Pollution Liability - One Eco-Disaster Could Change Everything

With the Gulf oil spill still fresh in all our memories and the recent fresh water wars in the Southeast, the protection of our natural resources is no longer just the concern of certain core environmental groups. As data gathering techniques have improved with the increased use of technology, so has public awareness of pollutants and the effects they have on Mother Earth and our health and well-being. An environmental accident can have both physical and financial repercussions on a business as these types of accidents are now part of our nightly dose of evening news.

Even if these occurrences are not directly caused by an individual, as we have seen in the BP incident, that the liability can be spread among many different parties. As with other unexpected incidents in life, the best approach to these types of pollution exposures is to be proactive and have a good plan in place before needed.

For many this proactive plan includes insurance with coverage that will protect your dealership from Pollution and Hazardous waste exposures. Many businesses feel that if they have put adequate procedures in place that they do not need additional coverage; but the fact is that accidents do happen and people do make mistakes. You may have adequately trained your own staff and put auditing tools in place, but it is much more difficult to control the companies you may employ for your waste transport and disposal. Millions of dollars every year are spent on clean-up from all types of pollution claims.

Cost of the clean-up can include the cost of fines levied from environmental agencies. The cost in terms of negative public relations if you were to have an accident with no quick plan or resources available to resolve it in a timely manner, are harder to quantify, but nonetheless very expensive. The fact that BP did have those resources available to draw upon accounts for the ability to sustain them as a viable business during and following last year's spill.

Some of the most well-known pollutants cause risk to the drinking water resources. An auto dealership is always at risk for this type of pollution just due to the nature of the business. Auto repair work requires the use of fuel, grease and other oils and solvents that if not properly disposed of can cause damage to the ground and seep into the water supply. Although this is one of the most known pollutants auto dealerships also have exposure from their marketing strategies. Many dealerships use banners, balloons and spotlights and other attention getters to advertise and all of these can also contribute to the potential for visual and audio pollution. The decision on whether a dealership may get zoning approval may be based on the proactive procedures they put in place and their coverage and ability to respond if an unexpected accident were to occur.

So how does an auto dealership determine if they have a pollution exposure and if insurance coverage for that exposure is necessary? The first step would be to do an appraisal of the physical aspects of your business. Do you store used oil or used batteries? Do you have underground or above ground storage tanks and what is the risk of spillage? How do you wash down service and body shop areas including new and used car detail areas? An objective assessment of the physical storage areas in your buildings in most cases will quickly point out your need for insurance for pollution exposure.

A Pollution Liability policy will ensure that the negative impact to your business both financially and publicly will be minimized. If you have ever been in a car accident you will remember how relieved you felt when the other party provided proof of insurance. This is exactly how your community will feel if an accident caused by your business should happen and cause harm to your community. This type of policy can not only provide coverage for the actual clean up of the pollutant but will also pay for the legal expenses in defense of any claims against your business covered by the policy. Without adequate coverage in place you not only bear the responsibility of what happens under your own roof but you also are liable for what happens with other parties such as the waste hauler that is carrying your used motor oil, neighboring businesses, government agencies, customers and many others.

It is legally your responsibility to notify the appropriate government agencies whenever a hazardous material discharge has happened anywhere in the U.S., and it is also your legal responsibility to make sure all your employees are trained to handle hazardous materials. The rules are very clear as to how often the training needs to be conducted and the content of the training material. What is not as clearly defined is you moral obligation to the community who supports your business. You have that obligation to have the necessary financial support and immediate response to remedy the unexpected as quickly and as thoroughly as possible. This community has been responsible for your financial success and you share in the responsibility of their well being.

When considering purchasing pollution coverage, make sure the policy will protect you for the types of exposures that exist in your business. Pay special attention to your named insureds and locations (including those closed or vacant), policy retro dates and any special endorsements added to the basic policy. Your insurance agent can help you review the entire policy and explain its application to your business.

If you think you don't have any exposure, remember that we do not know what technology will reveal as the next pollutant and the types of damages it may cause. For example, in the early 1900s, asbestos was considered a valuable material and used extensively in auto parts such as brake shoes/pads and various gaskets and widely used in the building industry. Since the mid 1900s, we have seen thousands of asbestos lawsuits costing various industries billions of dollars and the bankruptcy of many companies.