Pollution Insurance Coverage for Lagoons
Yes…It Really Does Exist…
I’ve heard from some OASIS members that getting insurance coverage for septage lagoons is impossible. Well, I hate to suggest that some of our members might be wrong but in this case, they’re wrong. Some of our members are fortunate to own a lagoon where they can drop their loads at any time with no waiting in line and no extra costs, but owning a lagoon comes with its own risks. You can Google stories about ground hogs digging through lagoon walls causing serious breaches and vandals purposely digging through lagoon walls to empty its contents. Record rainfall has also been known to overflow lagoons. And when the septage is let loose, the environmental costs often run into the millions. How would a million dollar loss impact your business? The best way to handle this exposure is to transfer the risk onto insurance.
Environmental Impairment Liability Insurance
Getting insurance for a lagoon is easy but it’s a different type of policy compared to the contractor’s pollution insurance which typically covers pumping operations. Pollution insurance for lagoons is typically called “Environmental Impairment Liability” insurance or “EIL”. The EIL insurance underwriter will want to know the lagoon’s capacity, who dumps there, what they dump, how the lagoon is constructed, how old it is and if it’s been re-lined. Did an engineer design it? Are all permits in place? Are test wells situated nearby and how often is testing done? What’s near the lagoon? How close is it to rivers or streams? I like taking photos to show the underwriter the exact lagoon set-up. Usually I’ll get 4-6 different insurance company quotes to ensure the best price but all quotes must include specific coverages.
Emergency Response Costs
When insuring a lagoon, you’ll want to think about the different costs you’ll face if it suffers a catastrophic breach. First, you’d need to stop the septage from migrating and that means bringing in an environmental emergency response clean-up crew. These specialized businesses respond quickly with the latest technology and equipment to prevent a spill from getting worse. They’re good…but expensive. You’ll want at least $250,000 coverage for that.
You’ll also want coverage to clean up your own land (first-party clean-up) with a minimum of $2m in coverage. This will pay your costs to remove the contaminated soil and remediate your property. It should also pay for future testing and monitoring expenses.
You’ll want another $2m (minimum) to pay for any third-party clean-up in case the spill migrates to a neighbouring property. Essentially, this coverage pays for the same things that first-party coverage pays for, except for a spill that’s not on your property.
Fines and Penalties
Depending on the circumstances of the spill, it’s possible that the M.O.E.C.C. may fine your company and a court could impose a penalty. Fines and penalties coverage should also be included in your pollution insurance policy. Not all insurance companies offer all of these coverages so it’s important that the insurance broker knows what to look for and who to ask.
Take Advantage of It
Owning and running a waste related business comes with its own unique set of challenges and exposures which are sure to keep you awake at night (Is that a ground hog I hear digging at my lagoon?!). A properly crafted EIL insurance product is an affordable way to transfer millions of dollars’ worth of worry onto someone else’s shoulders.
Lorne Wiebe is a Commercial Insurance Account Executive with Rhodes & Williams Ltd, an independent family-run insurance brokerage for over 80 years with offices in Ottawa and Toronto.
Presented here is a general article about insurance. The discussion is general in nature, and does not constitute insurance advice. This is not intended to be a description of coverage, and does not include details of the coverage nor the terms, conditions, qualifications, limitations and exclusions applicable. Policies should be reviewed in their entirety and related to your specific operations. Many insurers permit changes (Changes to insurance policies are usually called “endorsements” or “riders”) in their limitations or exclusions to match your specific requirements. As insurance advice must be tailored to the specific circumstances of each situation, nothing provided herein should be used as a substitute for the advice of a competent insurance broker. IN NO EVENT WILL RHODES & WILLIAMS LIMITED BE LIABLE FOR ANY DAMAGES WHATSOEVER, INCLUDING SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES, ARISING OUT OF OR IN CONNECTION WITH THE USE OR PERFORMANCE OF THE INFORMATION PRESENTED IN THIS DOCUMENT.