Tag: Recycling

  • Scrap Metal Recyclers

    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 Scrap Metal Recyclers 

    Include, but are not limited to:  PFAS Chemicals;  Storm water runoff;  Asbestos or lead containing materials;  Pollution events as a result of a fire;  Halon releases from fire suppression equipment;  Spills and leaks from the storage and handling of material containers, drums…from vehicles;  Metals with radioactive contamination;  Illegal placement of waste on your property by an unknown 3rd party (Midnight Dumping);  Air emissions;  Vapor Intrusion;  Above and underground storage tanks;  Pollutants on neighboring properties migrating onto yours;  Waste storage/handling practices;  Water and waste water treatment operations;  On site storage of raw materials;  Lubricant oils;  Product cleaning and chemical treatments;   Unsealed truck ramps and work yards;  Uncertainties about the historical use and conditions of property and neighboring properties;  Inadequate or no auditing of hazardous and non-hazardous waste handlers, transporter and disposal companies;  Nuisance odors;  Utilities that cross property;  Natural resource damages;  Silica;  Mold;  Tenants causing a pollution event at one of your leased locations;  and more…  

    Quick Facts

    • There are upwards of 2,000 different contaminants associated with the plastics industry. Examples of some of these contaminants are; antioxidants, asbestos, fillers and reinforces, formaldehyde, heat stabilizers, lubricants, peroxides, preservatives, ammonia, crude oil, flammable retardants, solvents, styrene. 
    • Per the EPA, five of the top six chemicals that are regulated as hazardous waste are commonly produced during the manufacturing and recycling of plastics and electronics. 

    Environmental Claim Scenarios – Operating Locations

    1. A recycling facility caught on fire. While fighting the fire, the fire department’s high-pressure hoses forced melting plastics, metals, insulation, roofing, drywall, chemicals, and other materials onsite to comingle, creating a toxic “sludge”. Some of the “sludge” flowed onto neighboring properties. The recycler was responsible for clean-up, 3rd party property damage & business interruption, and natural resource damages, which totaled over $4,000,000.  NOTE: fire departments are immune from liabilities that may arise from their services.
    2. A scrap metal recycling facility was sued when contamination was discovered in the drinking water at a neighboring property. After further investigation, it was determined that the recycler’s property was not the source of the contamination. The recycler was eventually released from the lawsuit. However, they had to expense more than $40,000 in legal defense fighting the suit. 
    3. A scrap metal recycler had a load contaminated with radioactive cesium get past their detectors and contaminated their line and bag house.  Cost to package, ship and store the waste exceeded $10,000,000
    4. During the night, an unknown party illegally placed drums of hazardous waste at a scrap metal recycling facility.  The containers were not leaking, but had to be tested and properly disposed of at the property owner’s expense. Total cost of the claim for the recycling facility was roughly $50,000. 
    5. Over a period of several decades, a scrap metal recycling facility performed outdoor crushing operations on an unpaved area of the property. Every time it rained or snowed, small amounts of oils and other pollutants washed off the materials / machinery and into the soil. During re-development at a neighboring property, pollutants were discovered and traced back to the recycler’s property. After further investigation, additional neighboring properties we’re found to be impacted as well. Investigation, remediation, legal defense, and 3rd party business interruption cost the recycling facility over $4,000,000.  

    Environmental Claim Scenarios – Transportation 

    1. A scrap metal recycler hired a waste hauler transport its waste materials to a 3rd party disposal site. During transportation, the hauler got into an accident, causing the truck to overturn and spill its load into a nearby stream.  Under CERCLA, the recycler must contribute for their apportionment of the load for cleanup cost since federal law states that you own your waste from cradle-to-grave.  Cost to settle the claim for the recycler was $100,000. 
    2. While picking up a vehicle to tow back to their facility, the driver for the scrap metal company backed into an aboveground fuel storage tank. The fuel escaped the tank’s secondary containment, and released into the surrounding area. Total cost of investigation and remediation was over $150,000. 

    Overlooked Benefits of Environmental Liability Insurance

    Unlike most liability exposures impacting scrap metal recyclers, pollution losses are not a frequency risk, but rather a severity risk. Since all scrap metal recyclers have 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 the clean-up costs are far less than other costs that can arise from the loss. Such as; 

    1. Defense Costs:  Environmental liabilities are relatively new & very litigious.  Even if you do nothing wrong you can still get named in a suit & 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:  Often, the cost to clean up the environmental condition is far less than the associated claims 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 cause an environmental condition.        

    Environmental Liability Insurance Products 

    Premise Pollution Liability (PPL)

    PPL provides coverage for economic loss caused by pollution that actually or allegedly originate from an owned or leased location.  Sometimes referred to as Environmental Impairment Liability (EIL), this coverage is for those who own, operate, lease, or have any other insurable interest in real property / the operations taking place at that property. 

    Policies typically include coverage for on/off-site cleanup, legal defense, 3rd party bodily injury and property damage, 3rd party business interruption, legal defense, Non-Owned Disposal Site Liability (NODS), Transportation Pollution Liability (TPL), and aboveground storage tanks. PPL policies can also cover underground storage tanks, 1st party business interruption (lost revenues incurred by the named insured should a pollution event cause their operations to be suspended).  

    PPL policies can be written to address both unknown preexisting conditions, and new conditions. However, to cover unknown pre-existing conditions, insured’s must provide copies of a recently performed environmental site assessment report for the scheduled property(s).   

    PPL policies can be written with term lengths of 1-year to 5-years, and multiple properties can be scheduled on a single policy, providing a per location premium saving when compared to individual locations on separate policies. 

    Transportation Pollution Liability (TPL)

    Generally, Business Auto or Truckers policies will exclude pollution losses arising from spills or other releases of their cargo. Broadened auto pollution liability (typically Form CA 9948) affords coverage during the loading, unloading and transportation, for a spill, release or sudden upset and over turn of transported cargo.                    

    Note:  You have potential indirect environmental exposures from the vendors you hire and products you purchase.  Should one of your vendors cause or exacerbate an environmental condition during the loading, unloading, and transporting of your product, your ownership of that product creates liability. It is important to require your trucking contractors to carry Transportation Pollution Liability. 

    Contractors Pollution Liability (CPL)

    CPL coverage protects you from liability for pollution conditions you cause or exacerbate while performing work away from your scheduled properties, whether being performed by you, or on your behalf by a 3rd party. For recyclers, CPL would cover work you perform in the field, such as breaking down materials at a customer’s / supplier’s location prior to shipment to your processing facility. 

    Property Transfer Coverage

    When buying or selling property there can be unknown preexisting environmental conditions. Since a Phase I, Phase II, All Appropriate Inquiry (AAI) 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.  Property buyers have negotiated lower interest rates by blending property transfer coverage with their mortgage. 

  • Plastic Recyclers

    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 Plastic Recyclers

    May include, but are not limited to:  Air emissions;  PFAS Chemicals;  Vapor Intrusion;  Above and underground storage tanks;   Insufficient secondary containment for above ground storage tanks;  Waste storage/handling practices;  Water and waste water treatment operations;  On site storage of raw materials;  Lubricant oils;  Products cleaning and chemical treatments;   Unsealed truck ramps;  Uncertainties about the historical use and conditions of property and neighbors;  Paint sludge;  Inadequate or no auditing of hazardous and non-hazardous waste handlers, transporter and disposal companies;  Nuisance odors;  Adverse reactions and interactions of chemical compounds that accidentally commingle during a fire;  No emergency response training for employees;  Halon releases from fire suppression equipment;  Spills and leaks from the storage and handling  (loading/unloading) of material containers such as drums, totes or bags from vehicles;  Utilities that cross property;  Corroded wastewater and storm water sewers;  Natural resource damages;  Asbestos or lead containing materials;  Silica; Mold;  Storm water runoff;  Devaluation of property due to known / perceived pollution conditions; and more…  

    • There are upwards of 2,000 different contaminants associated with the plastics industry. Examples of some of these contaminants are; antioxidants, asbestos, fillers and reinforces, formaldehyde, heat stabilizers, lubricants, peroxides, preservatives, ammonia, crude oil, flammable retardants, solvents, styrene. 
    • According to the EPA, five of the top six chemicals that are regulated as hazardous waste are commonly produced during the manufacturing and recycling of plastic packaging.  
    • Due to the variety of hazardous chemicals found in plastics, tight controls must be in place to ensure environmental conditions are properly mitigated. 

    Environmental Claim Scenarios

    1. A fire ignited at a plastic recycling facility. Water used by the fire department to extinguish the flames became contaminated by a toxic slurry like mixture from the melting materials inside the building. The high pressure hoses forced the contaminants to flow off the property, which included a local stream. Emergency remediation contractors began investigating and found that the pollutants had entered the stream and had flowed downriver into a lake. Because the fire department is immune from pollution claims while in the course of duty, the plastics manufacture was held liable for the claim, which included natural resource damages (including loss of aquatic life), investigation, remediation, 3rd party bodily injury from toxic fumes, and 3rd party business interruption claims as local business being forced to shut down during the cleanup. Total cost of the loss exceeded $6M.
    2. While moving a large metal coil, a forklift operator hit an aboveground storage tank, allowing the contents to flow out of the containment. Total cost of investigation and remediation cost the recycler over $150,000. 
    3. A plastic manufacturer stored a drum of caustic chemicals next to a drum of highly reactive acid. When a forklift disturbed the drums, their contents were released, causing a violent reaction. Fumes spread over the neighboring properties.  Forty plaintiffs filed three lawsuits to recover damages for injuries suffered from exposure to the air emissions, damages topped $3 million. 
    4. A plastic recycler operated an extrusion machine. A portion of the machine was located beneath the floor. For more than 20 years, lubricating oil from the machines moving parts was released into the surrounding soils. When a nearby homeowner’s down gradient well used for potable water was tested, it contained total petroleum hydrocarbons. After further investigation, it was found the manufacturer’s property was the source of the pollutant. Total cost of remediation and 3rd party bodily injury claims exceeded $5,000,000.
    5. A plastics recycler hired a waste hauler transport its waste materials to a 3rd party disposal site. During transportation the hauler got into an accident, causing the truck to overturn and spills its load into a nearby stream.  Under CERCLA, the recycler must contribute for their apportionment of the load for cleanup cost since federal law states that you own your waste from cradle-to-grave.  Cost to settle the claim for the recycler was over $100,000. 
    6. A plastic recycling plant was sued by a neighbor who alleged that dies stored at the facility had leaked or been spilled due to improper environmental management practices. The adjacent property owner contended they had been forced to purchase a new building and relocate their staff and business as a result of the contamination. Cost to the plastics recycler to remediate the problem along with third party claims came to $2,000,000.  The adjacent property owner also claimed their normal business operations had been interrupted and the pollution has interfered with the use of the property, and resulted in a diminution in their property value.  In total, the adjacent property owner was seeking damages in excess of $50,000,000.  Additional defense costs for the plastic recycler was an additional $250,000.
    7. A plastic recycler shipped their plastic pellets to 3rd party locations over an unsealed truck ramp.  The recycler’s unloading process allowed for the plastic pellets to find their way into the local sewer system.  Over time, the accumulation of plastic pellets clogged the sewer system and caused for sewer backups.  Property damage and cleanup claims exceeded $700,000.

    Benefits of Environmental Liability Insurance

    Unlike most liability exposures impacting Plastic Recyclers, pollution losses are not a frequency risk, but rather a severity risk. Since every Plastic Recycler 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. 

    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 often arise from the loss.

    Three Overlooked benefits of environmental liability insurance:

    1. Defense Costs:  Environmental liabilities are relatively new & very litigious.  Even if you do nothing wrong you can still get named in a suit & 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 cause an environmental loss.        

    Environmental Liability Insurance Products for the Plastic Recyclers

    Environmental Impairment Liability (EIL) 

    EIL is for plastic manufacturers susceptible to economic loss caused by pollution that actually or allegedly originated from their operations.  Sometimes referred to as Premise Pollution Liability (PPL), 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 multiyear terms, and multiple properties can be packaged on a single policy. 

    Contractors Pollution Liability (CPL)

    CPL Coverage protects the insured for pollution conditions they may cause or exacerbate while performing work at a 3rd party locations. This is for covered operations performed by or on behalf of the insured. For manufactures, CPL would cover any work they perform for their customers at their customer’s location, such as servicing, installation, and monitoring. 

    Transportation Pollution Liability (TPL)

    Generally, Business Auto or Truckers policies will exclude pollution losses arising from spills or other releases of their cargo. Broadened auto pollution liability (typically Form CA 9948) affords coverage during the loading, unloading and transportation, for a spill, release or sudden upset and over turn of transported cargo.                    

    Note:  For plastic manufacturers, you have potential indirect environmental exposures from the service vendors you hire and products you purchase.  Should your vendors cause an environmental problem or exacerbate an existing environmental issue their general liability insurance policy probably will have either an, absolute or total pollution exclusion.  

    How do you receive your raw materials?  Do you purchase the materials FOB point of shipment?  If you do, when your raw materials leave the shipping dock you are the owner.  What is your strategy if there is an accident while in transit and your raw materials cause a pollution loss?  

    Products Pollution Liability 

    Products Pollution Liability is for recyclers that make and/or distribute a product, that if faulty, could cause a pollution incident. This coverage can be written on a stand-alone policy, or included on an environmental impairment liability policy. For Environmental Insurance markets to consider offering this coverage, they typically prefer the product be intended for commercial use, as opposed to mass distribution to the general public. 

    Property Transfer Coverage

    When buying or selling property there can be unknown preexisting environmental conditions. Since a Phase I, Phase II, All Appropriate Inquiry (AAI) 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.  Property buyers have negotiated lower interest rates by blending property transfer coverage with their mortgage.  

  • Aggregate Crushing & Project Waste Management Contractors

    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 non-environmental contractors assume that claims arising from operations are covered by the general liability policy. However, claims resulting from a “pollution incident” are excluded from most general liability policies, which leaves many of these contractors exposed to potentially uncovered claims. What pollutants are impacting your business?

    Environmental Exposures 

    Include, but are not limited to: puncturing unknown underground storage tanks or utilities; release of oils/fuels from equipment; spills from mobile storage tanks; excavating through and/or spreading of unknown preexisting contaminated soil; using unknown contaminated material as fill; storm water runoff; puncturing unknown illegally buried drums or containers; lead; asbestos; silica; no auditing of waste handling and disposal companies; natural resource damages; vapor intrusion; storage and/or transportation of raw materials; business interruption expenses; leaks from hydraulic fluid; products pollution liability; raw materials stored and utilized in large quantities (i.e. acids, bases, compressed gases including cyanide and hydrogen chloride, diesel fuel and lubricant oils, flammable paints and solvents);  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; halon releases from fire suppression equipment; spills and leaks from the storage and handling  (loading/unloading) of material containers such as drums, totes or bags from vehicles and/or rail cars; improper characterization of hazardous waste…       

    Environmental Claim Scenarios

    • A foundry residual recycling operation provided material for a jobsite that 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. Project delays, cleanup costs, and 3rd party property damage claims exceeded $400,000. 
    • A commercial contractor hired a waste hauler to transport its used equipment oil and fluids. 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 carrier had to pay their apportionment of the remediation costs which totaled $450,000.     
    • A crushing contractor was preparing material for a new commercial project. Over the weekend a major thunderstorm destroyed the storm water runoff control system, causing the material to flow down grade through neighboring properties, roads, and into a nearby lake.  The contractor was responsible for cleanup costs and natural resource damages, which exceeded $2,000,000.  
    • 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 $320,000. 
    • A concrete recycling contractor hauled material from a jobsite that contained unknown contaminants. While transporting the material, heavy rains started, which allowed the contaminants in the material to escape from the truck. During the course of transporting the contaminants were found to have spread over a 35-mile route.  EPA fines and remediation expenses were in excess of $300,000. 
    • A concrete demolition contractor ruptured a natural gas pipe while working on a job, which created a large high-pressure release. Due to safety concerns, local authorities evacuated a 2-block radius around the accident while it was being contained, shutting all businesses down within that radius. The contractor was subject to cleanup costs and business interruption expenses in excess of $1,000,000. 

    Overlooked Benefits of Environmental Liability Insurance

    Because environmental losses are a severity risk, rather than a frequency risk, the majority of contractors lack the financial strength to self-insure their potential environmental liabilities. Since every contractor has notable environmental exposures, consideration 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

    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, 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 contactors 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?

    Environmental Impairment Liability (EIL) 

    EIL is for contractors that own, rent, lease, operate or have any other insurable interest in real property (a fixed site facility such as a shop, batch plants, cement manufacturing/mixing plant….) that can be susceptible to pollution liabilities that actually or allegedly originated from the insured property. 

    Coverage can include: Pre-existing unknown pollution, new pollution conditions, first party on-site clean up, third party bodily injury, property damage, business interruption and extra expense, off site cleanup costs, legal defense expenses, transportation pollution liability, offsite disposal coverage….  Multi year term policies can be negotiated. 

    Incidental Professional Liability 

    Professional exposures are generally excluded from General Liability and monoline Contractors Pollution Liability policies. In the course of their normal operations, contractors face all types of professional exposures. They may make slight adjustments on the provided plans to get the job done properly, they may supervise subcontractors, or provide other recommendations which could potentially be questioned in the event of a claim. In the event of a professional claim, will your insurance provide coverage? 

    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 over turn of transported cargo.    

    Underground Storage Tanks

    Financial responsibility requirements ensure that owners and operators of underground storage tank systems have the ability to financially handle a release from an underground storage tank. 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.      

  • Green But Not Clean

    Recycling may be the right thing to do, but it carries its own set of risks.

    By: Susannah Levine  Risk & Insurance

    The recycling industry is poised to continue growing as humans put greater stress on the planet, and technology allows more efficient extraction of useful materials from spent products.

    Although recycling may be green, the process is not clean, and it carries many of the same risks as other heavy industries, plus some additional pollution exposures.

    Even as environmental laws and regulations grow more restrictive, many recyclers still underinsure their operations for pollution.

    Typically, the recycling industry’s claims look like the claims affecting any heavy industry’s. The risks to recyclers of a product are similar to the manufacturer of that product, experts said.

    “When a pollution claim hits, it hits big,” said Daniel Curran, director of underwriting for several of Willis’ environmental programs, including RecycleGuard.

    Many recycling companies underestimate their environmental liability exposure and take a pass on the insurance.

    Even so, the market for pollution insurance is a “sizable” $1 billion — a rough estimate, since hard numbers don’t exist, said Mary Ann Susavidge, environmental chief underwriting officer at XL Insurance.

    The law requires more regulated companies, such as landfills and hazardous waste recyclers, to buy environmental insurance, while others, including “R2 certified” electronic recyclers, are contractually obliged to buy it.

    There are also larger companies that see environmental insurance as true asset protection even if they are not required to purchase it.

    Then, there are some less regulated companies, including paper and scrap recyclers, that tend to have operations of $5 million or less. Those companies often regard pollution coverage as a discretionary expense, experts said.

    “Fifty percent of the accounts I look at gamble on their general liability covering an environmental spill, fire or contamination and they don’t protect their assets,” said Matt Gartner, assistant vice president of underwriting at XL Insurance.

    “They don’t expect an incident, but bad things happen to good people,” he said.

    Stacy Brown, president and managing partner of Freberg Environmental Insurance, recalled a small business with a large above-ground storage tank that dislodged during one of the increasingly frequent major floods on the East Coast.

    The tank floated downstream, struck a tree and spilled five thousand gallons of oil into a river. Fortunately, the company had pollution insurance, which covered the million-dollar-plus remediation that would otherwise have forced it into bankruptcy.

    Many insurance companies request an environmental audit to limit their losses to catastrophic “acts of God.”

    When Brown underwrites a facility, he looks for the company’s degree of compliance with federal, state and local environmental laws. Even before he walks in the door, he looks at publicly available records, compliance histories, permits, and Google Earth, which shows the physical plant, stacks of recovered materials and above-ground storage tanks.

    Regulations guide the underwriting process. If the company handles hazardous materials, are they stored in the proper tanks? Does it have a storm-water management plan? Where does it store used oil?

    “I look at cleanliness. Housekeeping tells a lot about how a company is run,” Brown said. He looks at records, since companies may accumulate certain waste materials for only a certain time, and whether they’re filed neatly or jumbled in a desk drawer.

    He interviews management to understand how tightly they run the facility and line workers to understand how they do their jobs. Are they draining fluids the right way?

    The consultation with compliance experts is collaborative, not confrontational, he said.

    Noncompliant companies eventually get shut down and expose themselves to expensive engineering remedies. They also suffer reputational loss, which can be as crippling as the cost of corrective action.

    “It’s cheaper to stay in compliance,” Brown said.

    Bad Company

    And it’s cheaper to do business with compliant recyclers. Under Superfund Section 107, said Bill McElroy, senior vice president at Liberty International Underwriters, the chain of liability extends from material producers, through transporters, waste brokers, recyclers, and the people who buy the recovered materials.

    For example, 255 defendants — mostly upstream industrial producers — were named in United States vs. Chemetco Inc. et al., in which a now-bankrupt recycler of copper-bearing scrap and manufacturing residue pleaded guilty in 2001 to violating the Clean Water Act by secretly installing a pipe that illegally dumped metal-filled wastewater into a creek for a decade.

    The plaintiffs were fined $3.8 million, and the property is now a Superfund site.

    Not only do upstream producers have liability under the Resource Conservation and Recovery Act (RCRA) for the misdeeds of the rare recycling “bad actor,” said Kim Ferraro, a senior staff attorney with the Hoosier Environmental Council, an Indiana environmental advocacy group, but so do responsible buyers of a site contaminated by previous owners.

    Ferraro represented the plaintiffs in Adkins et al. vs. VIM Recycling, which couldn’t keep up with the volume of waste — engineered woods, plastics, steel, padding, drywall, etc. — from nearby recreational vehicle manufacturers in Elkhart, Ind.

    The waste accumulated in 100-foot-high piles, Ferraro said, and rotted noxiously when exposed to the elements, sickening neighbors with its smell and dust emissions, and contaminating the groundwater.

    When a spark ignited in a dirty grinder, the plant went up in flames, killing one worker and injuring another. VIM did not have the permits to do business legally, let alone pollution insurance, Ferraro said.

    The RV producers whose waste VIM putatively recycled may have had liability under RCRA, which establishes responsibility for solid waste that creates endangerment. Ferraro considered naming them in the case, but finally did not.

    The neighbors cheered when the court reached a default judgment against VIM, which failed to defend itself in court and went out of business.

    The assets of the operation were purchased by Soil Solutions, which makes animal bedding and landscape mulch from recycled wood chips.

    Although it obtained the proper permits and set up a responsible shop, said its attorney, Ed Sullivan, a partner with the international law firm of Faegre Baker Daniels, the company found itself hobbled by the hostility of the community, as well as lingering problems from VIM’s many failures to satisfy state standards.

    Soil Solutions was added as a defendant to an existing class-action lawsuit claiming the operations were a nuisance and health hazard. As part of an out-of-court settlement, it agreed to process and remove many of VIM’s contaminants.

    The settlement halts the litigation, and allows Soil Solutions to operate on the site for up to five years.

    Lessons learned? Beyond complying with regulations, Ferraro said, it’s important to have cordial relations with the community. Legitimately listen and address the concerns of neighbors.

    And second, she said, don’t buy a business that is being sued.

    Sullivan agreed on the importance of good community relations. “My client tried to do that,” he said, “but the plaintiffs decided early that Soil Solutions was just like VIM.”

    Any kind of environmental operation that creates odor, such as composting yard and waste processing, creates third-party liability and is fertile ground for plaintiffs’ attorneys — even if the operator does everything correctly and has all its permits, said Ken Cornell, executive vice president, chief environmental lines underwriter with Aspen Insurance

    Plaintiffs’ attorneys may comb through regulatory databases and inspections for violations, even administrative errors such as posting the right notice in the right place.

    “Good relations with your neighbors, and make darn sure your record is clean,” he advised. “Have a methodology for dealing with complaints up-front before the neighbors get attorneys.”

  • Following Fatal Blast, Metal Recycler Required to Invest in Modern Technology and Company-Wide Protections to Prevent Future Accidental Chemical Releases

    FOR IMMEDIATE RELEASE
    December 19, 2013

    Dale Kemery : kemery.dale@epa.gov 

    WASHINGTON – The U.S. Environmental Protection Agency (EPA) announced today that AL Solutions, a West Virginia-based metal recycler, has agreed to implement extensive, company-wide safeguards to prevent future accidental releases of hazardous chemicals from its facilities, resolving alleged Clean Air Act violations (CAA) stemming from an explosion at the company’s New Cumberland, W. Va. facility that killed three people.

    “Modern technology is making it easier to assess potential hazards and prevent disasters before they happen,” said Cynthia Giles, Assistant Administrator for the EPA’s Office of Enforcement and Compliance Assurance. “Facilities that handle extremely hazardous substances should be using these tools to protect their workers and those in surrounding communities. Today’s settlement makes this a requirement for AL Solutions, and we hope others take it upon themselves to do the right thing.”

    AL Solutions recycles titanium and zirconium raw materials for use as alloying additives by aluminum producers.  The company currently operates facilities located in New Cumberland and Weirton, W. Va.; Burgettstown, Pa; and Washington, Mo.

    In December 2010, three employees who had been handling zirconium powder at the company’s former plant in New Cumberland, W. Va. died following an explosion which may have been caused by an accidental release of the chemical. Debris from the explosion, which destroyed the production area of the facility, was scattered into the yards of local residents. Earlier this year, the company opened a new, automated facility in Burgettstown, Pa. which includes modern technology to safeguard employees and reduce exposure to hazardous metallic dust.

    The EPA estimates that the company will spend approximately $7.8 million to implement extensive measures to ensure compliance with environmental requirements, assess the potential hazards associated with existing and future operations, and take measures to prevent accidental releases and minimize the consequences of releases that may occur. In consultation with EPA, the company has already completed significant portions of the work required by the settlement and a prior administrative order.

    Among other requirements, AL Solutions must use advanced monitoring technology, including hydrogen monitoring and infrared cameras, to assess hazardous chemical storage areas to prevent fires and explosions. They must also process or dispose of approximately 10,000 drums of titanium and zirconium, or 2.4 million pounds, being stored at facilities in New Cumberland and Weirton, W. Va., both of which are overburdened communities, by December 2014 to reduce the risk of fire and explosion.

    he company will also pay a $100,000 civil penalty to resolve the alleged CAA violations documented during EPA inspections of the New Cumberland, W. Va. and Washington, MO facilities following the explosion. At the Washington facility, inspectors noted evidence of previous fires, burned insulation, fire-affected wiring, and titanium sludge covering large areas of the floor.

    PA’s complaint alleged that AL Solutions failed to conduct adequate hazard analyses, and failed to design and maintain the facilities to take account of the extremely hazardous substances there by providing safeguards consistent with industry codes and standards relating to these substances. The State of West Virginia is expected to file a separate complaint soon alleging that the company violated various provisions related to the unlawful storage of waste at the New Cumberland facility. The settlement will resolve those separate allegations.

    In a related action, AL Solutions recently agreed to pay the U.S. Department of Labor a total of $97,000 to resolve alleged violations of the Occupational Health and Safety Act (OSHA).  The OSHA settlement, which is subject to final approval by an Administrative Law Judge, requires expanded abatement measures that are consistent with the safeguards in EPA’s settlement to provide ongoing worker safety protection at the company’s four facilities. These measures require adequate fire detection systems, process hazard analyses for production areas, regular safety and health inspections, and restrictions on stockpiling combustible materials.

    ince the explosion, EPA and OSHA have coordinated their investigations and shared information, which has resulted in settlements designed to protect workers, communities, and the environment.

    The EPA’s proposed consent decree filed today in federal district court in the Northern District of West Virginia is subject to a 30-day public comment period and final court approval.

    For more information on the settlement: http://www2.epa.gov/enforcement/al-solutions-inc-settlement