Nothing to Lose

Kate McGinn XL Insurance — Environmental www.xlinsurance.com Exton, Pa.

SOME WASTE FACILITIES may be thinking, “not my problem,” when they hear about the environmental worries of more “risky” members of the industry such as landfills and hazardous waste haulers.

It's true that recycling centers, municipal transfer stations and scrap recyclers are less likely to suffer a severe environmental loss than their higher risk colleagues, who deal with such issues as methane gas, odors or leachate. But lower risk operations face the possibility of environmental impact too.

Take the case of a Florida scrap recycler last year. The privately owned facility was fined for environmental damage because it was suspected of illegally disposing of waste tires and other solid waste material such as waste oil, anti-freeze and acetone. Additionally, the waste violations stemmed from the owners' disposing of solid waste on county-owned property adjacent to their own property. The facility was ordered to pay $19,000 in restitution and was required to properly dispose of the waste and cleanup the site at its own expense.

Poor choices often lead to big financial losses, and making sound decisions is an important component of effective risk management. Fortunately, the waste industry is being offered more options with regard to its insurance coverage and its ability to purchase coverages that address specific needs and financial budgets.

For instance, a new kind of general liability (GL) program enhanced with pollution coverage recently was introduced to the market. The program is designed for low-hazard facilities and combines both general liability and pollution coverages in one policy.

Standard GL policies have an “absolute pollution exclusion,” which help to protect insurance carriers from potential losses associated with long-term or gradual pollution exposures — such as years of waste dumping or chemical discharges — by restricting insurance coverage to “sudden and accidental” pollution events.

The pollution exclusion, however, left many businesses with a gaping hole in their insurance coverage. As a result, a whole new environmental insurance industry formed to meet the environmental risk management needs of various industries, especially the waste industry. In fact, stand-alone environmental coverage has helped treatment, storage and disposal facilities (TSDFs) meet their legal requirement to show financial assurance in the event of an environmental incident.

To adequately protect high-risk businesses against their environmental exposures, a separate environmental policy may still be the best choice. However, businesses with minimal environmental exposure may benefit from an enhanced GL program. The pollution coverage in this particular program provides coverage for third-party bodily injury, third-party property damage, third-party off-site remediation expense and legal defense expense, within the limits of liability and subject to pollution self-insured retention.

In light of the growing availability of either stand-alone pollution coverage or pollution-enhanced GL programs, low-risk waste facilities should be more reluctant to go completely bare. With the option to combine environmental coverage with general liability, it's becoming a “no brainer” for even the lowest-risk facilities to include some form of environmental insurance protection in their risk management plans.

QUESTIONS TO ASK WHEN CONSIDERING POLLUTION-ENHANCED POLICIES: