Underground Storage Tank Insurance: A Comprehensive Guide to Coverage Options
Deep beneath the earth’s surface, a network of silent sentinels stands guard – underground storage tanks (USTs) safeguarding crucial petroleum and hazardous substances. The Environmental Protection Agency (EPA) reveals a staggering 542,000 of these tanks scattered across the nation. While they play a vital role in our lives, there’s a hidden peril that could spell disaster for us all – the potential contamination of groundwater, the lifeblood of nearly half of all Americans. Notably, the repercussions extend far beyond environmental harm, with potential third-party injuries, property damage claims, and even demands for natural resource restoration entering the scene.
Yet, let not the complexities of managing such subterranean entities deter their custodians. Underground storage tank insurance becomes a paramount consideration in ensuring comprehensive protection. Ensuring compliance with UST regulations is just the tip of the iceberg. Buried within lies the need for astute financial planning, diligent maintenance, and expert tank removal strategies. By peering beneath the surface and addressing these hidden vulnerabilities, owners and operators can shield themselves from the exorbitant costs of environmental remediation, safeguard their assets, and navigate the depths of UST challenges with resolute confidence.
The Risks of USTs
A common risk involving a UST occurs during the delivery of product into the tank. Improper hose connections or leaving product in the hose after it has been disconnected can result in spills. Spills can also occur when a tank is overfilled with a product.
Leaks from one or more areas of a storage tank system can occur in addition to spills from product delivery. Common places for leaks to occur include under the dispenser island, from the spill bucket, from submersible pumps, along the piping that transports the fuel from the tank to the dispenser, from UST system sumps, and from the tank itself.
Corrosion can also occur over time in metal UST system components such as piping or tanks, resulting in holes and product loss. According to the Association of State and Territorial Solid Waste Management Officials, corrosion and installation issues have resulted in the highest-cost releases in the past.
Many factors will influence the risk of a release: tank age, construction, monitoring and maintenance effectiveness, and leak detection.
Key UST Federal Regulations
Underground storage tanks in the U.S. are subject to various federal regulations designed to protect the environment and public health from potential hazards associated with the storage and handling of hazardous substances. The primary federal regulation governing USTs is administered by the EPA in collaboration with state agencies.
The following are key regulations governing underground storage tanks:
- UST Technical Requirements: The EPA sets technical requirements for the design, installation, operation, maintenance, and closure of UST systems. These requirements cover aspects such as tank construction, leak detection methods, corrosion protection, spill and overfill prevention, release response plans, and financial responsibility.
- UST Financial Responsibility: UST owners and operators are required to demonstrate financial responsibility to cover the costs associated with potential releases from their tanks. Financial responsibility ensures that funds are available to clean up any spills or leaks and compensate third parties for damages or injuries. The EPA provides options for meeting financial responsibility requirements, including insurance mechanisms.
Insurance Coverage for UST-Related Risks
When it comes to underground storage tank insurance, companies have two primary options: State Funds and Environmental Liability Insurance.
State Funds
Companies can opt for UST insurance coverage through a state UST fund. This specialized insurance is designed to provide compensation for cleanup costs and third-party liability damages resulting from releases from USTs, specifically insuring underground storage tanks. To fund these programs, UST owners and operators contribute fees, ensuring that necessary financial assurance is in place. However, it’s crucial for insured parties to understand the unique requirements and coverage offered in their respective states. Each state’s fund operates differently, with varying coverage limits and deductible options. It’s important to note that a state fund will not cover the UST owner’s legal defense costs, so additional coverage may be necessary for complete protection.
Environmental Liability Insurance
Environmental Liability insurance is available for UST owners, providing comprehensive coverage for UST-related risks. This insurance covers a range of costs related to UST incidents, such as cleanup, third-party liability claims, and legal expenses associated with pollution-related incidents.
UST owners can choose between a stand-alone policy specifically covering the underground storage tank or a broader policy that includes other pollution risks in addition to the tank. Having this insurance ensures that UST owners are well-prepared to handle any unforeseen environmental challenges that may arise, offering them peace of mind knowing they are protected from various potential environmental liabilities.
Our Environmental Program Covers Underground Storage Tank Insurance and Much More
Distinguished’s Environmental and Construction Professional Insurance Program approach to covering tanks includes protection for UST-related risks but also contemplates broader coverage for the entire facility, including coverage for cleanup, third-party bodily injury, and property damage liability, and can provide defense costs. Coverage may apply to pollution conditions at owned locations, equipment yards, non-owned disposal sites, and during transport.
Our program meets both federal and state requirements to cover the risks posed by a client’s underground storage tanks. Target classes include:
- Commercial Real Estate
- Construction
- Educational
- Habitational
- Healthcare
- Hospitality
- Industrial
- Institutional
- Retail
- Warehouse
Pricing for the UST exposure is based on three main factors: the material in the storage tank, the tank’s age, and the type of construction. The age of the tank is critical, as the typical life expectancy of a UST is 30 years and it should be replaced after this period.
Our program can provide limits up to $25 million/$25 million, with policy terms of up to 10 years.
Clients who have access to a state fund or a stand-alone tank insurance policy can also purchase excess coverage through our program as well as insure against additional environmental risks, such as legionella and mold matter. We may also be able to offer Difference in Conditions insurance to provide coverage not offered by a state fund, such as legal defense.
Claims Scenarios
USTs are typically located at office buildings, warehouses, manufacturing plants, and other facilities. Losses can occur in a number of ways. For example, a general contractor working at a new office building during excavation could potentially hit a preexisting UST with a backhoe and cause the remaining contents in the tank to release. Or a manufacturer may have an underground storage tank to store various chemicals, hazardous substances, and wastes used in its manufacturing and distribution processes. While transporting these waste substances to a treatment facility, a spill accidentally occurs when the hose ruptures during the pump-out process.
Leaks or spills at the premises, during transportation to a treatment facility, or at the treatment facility itself can be covered under Distinguished’s Environmental and Construction Professional Insurance Program. We can provide coverage for cleanup, including excavation and removal of contaminated soil, installation of remediation systems to treat affected groundwater, and continuous monitoring to ensure the site’s restoration. It’s important to note that cleanup costs can be very expensive, particularly if groundwater has been contaminated or the geographic footprint of the contamination is far-reaching.
In-House Underwriting, Claims Management & 24/7 Response Team
Our team of underwriters, engineers, geologists, environmental scientists, and insurance professionals have more than 300 years of combined environmental, construction, and insurance-related experience to provide solutions tailored to protect businesses from their unique environmental and professional exposures. Using a customer-focused approach and state-of-the-art systems enables us to provide a full suite of products to provide coverage for fixed facilities, contracting services, and professional liability with both primary and excess capabilities.
We partner with Cura to provide 24/7/365 emergency response services to our insureds. Cura is a one-call, full-service vendor that provides emergency spill response management in all 50 states. Experienced incident managers will activate an approved contractor with pre-negotiated rates to the spill site, coordinate the cleanup, handle any regulatory notifications, dispose of waste, audit all invoices, and complete interim and final reporting for our insureds.
Our in-house claims team includes experienced attorneys dedicated to addressing environmental, construction, and professional-related claims efficiently and effectively.
How to Submit Business
- Register your agency if not already registered.
- Complete and submit the applicable application to Doug Stepenosky, via email: dstepenosky@distinguished.com. Or contact your favorite underwriter.
About Distinguished Programs
Distinguished Programs is a leading national insurance Program Manager providing specialized insurance programs to brokers and agents with specific expertise in Fine Art and Collectibles, Environmental and Construction Professional, Executive Lines, Inland Marine, Real Estate & Builder’s Risk, Community Associations, Surety, Hotels, and Restaurants. Property and Liability products are distributed through a national network of agents and brokers. Serving the same core markets and partnering with the most stable and reputable carriers, Distinguished’s high-limit Umbrella programs remain the clear choice in its area of specialty for superior coverage, competitive pricing, and attentive service. Through thoughtful innovation, stemming back to 1995, Distinguished Programs fosters growth and opportunities for its brokers, carriers, and employees.
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