Underground Storage Tank Liability Insurance Update
As underground storage tanks age, risks grow and insurance coverage changes.
January 10, 2024
Owners of underground storage tanks (USTs) face decreasing capacity and escalating costs for UST liability insurance as the universe of USTs ages. If you own USTs, here are some things you should consider.
Underground Storage Tank Age Triggers Coverage Changes
Federal regulations in the early to mid-1980s resulted in the removal and replacement of tanks to meet stricter rules for materials of construction (mainly for leak prevention and detection) and compliance. Many of the tanks installed during this period are reaching age milestones that trigger increased levels of exposure due to the increased wear and potential for leaks associated with aging tanks. Insurance terms, premiums and deductibles generally start changing as tanks hit the 30-year milestone. Coverage can become particularly costly or even be declined. Coverage becomes even more challenging when tank installation dates reach 40 years old. Tank programs once on routine renewal now may require a different insurance placement strategy. Underground storage tank insurance marketing takes time and effort and can involve lengthy applications and documentation, such as tank testing and monitoring reports.
Underground Storage Tank Liability Insurance Considerations
How can the UST liability insurance process be managed more effectively? Should tank owners explore alternatives? Here are a few considerations.
Consider Alternative Coverage Options.
Many tank owners have other pollution exposures. Longer-term site-wide policies now cover a large percentage of USTs. Tank exposures can typically be underwritten into a site pollution policy (a comprehensive program that addresses site-wide pollution exposures) at a cost that can be relatively competitive on an annualized basis within a three-year program term. This also eliminates the time-consuming annual renewal process.
Consider State UST Financial Assurance Funds.
Most states have tank insurance funds with lower deductibles, and they are less costly than insurance policies. These funds meet the financial assurance requirements. Evaluate your eligibility. Although state funds generally do not provide third-party bodily injury or property damage coverage, they meet most owners' basic needs for clean-up costs. Most claims from tank releases are for clean-up costs. State programs generally do not have discovery exclusions for coverage frequently contained within insurance policies. The annual registration renewal process for these funds is also less time-consuming.
Consider Timing of Tank Replacement and Carrier Notification.
Should you remove or replace tanks as they age and insurance costs escalate? The timing of tank removal must be evaluated against the current policy terms (insurance carrier notification requirements). Carriers usually decline coverage for tanks noted as “scheduled for removal” or “temporarily out of service” on the insurance application. Failure to notify the carrier of a tank removal can lead to coverage refusal if contamination is detected during removal. Worse yet, some policies categorically exclude discovery of a release during the removal process. A thorough reading of the policy terms should be evaluated by the owner and a competent insurance broker at each renewal.
Expert Help Is Available
Pollution-related liability costs can add up quickly, seriously damaging your bottom line. Our environmental experts have the technical knowledge and regulatory understanding to help you effectively manage your risks. When you are ready, contact a Hylant environmental risk advisor.
The above information does not constitute advice. Always contact your insurance broker or trusted advisor for insurance-related questions.
Senior Risk Advisor-Environmental, VP
Don provides innovative insurance-based solutions to clients seeking to mitigate environmental liabilities. His experience includes environmental remediation and emergency response, hazardous waste management and compliance, and project development. He joined Hylant in 2004.