Environmental Claim Scenarios for Commercial & Retail Spaces
In the past, stores were often stand-alone structures, which meant that whatever environmental issues they experienced were typically contained within their own property boundaries. Today, stores are usually part of large shopping malls or strip malls. They no longer stand alone and the environmental impact of one retail establishment will often affect others in their vicinity.
Tenants at shopping centers may include restaurants (grease, cleaning solvents, mold), nail salons (solvents), auto parts stores (oils, solvents, batteries), as well as many others. While one of these would be considered “hazardous” operations, all have the potential to adversely affect the environment through a release, a fire, or improper handling of materials. They can all certainly experience environmental issues themselves as well, creating bodily injury claims, loss of business income, and other first party issues. Take a look at some real life pollution claims for retail spaces:
A strip mall owner upgraded the heating system for all of his tenants. While working in one of the stores, the contractor failed to vent the system properly, causing a release of carbon monoxide. Store employees and customers complaining of headaches and nausea were rushed to the local hospital. As a result, several bodily injury suits were filed against the strip mall owner.
A permanent lender placed a loan on a community shopping center. After an anchor tenant moved, overall tenancy at the property suffered and the loan went into default. An environmental site assessment discovered contamination at the property traced to a dry cleaner – one of the tenants that had vacated the premises. The lender was unable to find the responsible party from the dry cleaning establishment, and the limited partnership, which owned the property, filed for Chapter 11 bankruptcy protection.
A pension fund investor had provided a first mortgage loan on an urban office building. Years later, when the major tenant vacated the property, the loan went into default. Prior to foreclosure, a Phase I environmental site assessment was completed which indicated no areas of concern. After foreclosure, the lender retenanted the property and listed it for sale. A buyer was found who completed a Phase II environmental site assessment as part of their due diligence prior to completing their purchase. The Phase II investigation discovered underground contamination from petroleum based products, and the buyer refused to go forward with the sale.
A retail bakery in a shopping center used large ovens to bake an average of 3,000 loaves of bread each day. The ovens were heated with No 2 fuel oil, which was stored in a 20,000 gallon aboveground storage tank. The tank failed catastrophically, causing a breach of the secondary containment and the release of fuel oil to surrounding soils and an adjacent river. Claims and loss of business costs exceeded $1.5 million.
Employees attempting to repair a refrigeration system at a big box retailer caused a release of ammonia. Shoppers and adjacent store owners were overcome by fumes and had to be treated at a nearby medical center.
A fire broke out in a office facility, which resulted in toxic fumes being emitted into the air. The insured was sued by nearby third parties and had no coverage nor defense via their General Liability policy. The lawsuit has not yet settled; meanwhile the insured spent over $80,000 in defense costs.
A couple claims a loss of business and bodily injury due to growth of toxic molds in a rental space leased from the defendants interior design business. The husband and wife claimed economic damages in excess of $1.8 million and general noneconomic damages of an additional $3 million.
For more information or to discuss a specific account, contact us today.
These claims examples have been provided to us by our insurance companies. While the coverages we offer are designed to address these general issues, we make no guarantee or warranty that any individual policy we offer will respond to all issues as described herein. Please refer to the actual policy wording in each offered form to determine coverage applicability and acceptability.
Type: Blog
Topic: Claims Scenarios, Commercial, Retail
