in two specific buildings complaining of health problems.  The condominium association hired an environmental engineering firm to conduct air sampling tests.  Testing revealed the residents were being exposed to contamination from vapor intrusion caused by a neighboring property.  Cost to install a vapor barrier to protect condominium owners from the toxic fumes exceeded of $200,000.  Suit has been filed against the property owner responsible for the vapor intrusion for bodily injury, property damage, remediation costs and more.   
12. A tenant stirred up some excitement when the unit was raided by agents from the DEA.  Chemicals from the production of methamphetamines had saturated all porous surfaces in the unit.  All counters, cabinets and wallboard had to be removed and disposed of as hazardous waste.  Indoor air quality sampling was also required to be performed in each of the adjacent units to guarantee safety to remaining tenants.  
13. Residents were ordered to stop using their showers after Legionella was detected in samples taken from plumbing system.  An elderly resident was hospitalized when she breathed in Legionella tainted water droplets while showering.  It could take weeks to pinpoint the source of Legionella and to remediate the buildings entire water system.

Overlooked Benefits of Environmental Liability Insurance 

Unlike most liability exposures impacting mixed-use property owners, pollution losses are not a frequency risk, but rather a severity risk. Because all multi-use properties 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 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 of the most overlooked benefits of investing in Environmental Liability Insurance include; 

1. 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 
2. 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….?
3. 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 create an environmental loss.

Environmental Liability Insurance Coverages

Premise Pollution Liability (PPL)

PPL is for real estate owners susceptible to economic loss caused by pollution that actually or allegedly originated from their properties. PPL is applicable for commercial insureds who own, rent, lease, operate, or have any other insurable interest in real property and/or the operations. 

Coverage can be written in a variety of ways to address new conditions that may occur and/or unknown preexisting environmental conditions.  Coverage can include third party bodily injury and property damage, along with business interruption, on and off site clean-up, legal defense, Non-Owned Disposal Site Liability, Transportation Pollution Liability, and more. PPL can be offered on multiyear terms, which typically provides annual savings over the term of the policy. Most PPL policies cover above ground storage tanks up to a certain size.  You can also cover multiple locations on a single PPL policy.

Contractors Pollution Liability (CPL)

Real estate owners & developers 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. 

Property Transfer Coverage

When buying or selling property there can be unknown preexisting environmental conditions. Since environmental due diligence cannot guarantee uncovering all potential pollution conditions, 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.

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.  Real estate owners and developers who use this product as part of their risk transfer strategy can often negotiate with the seller to share the cost and negotiate a better mortgage rate than if they did not have property transfer coverage.  

Environmental Risk Managers

Process to Effectively Sell Environmental Insurance

Fact:  Every business is impacted by environmental exposures and environmental insurance is a financial assurance strategy that reduces or eliminates the negative impact of uncertain future environmental liabilities.    

Step #1:  Education  

Education is the solution to pollution, not dilution.  If an insurance professional is not environmentally educated they are not going to discuss environmental exposures and insurance.  Likewise, a business that is not environmentally educated does not understand the value pollution liability insurance adds to their business model, so why invest their monies?  With the ERMI environmental educational resources, businesses are able to focus on the most relevant risks in addressing future outcomes.  An environmentally educated businesses can make informed decisions on the structure of their financial assurance strategy and if investing in pollution insurance will add value to their business model.  www.ermi.us or www.estrategist.com for educational resources. 

Step #2:  Environmental Risk Tolerance 

Environmental Risk Tolerance is the amount of environmental risk a business can fiscally tolerate.  What are acceptable and unacceptable environmental liabilities such as defense, environmental investigations, clean up, third party bodily injury, third party property damage, third party business income, reputational risk, first party business income…?  Since every business is impacted by environmental exposures, as part of “Best Practices”, they must have a financial assurance strategy.

Step #3:  Risk Appetite 

Risk Appetite is how much a business wants to internally self-insure based upon their risk return goals and objectives.  Understand, environmental liabilities tend to be a severity versus frequency issue.  A businesses risk appetite is set by their board or upper management and helps to guide their resource allocation.

Step #4:  Merge Competitive Environmental Intelligence from Steps 1, 2 & 3 

To answer the following question:  “As part of the business’s environmental financial assurance strategy, does it make fiscal sense for the business to transfer their environmental exposures for fractions of a cent on the dollar via an environmental insurance product, or wait until an uncertain environmental liability occurs and spend 100 cents on the dollar out of their own pocket for legal defense, investigations, clean up, third party bodily injury, third party property damage, third party business income, reputational risk…?”

Step #5:  Fill out an Environmental Risk Managers Environmental Insurance Application

If you answered “Yes” to transferring the business’s environmental exposures, fill out an Environmental Risk Managers environmental insurance application and send the submission to your Environmental Risk Managers team member.  www.ermi.us for applications or call (269) 792-1070.     

Step #6:  Educate – Review, Compare & Get Deals Closed

Once Environmental Risk Managers marketing effort has been completed, educating the insured on the benefits, coverages, and differences between the various proposals is the final step in identifying the insured’s best investment option. Often times, a conference call with the agent, insured, and your ERMI team member, assists to further educate the insured and ultimately get deals closed!  It’s not about market access, it’s about customer service and writing business effectively, and ERMI has pioneered the process.  

Environmental Financial Assurance Risk Transfer Simulator

Condo & Apartment Owners

The base PPL policy isn’t a direct unit rating.  Underwriters still look at it on a per location basis.  So, if it’s all 1 facility with 250 units or less, premiums will likely be between $4,500 – $5,500 for the base PPL.  

Ballpark estimates for mold coverage option:

• Third-party BI only – $3,500 AP less than 250 units, $12/unit thereafter, better rate after 500 units
• Full Mold Coverage – $6,500 AP less than 250 units, $18/unit thereafter, better rate after 500 units

Assuming $1/2M limits, mold coverage written with a $25K SIR (rough minimum for mold related claims).  If there is one location with less than 250 units, the total premium would be $8,000 with third-party BI mold coverage included and $11,000 for full mold.  400 units would be $9,800 for third-party BI mold coverage and $13,700 for full mold coverage.  

What is a Pollutant? 

Any material, substance, liquid, product, etc… which is introduced into an environment for other than its intended use / purpose. In other words, something that ends up where it doesn’t belong. 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 Gravel Quarries

May include, but are not limited to: Silica;  Stormwater runoff;  Release of oils/fuels from equipment;  Spills mobile storage tanks;  No auditing of waste handling and disposal companies;  Natural resource damages;  Vapor intrusion;  Storage and/or transportation of raw materials;  Business interruption expenses from pollution loss (1st & 3rd party);  Leaks from hydraulic fluid;  Products pollution liability;  Raw materials stored onsite;  Uncertainties about the historical use and conditions of property;  Obsolete and remote equipment storage (bone) yards where contaminants percolate into the soil/groundwater;  Nuisance odors;  No emergency response training for employees;  Spills and leaks from the storage and handling (loading/unloading) of materials from vehicles, rail cars, barges…;  Improper characterization of hazardous waste… And more      

Environmental Claim Scenarios

• A gravel quarry provided material for a jobsite, which contained unknown pollutants. The excavation contractor unknowingly spread the contaminated material across a project site. Later during the project, the contamination was discovered and determined to have originated from the material provided by the gravel mine. Project delays, cleanup costs, and 3rd party property damage claims exceeded $600,000. 

• A waste hauler was hired to transport used oil and fluids to a 3rd party recycling facility. 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 waste from cradle to grave, so the generators of the waste had to pay their apportionment of the $2,000,000 expense for remediation. 

• Over the weekend a major thunderstorm destroyed the storm water runoff control system at a quarry, causing the material to flow down grade through neighboring properties, roads, and into a nearby lake.  The quarry was responsible for cleanup costs, natural resource damages, and 3rd party property damage claims, which exceeded $3,500,000.  

• 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.  Total cost for investigation, removal, and disposal exceeded $275,000. 

• During a particularly dry spell in the summer, heavy winds allowed silica dust to drift from a quarry into a neighboring community. The liable quarry filed a claim with their GL carrier for the resulting property damage and bodily injury, but the insurer denied the claim, due to the policy’s pollution exclusion. The quarry was ultimately responsible for coving 100% of the loss, which totaled over $1,000,000. 

• A quarries tailings piles over several years of being exposed to the elements and rain, percolated into the ground and ground water.  The soil contamination plume impacted numerous third parties and the ground water contamination plume impacted both private and municipal water wells.  Costs for remediation and other expenses had not been calculated but will be in the millions of dollars.  

Benefits of Environmental Liability Insurance

Because environmental losses are a severity risk, rather than a frequency risk, most commercial insureds lack the financial strength to self-insure their environmental liabilities. Since every gravel quarry has notable environmental exposures, consideration should be given to the economies of scale afforded with environmental liability insurance as part of your risk transfer strategy, versus self-insuring. 

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 Coverages

Environmental Impairment Liability (EIL) 

EIL is for gravel mining operations susceptible to economic loss caused by pollution that actually or allegedly originated from their owned or leased location (mine).  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.  Sewer lines and pump/lift stations can be covered by EIL.  Most EIL policies cover above ground storage tanks.

Transportation Pollution Liability

Generally, Business Auto or Truckers policies will exclude pollution losses arising from spills or other 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.    

Contractors Pollution Liability (CPL)

Contractors Pollution Liability (CPL) is for gravel mining operations that perform contracting work away from any premises they own, rent, lease or occupy, should they cause or exacerbate an environmental condition while performing their contractor services.  

Coverage can be written on a job specific basis, or on a blanket basis to cover all the work performed by the insured.  Most policies can be endorsed to cover transportation pollution liability, mold, lead, and asbestos, defense outside the limits, off-site disposal coverage, and more. Contractors incorporating CPL coverage as part of their risk transfer strategy, drive their growth and profits by marketing the benefits CPL coverage affords in reducing job interruption due to environmental issues.  A major environmental liability exposure faced by all contractors lies in who they are doing business with.  If there is an environmental loss at a job site, innocent contractors can and do get named in lawsuits.  Do your subs/vendors have CPL insurance if they cause an environmental loss?

Underground 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 tank system.  

Property Transfer Liability 

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. 

Property transfer coverage assists to keep the property at its maximum value while allowing the insured to negotiate more favorable loan terms than property not supported by this coverage.      

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. What pollutants are impacting your business?

Common environmental exposures encountered with hunting and fishing clubs/outfitters include, but are not limited to:   Natural resource damages;  Pollution cleanup and liabilities that result after a fire is put out;  Use of herbicides, pesticides (Glyphosate), fertilizers…:  Storm water runoff;  Historical pollution from mining, landfills, manufacturing, government facilities, agriculture, scrap yards, old equipment bone yards;  Lead contamination at shooting range impacting soil and groundwater;  Illegal disposal of waste;  Improper treatment and/or disposal of sanitary wastewater facilities;  Fuel spills from recreational equipment;  Underground or above ground storage tank leaks causing water and soil contamination;  Abandoned underground storage tanks especially those of which the site owner is unaware or those which have been improperly closed;  Lead paint;  Asbestos;  Fueling boats in the water;  No auditing of waste handling and disposal companies;  Improper management of protected or sensitive areas such as wetlands;  Siltation of nearby streams, rivers, or lakes;  Improper erosion control management;  Electrical equipment containing toxic PCBS;  Old, abandoned wells which are not properly closed and serve as an open conduit for groundwater contamination;   Poor information on the possible adverse reactions and interactions of chemical compounds that accidentally commingle during a fire;  Old septic systems;  Pressurized gas cylinders;  Spills from loading and unloading of raw materials;  Pollution from neighboring properties migrating onto yours;  Easements that cross the property which may leak or spill hazardous materials;  Residual contamination such as fertilizers or pesticides from past farming or similar uses;  Previous spills of hazardous materials from adjacent roads or railways due to truck or train accidents;  Corroded wastewater and storm water sewers;  Improper purging of bilge waters from marine vessels; spills and air emission from power generators;  Mold / legionella….

Sportsman Clubs Environmental Loss Examples 

1. A Hunting Club in a remote area, the owner discovered several piles of unidentified waste that had been dumped on the property. The Club had the piles tested, at a cost of several thousand dollars. The piles contained hazardous waste.  The Club owner’s cost to dispose of the waste was estimated to exceed $200,000.
2. Clean Property; Phase I and Phase II environmental assessments involve limited sampling of a property and cannot guarantee that the property is clean. For example, a hunting/fishing business, acquired property previously used for farming.  An environmental consultant was hired to conduct a Phase I Environmental Assessment. The property was determined to be “clean.”  However, during excavation for a building, 100 drums of buried pesticides and herbicides were unearthed. The chemicals contaminated the soil and had to be removed.  Remediation and drum disposal costs exceeded $450,000
3. A hunting / fishing business in their maintenance garage changed the oil for its equipment over a drain leading to an on-site septic system.  Over a period of many years the oil breached the septic field and migrated to neighboring properties.  When contamination was discovered in a nearby well investigations determined the contamination was coming from the hunting / fishing septic field.  Site remediation and installation of a groundwater recovery system exceeded $6000,000.
4. Upstream from a fishing lodge served as a convenient illegal disposal site for a recycling contractor. The contractor dumped five 55-gallon drums, releasing 275 gallons of used mineral spirits into the stream. When the drums were dumped, the hazardous contents leaked into the soil. In addition, the contractor emptied the contents of the vacuum truck into a nearby community lake.  Total cleanup expenses amounted to $475,000.
5. A fishing camp operated its own on-site wastewater treatment facility. Seals on the bottom of the treatment system leaked and wastewater overflowed from the top of the system. This caused numerous discharges of contaminated effluent to enter the soil and migrate into the nearby lake.  The EPA cited the fishing camp for various discharge violations and issued an administrative order finding the fishing camp responsible for contamination of the adjacent properties. Government mandated cleanup costs exceeded $250,000. In addition, neighboring property owners filed claims against the fishing camp for property damage, business interruption and trespass of pollutants. The combined total of the civil suits exceeded $500,000.
6. A fishing camp stored fuel for their boats in an above ground 5,000-gallon storage tank.  The tanks secondary containment was cracked and a leak from the storage tank breached the secondary containment allowing more than 1,000 gallons of fuel to be released into the environment.  Cost for remediation exceeded $250,000.
7. A sportsman club had to pay for remediation and supply potable water to residents when it was determined that lead from their shooting range via stormwater runoff had leached into the groundwater over a period of many years.  Remediation and third-party claims for bodily injury exceeded $1,000,000.
8. A hunting and fishing guide service, during the summer season, had several customers complain of headaches and nausea.  Investigation revealed several sleeping cabins had water leaks from several sources (plumbing, open windows during storms…) that allowed for mold to develop.  Cost to remedy the issue exceeded $75,000.  
9. A hunting club had a fire at their main lodge.  Once the fire department put out the fire thousands of gallons of contaminated residue from the fire entered the lake on which the club was located.  Natural resource damages and cost to remediate the land exceeded $200,000.

ENVIRONMENTAL LIABILITY INSURANCE BENEFITS

Sportsman’s clubs generally lack the financial strength to self-insure their environmental liabilities.  Since every commercial contractor 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.

The Three Main Benefits environmental liability insurance offers:  

1. 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.  
2. 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….?
3. 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 Risk Transfer Products

Environmental Impairment Liability (EIL)

EIL is for hunting and fishing businesses 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 multi year terms.  Most EIL policies cover above ground storage tanks.

Property Transfer Coverage

When buying or selling property there can be unknown preexisting environmental conditions. Since a Phase I, Phase II… site assessments 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 (TPL)

Generally, Business Auto or Truckers policies will exclude pollution losses arising from spills or other releases of their 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.

Underground and Above Ground Storage Tanks (UST, AST)

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.

Vendor Insurance Coverages

If you hire contracting services i.e. mechanical / equipment repair, general construction, HVAC, plumbing, electrical, roofing…, landscaping, herbicide & pesticide application…, pool maintenance… you should confirm the vendor has contractors pollution liability coverage.  

Contractors Pollution Liability (CPL)

Contractors Pollution Liability (CPL) insurance protects the insured should they cause or exacerbate an environmental condition while performing their contractor services.  CPL protects the insured for covered operations performed by or on behalf of the insured, while operating away from any premises they own, rent, lease or occupy.

CPL can be offered on a claims made or occurrence basis.  Coverage can be written on a job specific basis, owner controlled or blanket basis to cover all the work performed by the insured.  Most policies can be endorsed to cover transportation pollution liability, mold, lead, and asbestos, defense outside the limits, off-site disposal coverage, and more. 

If the vendor is a transporter refer to transportation pollution liability above.

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 

1. 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. 
2. 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. 
3. 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.  
4. 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. 
5. 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. 
6. 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. 
7. 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.
8. 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. 
9. 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.
10. 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:

1. 1. 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.  
   2. 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.