Insuring a Property: Site Pollution Liability

As the United States recovers from the economic crisis over the last few years, we are once again seeing growth in the acquisition and transfer of properties. The issues that arise from the sale or purchase of these properties at times can be a Pandora’s Box. The options to either borrow money to finance the purchase of a property, or to use your own money to do so, does not change the driving need in today’s marketplace to have environmental liability insurance in place to protect the investment.

There are many issues that must be addressed when thinking about Site Pollution coverage for these types of risks:

  • What has the property previously been used for?
  • What will the property be used for in the future?
  • What policy limit of insurance will cover your contractual needs or make you feel safe in the event of a loss?
  • Are you concerned with first party triggers or will third party be enough?
  • Will you want pre-existing coverage, new conditions only, or both?

With answers to all the questions above, your wholesale broker will be able to advise you on the specific coverage you may need and the number of insurance carriers that are willing to write this type of coverage. Each insurance company has its own unique form, so it is crucial to carefully review them to make sure there is a complete understanding of what it does—and doesn’t—cover. It is important that most properties have Site Pollution Liability insurance, which is designed to cover claims arising from pollution releases at, on, or emanating from a specific scheduled location. Securing Site Pollution Liability insurance is a key coverage to have since claims arising from a pollution condition from a property may not be covered under the General liability or Property coverage form.

Who buys Site Pollution Liability?

  • Property Owners, Operators, and Managers.
  • Industrial facilities, including recyclers, storage sites, landfills, warehouses, manufacturers, etc.
  • Any purchasers or sellers of properties.

The minimum premiums can start in the $5,000 to $10,000 range with deductibles as low as $10,000; but, on average, coverage ranges between $25,000 and $50,000. Both price and deductible can go as high as the risk demands.

The EPA continues to set regulations on how businesses operate so that they are held accountable for their actions and any issues resulting from them. An insurance claim on an uninsured property can have devastating repercussions. Take this opportunity to help your clients protect themselves from a potentially disastrous financial loss and secure the future of their businesses and workforces.

Site Pollution Claim Scenarios:

  • A property owner had his drinking water well tested prior to selling his land. Testing revealed that the well contained an alarmingly high concentration of total petroleum hydrocarbons. Further investigation revealed that the source of contamination was several dozen drums of waste oil and maintenance fluids buried on a neighboring farm. Though the previous farm owner buried the drums, the current owner was nevertheless responsible for disposal of the drums, soil and groundwater cleanup, and bodily injury and property damage claims submitted by the neighboring property owner. Total costs exceeded $1,000,000 and caused the farmer’s bankruptcy.
  • A large college disposed of its science lab wastes in a 53-year-old, 20,000-gallon underground storage tank. The underground tank ruptured and contaminated the soil, the private wells and the groundwater that flowed into a nearby reservoir. Several third parties sued the university, with claims totaling $450,000. In addition, costs to clean up the reservoir amounted to $1.1 million.
  • A maintenance garage that used solvents for parts washing performed the work over a drain leading to an on-site septic system. Over time, the septic system leach fields migrated into the surrounding soils and groundwater. At the time of the septic system closure and conversion to a public sewer system, the contamination was discovered. Site remediation involved soil removal and the installation of a groundwater recovery system. The costs exceeded $720,000.
  • 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 warehouse utilizing an on-site septic system experienced periodic chemical and contaminant spills when floors were hosed down and the washwater entered the system. After some time, samples from neighboring residential wells showed that contamination originated at the warehouse location. Soil and groundwater cleanup costs exceeded $365,000.