"THE DIRTY SECRETS: POLLUTION LIABILITY"
WESTERN PETROLEUM MARKETERS ASSOCIATION CONVENTION
MIRAGE HOTEL, LAS VEGAS, NEVADA, FEBRUARY 18, 2010

Ultimately, where does the responsibility for a contaminated piece of property lie? With you, the property owner.

The starting point is insurance products do not cover pollution. Pollution is not an insurable event. So the starting question for you is what pollution endorsements have you added back into my policy? Because general policies have nothing to do with pollution.

State funds all differ. Many of them have sunset dates. How long will the state funds be here? The intent was a short-term fix. There are a variety of differences in features. Deductibles: in Idaho, Utah and New Mexico it's $10,000; in Washington, you're responsible for the first $75,000. In Nevada, it's 10% of whatever the cost is. Limits: most state funds have a $1 million limit. How they're funded. Coverages change. Most of the WPMA states, the fund cleans up your property and when it trickles off the property. In New Mexico, it covers only your property. If pollution leaves your property, it's up to the marketer to pay. Some states cover all tanks and some cover only underground storage tanks and leave it up to the marketer to cover aboveground storage tanks. Different agencies handle the cleanup funds in different states.

Private insurance marketplace is designed to fill in the gaps.

Potential areas of exposure:

• Owned or leased property. Is there contamination there? You're responsible.
• Your operations. You have people running all over your service area, tanks at construction sites, potentially at farms. You have liability there.
• Owned or leased vehicles. If something happens and you have a turn, they can figure out pretty quickly whose name is on the side of the vehicle.

Pollution needs typically fall into three categories:

1. First party: damage to you, the policy holder. The pollutant cleanup takes place at your owned or leased site.
2. Third party: damage to other parties. Somebody gets sick and they live close to your bulk plant. Somebody's basement, because we filled it up and their pipe wasn't connected, is now filled with product that has to be cleaned up. A stream was contaminated or a water well or a sewer system.
3. Government mandated requirements. Financial responsibility laws and your local, state, and federal regulations.

Where do you turn if you have an event at your property?

1. Primary insurer
2. Environmental insurer. Where your primary insurance stops, what specialty carrier is out there who can fill a gap?
3. State fund
4. Checkbook
Evaluate everything in advance so you won't be surprised if an incident takes place.

Could this happen to you? You have a warehouse full of gasoline and lubes and a fire starts. The Fire Department comes and puts it out but they fill your warehouse with water and it washes down the street. Then the city comes back after you and they want you to clean up the pollution in the storm drains from the water washed down there by their own Fire Department employees. What do you do? You're responsible. The majority of fire events at automotive or petroleum facilities end up with a pollution claim.

You all know about tanker rollovers. 1 in 7 rollovers results in the death of a driver. They're a terrible tragedy. And the majority result in a pollution event. If this happens, what is your next step? There is probably more protection in your primary policy than other policies. But watch for pollution exclusions.

Buying excess coverage above State Fund coverage is very, very affordable and it's almost not worth not doing it.