Pollution-based insurance claims: The iceberg

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The majority of an iceberg’s mass lies below the water’s surface. This is a great metaphor for pollution and property claims. Contamination and liability issues are often a complex mix of fact versus fiction, forensic and laboratory analysis, civil and criminal law, environmental regulation, and cleanup activities. This is why insurance carriers often have special liability or complex claim teams to handle these sorts of claims. Here are a few things to look for when dealing with contamination-based issues and insurance claims: The plot thickens As I write this, I’m reminded of the TV show House. Diverse plots with multiples themes and subplots with twisting endings occur in nearly every episode. A complex pollution claim can often feel the same way. My colleagues have noted that it is imperative to either have a written statement or record of a loss incident to prevent confusion. A well-detailed account of events can support your analysis of a claim and be useful in both a forensic setting and in later cost recovery actions. What if there are multiple hazards occurring at the same property? Has a chemical release impacted wells supplying a public water system? On several occasions we have observed chemicals impacting not only environmental media (soils and water), but building materials like friable and non-friable asbestos-containing materials. In this case not only is there a chemical release, but during the remedial activities an asbestos abatement may have occurred. Now you must plan not only for the remediation, but for an abatement to protect worker safety and public health. Swiss cheese It has been demonstrated that the method and timeframe in which a tank, pipe or other storage vessel leaks can have a bearing on insurance coverage. For example, when did a tank first start leaking? It is evident that forensic analysis is starting to play a large role in insurance claims and the evolution of environmental services.

The tank pictured below had corrosion holes one foot in diameter. Forensic age-dating would likely place the petroleum release as having started more than 19.8 years ago. But are there extenuating circumstances? Is there supplemental evidence to help support your argument about the timeframe of discharge? A detailed consumption analysis and other supporting forensics can assist you with determining an initial release date. Litigation In New York, the New York State Navigation Law puts strict liability on dischargers. Many times, in both a regulatory and legal setting, a responsible party is determined to be a property owner. This is typically because landowners are in a “point of control”. However, as noted in the case of White v. Long (supra, 85 NY2d, at 568), the Navigation Law allows for faultless landowners to seek cost recovery against other dischargers/responsible parties. The use of an environmental consultant to collect evidence, follow chain of custody procedures and generate a comprehensive report will undoubtedly provide a significant benefit when the time comes. History class The timeline and history of a property can be just as important to a claim as the identification of subsurface soil and groundwater impact.

How long has the property been owned by your insured? How long has the insured been utilizing a specific pollutant, or lack thereof? It may not seem important at first glance, but an historical investigation may alter a subsurface soil or delineation event. Let’s use a gas station as a simple example. Over the last 100+ years, gasoline has been used, but the blends and formulations have changed over time. Using historical fire insurance maps, you can sometimes identify the presence of gasoline tanks at various properties as early as the late 19th century. Identification of gasoline markers (lead, MTBE, ethanol) can also be useful to identify periods of discharge. In summary, pollution-based claims don’t need to be so complex. If you bring an environmental consultant to the table, you will get the guidance and value that you and your clients are looking for. Diminish your exposure, and help fill in the gaps. Kevin M. Taylor is an environmental consultant with 15 years of experience. He holds a M.S in GeoSciences – Hydrogeology and B.S in Biology from Stony Brook University. The last 10 years of his career have been focused on the investigation and management of pollution-based claims on behalf of some of the largest insurance carriers in the Northeast. Have questions? Kevin can be reached at ktaylor@h2m.com.