Environmental Impairment Liability

dennishendrickson  -  Feb 10, 2013  -   -  Comments Off

Florida Common Area Homeowner Associations, Florida Fee simple homeowner associations with buildings, and Florida condominium associations. This coverage sometimes is referred to as pool and spa contamination insurance.

Coverage’s Offered:
First & Third Party Coverage for Pollution Conditions.
Clean-Up expenses.
Legal Defense incurred in the investigation, adjustment, settlement, and defense of a claim.
Defense is inside the limit.
Limits go up to 1,000,000.

Need For The Coverage:
All known General Liability providers for community associations exclude Bacteria & Pollution coverage. As a result, a standalone Environmental Liability is needed to supplement these exclusions.

Features & Advantages:
No policy minimum premium per association.
Composite rates based on members / units, and ancillary items.
No distance to coast restriction.
Cost effective, premium could be less than $1000 per year depending on number of units.

Some claims examples regarding Environmental Pollution:
A storm damages the fuel line of the association elevator generator causing diesel fuel to leak into the soil.
Vandals cut the fuel lines of the pools chlorine tank causing a pollution spill and the need for EPA compliant cleanup.
A contractor incorrectly connects the clubhouse intake/outtake HVAC lines causing release of pollutants causing bodily injury.
The association pond overflows and causes migration of pollutants to spill into a nearby wetland area.

Bacteria Claims Examples:
Bacteria from the pool spa causes bodily injury to a member of the association resulting in legionnaires disease which has a survival rate of 30%
The temperature of the hot water heating system was not kept at the proper amount and as a result bacteria caused owners to contract an illness.

Some additional claims examples:

Indoor air quality – Contractor Activities:
A welding contractor was performing work in the association’s clubhouse and was using a gas powered generator. Metal fumes and carbon monoxide were entrained in the buildings air intake requiring evacuation of the clubhouse. Two people were taken to the hospital for treatment and observation. Bodily injury claims were filed against the the condominium association, property manager and the contractor. Settlement proceedings are still ongoing at this time.

Swimming pool water treatment:
A water treatment pump and chemical regulation meter at an association swimming pool failed resulting in excessive sodium hypochlorite addition to the water. Five residents and two guests complained of burning eyes and skin requiring hospital treatment. One of the two guests filed bodily injury claims against the association to cover medical costs, and pain/suffering. The pump manufacturer was ultimately found to be negligent, but only partially liable. The resulting law suit determined that the association was also negligent for inadequate maintenance of the pump and meter calibration. Medical expenses were minimal, but the association’s portion of the mental anguish damages awarded was $80,000 and legal defense expenses exceeded $150,000.

Elevator shaft solvent vapor intrusion:
An association hired a geotechnical consultant to perform an evaluation to support the renovation/replacement of an existing elevator shaft. Soil and groundwater sampling below the shaft detected tetrachloroethyleyne (PCE) at concentrations exceeding state standards. The building housed several hundred residents and due to vapor intrusion concerns, indoor air testing for PCE was performed on the common areas of the first and eighth floors. PCE was detected in both areas. Additional soil borings and monitoring wells were installed outside the building and through the basement floor. The elevator shaft was found to be the source area. A remedial plan was developed to remove the contaminated soils below the elevator shaft, which was very labor intensive to implement. Several thousand gallons of contaminated groundwater were also removed. Subsequent indoor air sampling showed declining levels of PCE; however concentration began to increase. Groundwater was found to be an ongoing vapor intrusion source. The state regulatory became involved and required a vapor recovery system, sealing of the basement floor joints and cracks, HVAC system modifications, evaluation of the building sumps and drainage systems and ongoing monitoring. The associations pollution insurance paid the $500,000 policy claim; however, the costs were reported to be in excess of $850,000.

HVAC system failure:
An association was responsible for their heating and ventilation system operation and maintenance at the clubhouse. The system malfunctioned and released carbon monoxide, which seriously injured 5 persons in the clubhouse. The associations comprehensive general liability insurance carrier denied coverage due to the pollution exclusion. The association subrogated against the third party HVAC contractor that serviced the furnace unit, but the firm was only found to be partially liable as there was no standard preventative maintenance schedule established via contract. The association did not have pollution liability coverage and the multi-million dollar loss caused serious financial hardship for the association. The association subsequently obtained pollution liability coverage.

Important Exclusions:
Known circumstances or condition.
Mold matter.
Offshore oil and gas.
Any underground storage tank not scheduled on the property.

Among risks not eligible:
Underground storage tanks which are not double walled.
Above ground tanks without secondary containment (dikes, double walled, etc.)
Gasoline tanks.
Risks with any prior claims.

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