Not Cleaning Up Someone Else s

Transcription

1 Not Cleaning Up Someone Else s Mess Understanding and Managing Environmental Claims George Boire Environmental Practice Leader Marsh Canada Mark E. Samis, M.Sc., M.B.A., P. Geo. VP Environmental Science Pario Engineering and Environmental Sciences

2 Common Environmental Exposures and Losses First-Party Cleanup Third-Party Regulatory and Legal Business Risks Cost overruns for pre-existing conditions Discovery of unknown preexisting conditions Re-opener of closed issues Offsite cleanup Property damage Bodily injury Loss of value Natural resource damage Toxic tort claims Off-site disposal legacy Fines and penalties Governmental reopeners Business interruption Loss of rents Increased development costs DEFENSE COSTS, WHICH ARE ALSO INCLUDED, CAN OFTEN BE AS IMPORTANT AS ACTUAL CLAIM COVERAGE

3 Types of Environmental Insurance Pollution Legal Liability (PLL) also referred to as Fixed Site Environmental Impairment Liability (EIL) Contractors Pollution Liability (CPL) Storage Tank Liability

4 Pollution Legal Liability Insurance Overview Insures against risk of Pollution Conditions Known conditions generally excluded Coverage for third party claims if localized/delineated and/or risk assessed Common uses: Operational and Legacy Risk Management M&A/Transactions Coverages Clean-up of new Pollution Conditions Clean-up of unknown Pre-existing Pollution Conditions Third party liabilities (e.g Bodily Injury/Property damage) Business Interruption Non Owned Disposal Sites Transportation Fines and Penalties Coverage Excess of Indemnity Divested Properties Legal Defense for all of the above

5 Types of Environmental Claims Many environmental liability type policies allow for both: First Party Discovery Claims 3rd Party Liability Claims (including claims from Regulatory bodies)

6 Disclosure Who Knew What and When? Known Conditions must be disclosed prior to binding coverage Non-disclosure can be basis for claim denial What is a Known Condition? Who is a Responsible Insured?

7 What Constitutes Discovery? Definitions: Pollutant Pollution Condition Remediation Standards When did you discover the Pollution Condition?

8 Emergency Costs vs. Remediation Costs Most Environmental policies allow the Insured to incur Emergency Costs (e.g., costs to contain a spill) without the Insurer s express approval Remediation Costs/Expenses generally require the Insurer s approval prior to be incurred As with all claims, timely reporting is important

9 What if the Pollution is Just Passing Through? Up-gradient Neighbouring property(ies) is the source of a Pollution Condition flowing through your site What if your Down-gradient Neighbour and/or the Regulator sues you? Duty to defend

10 Generic Site Examples Flow Through Property Boundaries Road Allowance (Property 3) Property 5 Property 4 Property 2 Property 1 Fuel Tank/Release Point

11 Generic Site Examples Multiple Pollution Conditions 1. Rail Line 3. Loading Racks 2. Rail Spur 9. Drum Storage Floor Drains 7. Oil/Water Separator CB Main Gate Main Plant 8.Loading Docks CB 4. Transformer 5. Backup Generator 6. Diesel AST Fuel Tank/Release Point

12 Road Allowance Multiple Potential Sources Storage Tanks Pump Islands Storage Tanks Gas Station Gas Station Pump Islands Road Allowance Gas Station Pump Islands Storage Tanks Multiple Plumes/Multiple Sources

13 Using Forensic Engineering to Resolve Claims Soil/groundwater analysis data can be used to help determine the type, source and/or age of contaminants Part II of the presentation Mark Samis from Pario Engineering and Environmental Science

14 Some Concepts Type of pollutant Age of pollutant Direction of migration 3rd party liability How clean is clean Mechanism of the Loss Was it ours? Was it within the coverage period? (Age of the contamination) What needs to be done within the policy and prevent 3 rd part impacts? Implications of not cleaning up How many events/deductibles? Options for file closure Are there co-mingled plumes Who else can we invite to the party

15 Methodology 1. Understand the site, it s history and that of adjoining sites Was this product ever used at this site? 2. Employ a staged approach to sampling and laboratory analyses Have a clear objective Regulatory compliance is different than forensics 3. Multiple lines of evidence Laboratory Site History Travel times and directions

16 What Type of Pollutant? Most Common Pollutants Gasoline Kerosene/Jet Diesel/Heating Lube Oils Light-end - Middle distillates Heavy End More soluble in water More volatile More biodegradable Migrates quickly Less soluble in water Less volatile Less biodegradable Very low solubility in water Not volatile Not very biodegradable Migrates slowly

17 Weathering of Contaminant Contamination weathers depending on: Exposure to oxygen/potential to volatilize Water washing different solubilities of different compounds Biodegradation Changes finger print (chromatograph) Influences clean up approach Not necessarily a silver bullet

18 Not Cleaning Up Someone Else s Mess Establish background Background concentrations Next to major highways are highly variable and can be in the 1,000 of ppm range Take source sample Take background samples Clean up the appropriate hydrocarbons. Differentiate between old and recent (if possible).

19 Not Cleaning Up Someone Else s Mess Heavy oil, rubber, motor oil Asphalt natural organics

20 Not Cleaning Up Someone Else s Mess Diesel range

21 Fresh Diesel Not Cleaning Up Someone Else s Mess Diesel (75% weathered)

22 Collecting the right data at the outset of the project can be critical when there is subrogation involved or if there are preexisting impacts not related to the subject release or is not covered. Don t always know there is are pre-existing impacts when a project is commenced. Collect source samples, background etc. Don t skimp on sampling

23 Example 1 Multiple potential sources adjacent to each other Same potential product, at least it appeared to be Multiple aquifers Hydrogeology suggested from another source

24 Well A Impacts appeared consistent with time Well B Impacts appeared to be changing with time

25 Example 2 Fuel Oil Spill Tank and spill location Oil spill occurred Monitoring wells were install within 1 week Impacts were found upgradient Impacts were found downgradient as far as 50 metres in 1 weeks Groundwater flow velocity was estimated to be 0.5 metres per year There were no BTEX, very little F2 and significant F3 and some F4

26 Example 3 Gas Station Diesel plume Gasoline Plume Breaks in the lines X X X Multiple line breaks Diesel up-gradient Diesel not sold during the policy period Tanks - Gas X

27 Options Clean up the impacts immediately Longer-term clean up Partial clean up Risk assessment Pay out limits Technical expert is there to provide options, implications and cost estimates so the insurance professional can manage the claim

28 Questions