A recent tanker truck accident in Fairchild, Wisconsin, raised alarms over possible wetland contamination after the truck rolled over onto the side of the road and spilled pesticide. The Sept. 17 incident occurred when the truck driver swerved to avoid a deer, WQOW reported.
A provincial court ruling in Canada last month also pointed to the environmental risks associated with transportation. A trucking company in Marathon, Ontario, was fined $30,000 and a $7,500 victim fine surcharge over failing to promptly clean up a fuel spill caused by a trucking accident in 2019, FreightWaves reported Aug. 21.
“Both stories are cautionary tales about why clients should consider having Environmental Insurance and having it extend to pollution conditions from transported cargo,” said Karim Jaroudi, Manager, Environmental, Burns & Wilcox, Toronto, Ontario. “Just because a company has not had any environmental issues yet does not mean they do not need coverage.”
Both stories are cautionary tales about why clients should consider having Environmental Insurance and having it extend to pollution conditions from transported cargo.
Transportation pollution incidents can be covered by Transportation Pollution Liability (TPL) Insurance, said Gina Jones, Vice President, Director, Environmental Programs, Burns & Wilcox, Denver, Colorado.
“That is over-the-road pollution coverage that covers pollution incidents caused during transportation,” she said, adding that covered expenses include cleanup costs, property damage, bodilyinjury, legal defense, and penalties. “The fines can go into the thousands of dollars or even up into the millions, depending on the amount of damage that is done.”
Pollution losses often excluded on other policies
Transportation accidents that cause environmental hazards are an ongoing issue in the U.S. and Canada. In July, IndyStar reported that the number of highway hazmat incidents in the U.S. has been on the rise over the last 10 years, increasing from around 16,100 incidents in 2013 to 25,300 in 2022. In Canada, 300 road accidents involving dangerous goods were reported in 2018, the latest year for which data is available, according to Statistics Canada.
Any company that transports cargo or hires a trucking company to transport its goods could be at risk for an environmental claim. While business owners may believe their Auto Liability Insurance would provide coverage, pollution events are typically excluded from these policies or, in some cases, only a very small limit may be offered.
The reality is that individuals do not realize transportation is a huge, huge exposure. When these vehicles turn over and have an accident and the transported cargo spills into our environment, that is not usually covered by an Auto Liability Insurance policy.
“The reality is that individuals do not realize transportation is a huge, huge exposure,” Jones explained. “When these vehicles turn over and have an accident and the transported cargo spills into our environment, that is not usually covered by an Auto Liability Insurance policy. Anything that is released is generally specifically excluded.”
If a small limit is available for these types of losses, it would not typically be sufficient to cover a claim that includes regulatory fines or natural resources damage, Jones added. This is also the case in Canada, Jaroudi said, where coverage for transportation pollution incidents must be specifically added to a company’s insurance policy.
“You cannot hide behind an auto policy on an environmental claim,” even if a portion of environmental damage is covered, he said. “That is not protection. Protection is buying the policy that speaks directly to these concerns.”
Cost, frequency on the rise for environmental claims
Lawsuits and insurance claims over environmental incidents are “some of the most difficult to navigate, and they are very expensive to settle,” Jones said. A lawsuit over an oil spill in California that discharged 25,000 gallons of crude oil into the Pacific Ocean recently settled for $45 million, the Wall Street Journal reported on Sept. 18, and in June a freight company based in New York was fined $34,000 for failing to clean up an oil spill in a service area on the Massachusetts Turnpike, the Telegram & Gazette reported.
You cannot hide behind an auto policy on an environmental claim.
Incidents have been on the rise as more roads get back to pre-COVID traffic levels, according to Jones. Vehicle miles traveled in the 10 most populous U.S. cities were up 4% compared to pre-pandemic levels, Property Casualty 360 reported in March.
“Our roads and highways are becoming congested again, lots of transportation and manufacturing activity is going on, and it is impacting a higher frequency of transportation and waste disposal claims activity,” she said. “We are seeing a lot more activity in this space.”
In Toronto, Ontario, traffic congestion returned to normal levels by mid-September of 2021, the Toronto Sun reported. The cost of environmental claims is also on the rise in Canada, Jaroudi said, making Environmental Insurance coverage all the more important. “You want to have a policy in place that will specifically speak to this type of loss,” he said. “Mitigate your risk and protect your balance sheet. It just makes sense from every perspective.”
It is important to know that potential pollutants are not limited to things like dangerous chemicals, Jones said. “Anything in excess and anything outside of its natural environment is, in fact, a pollutant,” she said. “It does not necessarily have to be a pesticide, for example. It can be anything innocuous that can go into our environment.”
Even spilled milk has been linked to multiple environmental incidents, including a 2017 tanker truck crash in North Carolina that threatened a creek’s ecosystem after 6,000 gallons of milk were spilled, FOX8 WGHP reported, and a 2020 release of milk into a stream that killed an unknown number of fish, WOI-TV reported. More recently, a tanker truck crash just this month spilled milk into the Susquehanna River in Pennsylvania, CT Insider reported.
“If a population of fish or birds has been wiped out, that cost to replenish the aquatic life or animal stock is going to be very costly,” Jaroudi said.
Expert can help assess risks, coverage needs
Natural resources damage is not always included in an Environmental Insurance policy, such as TPL Insurance, but it is essential, according to Jones. “It is going to cover the cost to assess, restore, rehabilitate, or replace that natural resource,” up to the policy limits, she explained. “That is all part of what could be covered under natural resources damage.”
Every single insured has an environmental exposure. You need to make sure that you work with an expert and understand the coverages that are necessary.
When purchasing Environmental Insurance for the first time, business owners should consider any transportation-related services that could put them at risk for a pollution loss, Jaroudi said. “It really makes sense for clients who are first-time buyers to think about what it is they are transporting or have transported on their behalf,” he said, adding that choosing to go without insurance “is like not buying Property Insurance because you have never had a fire,” for instance.
“Does that mean you will not have one tomorrow? That is what insurance is there for,” he said. “Do not underestimate certain exposures just because you have not had losses before.”
Working with an expert in Environmental Insurance can help ensure that businesses understand their risks and the types of coverage they need, Jones added. “Every single insured has an environmental exposure,” she said. “You need to make sure that you work with an expert and understand the coverages that are necessary.”