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1st Responder Contracts Can Be Critical in Pollution Claims

A contractual relationship with a first-responder is critical in a pollution claim, according to Brad Maurer, J.D., C.P.C.U., at American Risk Management Resources, a wholesaler specializing in environmental liability,

“Charges by first responders can mount up quickly unless you have a contract that provides 24/7 response with agreed-upon rates,” Maurer told the Claims Practice Group at s recent teleconference.

Here is some of his advice on pollution claims, as well as comments from practice group members.

In the case of a product spill, focus on the recovery of the product. As an example, consider a leak from an above-ground storage tank for diesel fuel. If the fuel goes outside of the containment area, it is prudent to sample the soil to be determine whether mitigation is required.

Suppose the spilled fuel soaks cardboard boxes at a nearby manufacturing plant. This can be considered physical damage to the cardboard boxes rather than a toxic effect.

Reporting Guidelines

Reporting a situation is critical for two reasons.

  • First, it is a legal obligation and failure to do so can result in fines and penalties for the insured. Different states and government agencies have different thresholds for what needs to be reported. Make certain the loss control and claims people are notified promptly.
  • Second, you want to understand your total obligation for cleanup. If it is significant, most policyholders prefer to have an environmental consultant in charge of interaction with first responders. Again, this is when a contract is important.

Avoid speculation. Be factual, describing water from a burst pipe or soot from a fire. However, don’t speculate on whether contaminants may be present in the water or soot.

Reporting claims quickly also can help mitigate additional claims. For example, a senior housing facility had significant water damage. It was important to alert the environmental carrier promptly because of the possibility of mold, potentially affecting residents’ health.

When an incident occurs, document the response and take samples.

Cautionary Reminders

  • After Hurricane Harvey, flooding disabled the refrigeration system at the Arkema plant that manufactured organic peroxide. The resulting explosions and wastewater tank overflows contaminated surrounding properties, resulting in lawsuits from first responders and neighbors plus OSHA fines of $91,724.
  • Remember that a fresh water loss can turn into a Category 3 water loss if the water is not cleaned up within three days. Category 3 water is contaminated with pollutants, including fungi and bacteria, and coverage is excluded from most property and liability insurance policies.

Checking Coverage

A challenge is that environmental insurance policies are not standard. Check them carefully.

  • Some policies cover crisis management services, including having a public relations firm interact with the public and media.
  • Business interruption coverage can be included in an environmental policy.

Brad can be reached at (608) 824-3347 (office), (608) 345-7641 (cell) or Maurer@armr.net.