Owners and operators of manufacturing facilities have a unique set of exposures stemming from the activities that are part of their daily operations, the premises on which the operations are performed, and handling/distributing the products being manufactured. Exposures may also be present due to the sheer size of these facilities and the amount of goods typically stored on-site at any given time. Beacon Hill specializes in helping agents with this type of insured access the proper insurance to protect them in the event of a claim. We can help you explain the environmental coverages to your insureds, and seek the options that best suit them and efficiently manage the binding process.
Common Environmental Exposures for Manufacturing Businesses
Presence or generation of contaminants.
Unlike many types of pollution exposures, manufacturing risks have a high level of inherent exposure in their operations. Whether it is the raw material used in the manufactured product, cleaners used in the manufacturing process, or the substances used to run and service the machinery, facilities have a significant on and off site pollution exposure. The exposure extends not only to the actual materials handled, but to the waste stream generated by the facility, as well as long term incremental contamination of the property. Exceeding discharge permits or contaminating the local groundwater are both environmental liabilities all manufacturing risks face.
Manufactured product causes a pollution event.
A substantial exposure for manufacturers remains the liability associated with their product. While most CGL programs provide coverage for the failure of the product, many exclude any pollution resulting from that failure. In the case of a manufactured vessel failing and releasing the product it held into a person’s eyes, into a body of water, onto the ground which leaks into the soil, etc., this could lead to a pollution claim. If a product is a blended chemical and it interacts with the environment improperly through miss blending, it could cause a pollution problem. It is important to recognize that the CGL carrier may be able to take any resulting pollution event and use it as grounds for declination of coverage.
Contracting operations performed away from the site.
Some manufacturers may be involved in the installation of their product or in service after the sale. These job site operations can lead to potential environmental issues. Exposure can come from materials brought to the site by the service team (fuels, lubricants, solvents, cleaning agents, etc.) or from an actual accident caused by the service people directly, such as a cut fuel pipe, breached tank wall, etc.
Disposal of Waste – Non-Owned Disposal Site coverage.
Every manufacturing process generates a waste stream of some sort. This may be discharged under permit into the sewer system or a stream, or it may be collected in drums for disposal. Waste retention lagoons are regularly pumped and cleaned, with the resulting byproduct disposed of. As the generator of the waste, the manufacturer retains a degree of liability for the waste, even when it’s been properly disposed of. This can lead to claims at locations completely removed from the insured’s site.
Over the road transportation of products, contaminants, or waste.
Transportation creates a wide range of exposures for all insureds. Whether it is the insured bringing in raw materials or delivering their product, or a third party hired by the insured disposing of waste, a spill on the highway presents an environmental exposure for the Insured. This over the road exposure can come from the Insured operating their own vehicles, or through their contingent liability for those they hire.
Understanding the Unique Risks of Common Manufacturing Classes
On-site storage and usage of hazardous materials—including solvents, adhesives, stains, varnishes, and lacquers—can result in soil or groundwater contamination if these items are improperly stored or disposed of. Volatile organic compounds and other chemicals commonly used in the finishing process may also lead to air emissions subject to environmental regulation. Additionally, the finished furniture itself may contain formaldehyde or flame retardants that can off-gas for years, worsening indoor air quality for consumers.
Processes typical to this class include mercerizing, dyeing, sizing, cleaning and finishing. The compounds used to perform these steps include alkalis, bleaches, heavy metals, solvents and other volatile organic compounds such as flame retardants. These materials and processes pose a significant risk of water contamination, so it is important to carefully review the manufacturers’ chemical storage, wastewater treatment, and waste disposal practices. Chemical residues on fabrics may also cause allergic reactions in certain consumers.
Pulp and paper mills commonly use solvents to bleach and de-lignify pulp, as well as biocides to prevent bacterial growth in finished products. Because the pulping process requires enormous amounts of water, discharges back to surface waters may result in toxic impacts to fish, water fowl, and sediments. Paper production is also energy intensive, leading many mills to have their own onsite coal-fired power plants. These may produce air emissions causing acid rain, or greenhouse gases contributing to global climate change.
Any hazard associated with the production and usage of insulation depends heavily on the product type: foam plastics might utilize chlorine-based chemicals that deplete atmospheric ozone; fiberglass may rely on chemical binders that off-gas, contributing to indoor air quality issues; fibrous materials may be treated with problematic fire retardants. Even products deemed environmentally-friendly may pose a risk if installed improperly. Worse, remodeling projects may release hazardous materials long since banned from use.
This class of business includes not only the producing of commodity chemicals, but also the mixing, blending, diluting, or converting of basic chemicals to make a wide variety of other products. Such activities may cause air pollution from the release of chemical fumes, water pollution from accidental spills or contaminated effluent, or soil pollution from improper storage of hazardous materials. Production waste such as process residues, spent catalysts or solvents, or contaminated containers may cause loss if disposed of improperly.
Herbicide & Pesticide Manufacturers
Similar to other chemical manufacturers, this class is characterized by the bulk storage and transport of hazardous materials. What is unique about this class, however, is that its products are designed to kill certain targeted species. In the event of a fire, explosion, derailment, or other catastrophic release, non-target species (including humans) may be exposed to inordinately high doses of biocides, possibly resulting in claims for natural resource damages, property damage, or bodily injury including death.
Remediation Equipment Manufacturers
Firms that produce equipment (such as oil/water separators or vapor extraction systems) designed to prevent or remediate pollution conditions might seem to present a very low risk compared to other manufacturers. In fact, they are no less vulnerable to loss, particularly due to claims that their equipment failed to remediate contamination, or even worse, exacerbated a known pollution condition. If they also install or service their own equipment, they may be exposed to pollution liability as a contractor.
Storage Tank Manufacturers
Both above- and below-ground storage tanks are manufactured for a specific end use, whether for containment of dry bulk, liquid, or gaseous materials. Their construction features dictate the onsite operations. For example, a facility making steel tanks performs fabricated plate work, steel rolling, cutting and welding operations that may include the use of solvents. A fiberglass tank manufacturer, on the other hand, may use resins, solvents, coatings, adhesives, or foaming agents that known to be sources of toxic air emissions.
Environmental liability insurance policies that address the needs of manufacturers:
What is Site or Premises Pollution Liability Insurance?
Site Pollution Liability insurance is designed to cover claims arising from pollution releases at, on, or emanating from a specific scheduled location. A “location” can be as broad as an entire piece of property or as narrow as a specified storage tank.
Site Pollution Liability Insurance is . . .
What is Contractors Pollution Liability Coverage?
Contractors Pollution Liability insurance (CPL) is coverage designed to protect from third party claims for damages caused by “Pollution Conditions” arising from the insured’s covered operations. Adding “Mold” coverage broadens the defined list of covered pollutants to include molds, funguses, etc.
The policy provides coverage for Bodily Injury . . .
What is a GL/Products Pollution policy?
Products Pollution coverage is a package liability product available to many manufacturers and distributors. A combination GL/Products/Product Pollution Liability policy includes Bodily Injury, Property Damage, and Clean Up coverage for third party claims. The Products Pollution coverage part can be provided by either a stand alone . . .