Things You Should Know about Pollution-Related Incidents and Your Insurance Coverage

By Geoff Stathos

It is important to understand what exposures you have when it comes to pollution claims, because a pollution-related accident can be costly. Here are just two examples.

Costly Accidents

Recently we had a client lose control of his vehicle. The pickup landed upside down in the median strip of Interstate 5. The driver was OK, but a 110-gallon diesel fuel tank mounted in the bed of the pickup started to leak fuel onto the ground. Due to the amount of diesel fuel escaping, the Department of Environmental Quality (DEQ) was called to assist with the cleanup.

The spill resulted in the need for a backhoe to remove the contaminated soil, and a trucking company was dispatched to haul the contaminated soil to a hazardous waste dump. Total emergency response costs totaled $35,000.

Another pollution incident happened when a logging contractor was moving a delimber across a bridge, and the bridge collapsed resulting in the machine lying on its side in a river. Immediately oil, solvents, and fuel began leaking into the river, with a fish hatchery several miles downstream.

DEQ responded to the incident and had the fish hatchery set out absorbent booms to soak up the oil, solvents, and fuel before it reached the hatchery, possibly killing the fish. As a result of this incident, no fish were lost but the expense of having the fish hatchery set out its absorbent booms and monitor the situation until the delimber could be removed from the stream was expensive. The total cost of the spill was $45,000 and billed to the contractor.

Will the insurance company defend and pay the claims described above?

When it comes to pollution claims, insurance companies will offer limited coverage in the Business Automobile Policy. For example, if the fuel used to power the vehicle causes a pollution incident, you have coverage or if you hit another vehicle that is transporting pollutants, you have coverage.

What about the diesel fuel and oil that are hauled in the back of pickups, service trucks, etc.?

There are insurance carriers that offer pollution coverage for transporting off-road diesel, oil, and solvents, but this is added to the Business Auto Policy by endorsement, and the insurance company will normally make a premium charge per vehicle or a flat premium charge based on the exposure. Without this pollution endorsement, the logging contractor has no insurance for pollutants that are being transported in the back of a vehicle.

When it comes to the delimber lying in a river, it can be more complex. Some insurance companies will provide pollution coverage for Inland Marine Equipment (a delimber falls under this category) for sudden and accidental pollution incidents such as described above, providing the event was unexpected and unintended from the standpoint of the insured.

However, several insurance companies will endorse the Commercial General Liability Policy with Absolute Pollution Exclusion and provide no pollution coverage with respect to heavy equipment. This endorsement must be discussed with your insurance agent.

What can the logging contractor do to protect himself in the event of a pollution claim?

Communicate with your insurance agent. Bring up the examples that I have mentioned and ask how your insurance policies will respond to these types of incidents and whether you have the proper coverage. Also ask if your current insurance program can be endorsed to protect you in the event of a pollution claim resulting from your vehicles transporting diesel or oil. Additionally, see if your General Liability Policy will respond for heavy equipment pollution losses providing the loss is unexpected and unintended.

Have your insurance agent also explore the option of a separate Pollution Policy for your company. These policies are normally broader than the coverage we find in the Business Automobile Policy and Commercial General Liability Policy. They will provide coverage for Contractors Pollution Exposures and can be expanded to also cover transportation exposures for your vehicles. I have found that these policies are best suited for accounts that transport large quantities of fuel in fuel trailers or fuel trucks or have a large fleet of vehicles that transport pollutants.

The examples I have described above do not address contaminated soil at your business locations that can seep into ground water, surface water, roadways, etc. Logging contractors are subject to all kinds of pollution claims. What I have described are the two most frequent claims we see with our logging contractors.

Address the Problem before It Happens

It’s important to assess the potential exposures you have regarding pollution claims. Pollutants are stored in the shop, on vehicles, in equipment, and on the jobsite. It’s also important to assess your exposure to loss and either elect to minimize your exposure, self-insure, or pass the exposure off to the insurance companies.

Geoff Stathos is a sales executive of Propel Insurance, www.propelinsurance.com.