Insurance News

By Dave Mdave masonason, OPCA Insurance Program Manager

For more information on these articles or the OPCA insurance program please contact Dave at (705) 476-3411 or


Site Operators Pollution Liability Insurance Options

Retailer service station owners have two types of Pollution Liability policies available to insure retail sites from pollution 0incidents caused by spills and leaks.

Storage Tank Liability:

Storage Tank Pollution polices list specific tanks by construction type, age, characteristic and protection.  In the event a storage tank system fails and results in a leak or spill, the insured can seek clean-up costs including restoration, emergency clean-up costs and third party liability in the event the pollutant migrates off the property. This type of policy usually extends to pollution conditions caused by unloading and loading of product.

The key to “triggering” the coverage is that an incident must have occurred and be reported by the insured during the policy period. As stated in the statutory conditions of all insurance policies, the onus on the site operator to prove their loss.

Note the policy does not cover pre-existing conditions, it only covers releases originating from the storage tank system during the policy term.

The cost per this policy is generally $ 1,500 per tank subject to underwriting criteria.

Premise Pollution Liability:

Premise pollution policies provide coverage for pollution conditions that occur from storage tank systems; other on site operations and pollutants that have migrated onto the premise from adjacent properties. An example of on-site claim is a leak or spill that occurs in the garage area of service station, coverage would be afforded.

As in any insurance policy, the coverage is “triggered” by the discovery and reporting of an incident.

The cost of a premise policy generally starts around $ 7,500. The underwriting requirements include any available environmental site assessments. So depending on the history, the insurer might request a phase 1 or phase 2 ESA.

Contractor’s involvement with insurance pollution claims:

As a contractor servicing retail sites, it’s important to know the basics of the claims settlement process involving pollution incidents.

First and most importantly the policy is triggered by the reporting of a pollution condition as the result of the discovery of a spill or leak. Often you can face situations were contamination exists but a claim has never been submitted to the insurance company.

Two common situations where impacted sites are discovered without a specific date of leak or spills occur in the due diligence of a property sale or the actual removal of tanks.

In the case of a tank removal, impacted soil conditions are often discovered. Depending on the extent of the plumes, the insured would look to the Storage tank pollution policy for indemnification.  The same situation occurs during the due diligence of a property sale.  The purchaser could discover pollution conditions from new ESA reports that were never previously completely. Again the owner will look to the pollution policy for indemnification.

In both of the cases, the onus on the insured is to prove his loss. The insured has to prove that an incident occurred during the policy period.

Once the insurer has been placed on notice, a non prejudice letter goes to the site operator which basically acknowledges the reporting of the claim and the advisement that a complete investigation will occur to determine if the policy will respond.

The insurer starts the investigation into the contamination to determine the source and age of the pollutants.  Precision leak tests, Inventory records and alarm reports are reviewed in an effort to determine the time and origin of the incident.  Once the information is gathered and reviewed, the insurer provides a position letter in regards to the policies response.

On a Storage Tank policy if the incident cannot be pin pointed to a time that the policy was in place, the insurer will deny and turn it back to the insured to prove when the spill occurred.

Often the site operator will turn to a petroleum contractor to provide any evidence that will substantiate a pollution condition happened during the policy period.  Your customer will often request service records. At this point the owner might ask you to do further work at the site or ask for your opinion to help “prove his claim”. It’s important to realize that this additional work is performed at the expense of the site owner until it’s determined that coverage is in place. It’s important to know who you’re working for, the site owner or the insurer.

It is recommended that any documentation provided to a client regarding an opinion of equipment or site condition should include a disclaimer.

In general a disclaimer should communicate the following points:

  • It’s important to declare the type of services you provide or your duty as a contractor.
  • The disclaimer should include a hold harmless clause.
  • The disclaimer should suggest that an appropriate environmental study be completed by an Environmental Professional.
  • Precision leak test should be recommended.

The client should sign and date your documentation.

When providing a written opinion of equipment and/or site conditions, it’s important that the opinion is related to specific work prescribed or preformed. Stand alone opinion letters are more likely to be interpreted as professional opinions as opposed to being part of your work. In the event you are brought into an incident by way of a statement of claim, the opinions can be interpreted as professional services which in general is an exclusion under majority of liability policies.

In summary, it seems in this day and age, a quality paper trail is as important as the workmanship itself. It is recommended that your documented opinions with clients include a disclaimer and relate to specific work you perform as a petroleum contractor.

Rental Equipment Contracts and Commercial Property Insurance – What contractors need to know!

With the busy construction season upon the industry, contractors constantly rely on rental equipment to get the job done. Below are a few points about the rental contracts you as contractors encounter and the potential exposures that you assume.

Rental Period vs. Legal Responsibility: Most rental contracts state that the Contractor is responsible for the piece of equipment until it returns to the rental yard or arrives on a new site for the next renter. Therefore, regardless if you’ve contacted the rental company and have secured an off rent number, the equipment is your responsibility until it returns to the rental yard or deployed under a new rental contract. If you’ve driven by a job site days after the work was completed to see the rental company’s skid steer still parked, you continue to assume the risk of damage or theft until pick up and long after its been called off rent. Do you leave the job site with the equipment left behind for pick up? Are you confident that the equipment gets picked up in a timely fashion? Are you confident that the rental company is using reputable carriers to move the equipment? Does the rental company display priority pick up service on equipment that is insured by their protection plan? Questions to consider when renting equipment.

Replacement Cost Evaluation basis for damaged or stolen equipment: The rental contracts usually hold the contractor responsible for replacement cost of the equipment regardless of the age and condition of equipment. Insurance for rental equipment can be covered under your Contractors Equipment policy by actually listing the individual pieces of rented equipment or by appropriating a blanket limit towards the rented piece. Two important points (1) with respect to a blanket limit, check your policy for a 30 consecutive day rental limitation, many policies have these limitations. (2) Check the stipulation for age of equipment regarding the replacement cost coverage. Often the Blanket rental coverage follow the same wording as Owned Contractors Equipment which will mostly likely have a 60 month age limitation on replacement coverage. How old is the equipment you are renting? Do you list the equipment separately to avoid the 30 day limitation? Do you purchase the rental company’s protection program?

Rental Agreement clauses: The rental contract includes one sided clauses regarding you the contractor, waiving your rights to pursue the rental company (hold harmless clauses) while maintaining full rights for the rental company to pursue you (right to subrogation). In the event of a legal action between the contractor and rental company, these clauses help solidify the rental company’s position in reimbursement for damage or stolen equipment. Rental agreements can also included clauses that hold contractors liable for lost rental income as the result of downtime caused by damage or theft. These clauses should be reviewed carefully.

If you are involved in any sort of disagreement with the equipment rental company over the condition, damage or theft of a rental unit, the direction of the dispute will follow the rental agreement regardless of what verbal promises are made; length of time it takes to pick up the equipment or the age or condition of the equipment. All parties will go back to the signed rental agreement and use this document to settle the disputes. Since these contracts are designed by the renter, you really do not have option to start stroking out clauses and getting initials at the time of securing a rental. The contractor will be held responsible regardless of the situation.

The bottom line is contractually, you assume the risk of the rental company’s service so take time to review the rental contract, have your insurance broker review your coverage and establish and communicate internally your policies and procedures regarding rental agreements.