Closed for Business: A Pollution Liability Insurance Case Study

A Seattle firm owned 15 gas stations in Washington and leased them to a large oil company for a number of years. The oil company self-insured the Pollution Liability for the underground storage tanks (USTs). A normal amount of leakage and contamination occurred over time at a number of locations. Eventually, the lease ended and operation of the 15 gas stations reverted back to the owner.

The owner’s insurance broker was not able to place pollution insurance coverage for all of the USTs due to insurance carriers’ perception of the pre-existing contamination. The broker did not understand environmental insurance issues well enough to craft a solution and gave up in defeat. This created a significant problem for the owner, who was prevented from re-opening 4 of the 15 gas station locations due to a lack of Pollution Liability insurance. The owner reached out to competing insurance brokers for a solution and contacted Parker, Smith & Feek.

Our Account Executive reviewed the UST environmental reports for all locations and, based on his experience and knowledge, discovered the key to solving the owner’s problem. The pre-existing contamination risk was well characterized and could easily be differentiated from any new leakage and contamination that might arise after policy inception. Since pre-existing contamination was the responsibility of the oil company lessee, our account team was able to persuade a carrier to insure the owner for new contamination only. By working collaboratively with the underwriter, we successfully brokered a win-win insurance transaction for the owner and insurance carrier.

Parker, Smith & Feek specializes in Environmental Liability, including innovative solutions to challenging risk exposures. Our clients include owners and developers of the contaminated property, environmental consultants, and environmentally exposed businesses. We have an environmental specialist on staff, whose areas of expertise include asbestos abatement, environmental impairment liability, the use of environmental insurance in real estate transfers, and USTs. We have strong relationships with insurers who specialize in environmental coverage and our claims team is skilled in the management of claims that arise out of pollution losses.

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