Know your exposures
Your service manager calls you and explains there has been a pollution incident with your waste oil. The first question you should ask yourself is: Do I have insurance coverage for pollution incidents?
If you live in the United States, be cautious, because anyone with your EPA generator number who has picked up pollutants from your dealership has potentially created a liability for you.
Every dealership has pollution liability exposures, but many dealers don’t have insurance coverage for these complex hazards. Many companies that have significant pollution exposures are required to buy pollution coverage (i.e. those with underground tanks); however, for most dealerships, the decision to purchase insurance is voluntary.
This coverage can be overlooked by insurance brokers because they may not understand dealership pollution exposures or don’t have access to insurance markets that can provide cost effective coverage. Most garage liability carriers have standard pollution exclusions, thus a separate policy is typically required. There are many different types of coverages and policies depending on the complexity of your pollution exposures and hazards.
Common auto dealership pollution exposures include:
- Cleaning agents
- Collision repair and painting operations
- Petroleum products
Results of pollution incidents include:
- Damage to third party
- Cleanup costs of contaminated property
- Off-site waste disposal clean up expense
- Fines and penalties for violation and adverse public reactions
The Resource Conservation and Recovery Act gives the EPA the authority to control hazardous waste from "cradle-to-grave." This includes the generation, transportation, treatment, storage, and disposal of hazardous waste. It imposes strict waste management requirements on generators and transporters of hazardous waste, and upon waste treatment storage and disposal facilities. This means that you own the liability for the lifetime of the pollutant. There is also strict joint and several liability with pollution incidents which means, regardless of who was negligent, you can be brought into the suit to defend and remediate the pollution incident.
At a minimum, every dealership should have three basic coverages:
- Dealership property and damage to third party that originates at your property for bodily injury, property damage and clean up costs.
- Transportation coverage for non-owned autos that pick up your pollutants and transport them to non-owned disposal sites to protect your dealership from bodily injury, property damage and clean up costs.
- Non-owned disposal site coverage which provides coverage for properly permitted sites for bodily injury, property damage and clean up resulting from a pollution event on, under or migrating beyond the boundaries of disposal sites. And in some instances, if you have underground tanks, you need specialized coverage.
Take the time at your next renewal to ask your insurance broker to review pollution coverages to make sure your dealership's pollution exposures are addressed.