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Environmental Insurance Pollution Liability

Most "base" policies that I know of specifically "exclude" pollution liability. Others have a small minimal amount of coverage. What does your policy have for environmental pollution liability coverage? Need a policy review or quote? Contact us today?

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Read this as one example of one class of operations.

Environmental Implications of Feedlot Operations

The trend of confined/concentrated animal feeding operations (CAFOs), also known as “feedlots” continues to raise environmental issues. Animal feeding operations (AFOs), in general are now being targeted by Federal, state, and local governments and citizen’s groups. The Environmental Protection Agency (EPA) stated “the continued trend towards larger operations, coupled with greater emphasis on more intensive production methods and specialization, is concentrating more manure and other animal waste constituents within some geographic areas.” The discharges from AFOs are creating substantial environmental liability for their owners and operators. Animal wastes can enter into water sources by spills or leaks from waste storage structures or due to excessive rainfall. Since there are over 450,000 AFOs in the United States, the EPA considers their concerns regarding the environmental impact of AFOs justifiable.

Obviously, the primary environmental exposure derived from AFOs is animal waste management. CAFOs are the largest producers of waste because they typically hold thousands of animals such as chickens, hogs, and cattle. CAFOs produce tons of waste on a daily basis. Manure contains pollutants such as nitrogen, phosphorus, organic matter, sediments, pathogens, metals, hormones, antibiotics, and ammonia. These pollutants can decrease oxygen in water and promote the growth of toxic algae. Nitrogen can concentrate as nitrates in drinking water supplies.

The EPA has established rules for CAFOs under the National Pollutant Discharge Elimination System (NPDES) permit regulations. The regulations require the appropriate use of manure for agricultural purposes only. In addition, all CAFOs must obtain an individual NPDES permit that contemplates the discharges from each specific facility. Large swine and heifer operations must also apply for a specific operating permit. CAFOs must implement nutrient management plans to protect water quality. All CAFOs must submit an annual report summarizing their operations.

Specific incidents involving CAFOs:

Residents of a small town in the south frequently suffered from diarrhea, nausea and headaches. The community was in close proximity to a CAFO. The residents began to realize that the odor from the CAFO may be indicating that pollutants from the operation were causing the illnesses. The town tested its drinking water supplies, revealing high levels of nitrogen, phosphorous, and pathogens. These contaminants are common in livestock manure and urine. The nitrate level was ten times that of normal drinking water. High nitrates in water have been found to increase the risk of methemoglobinemia or “blue baby syndrome,” cancer, and spontaneous abortions. The subsequent investigation indicated that the CAFO’s poor waste management practices and leaking lagoons was the cause of the contamination. The residents have filed a class action suit against the CAFO for bodily injury and property damage.

In 2003, a judge ruled that the owner of animals contained on three AFOs were also liable for pollution conditions on those farms, even though the entity had no ownership interest in any of the AFOs. This ruling sets a precedent indicating that Strict liability imposed by the EPA also applies to the livestock industry and AFOs. Strict Liability plays a major role in how environmental exposures can destroy a family-owned business, which comprises the majority of the livestock industry. Federal and state legal precedents have established that environmental liability is Strict Liability, meaning that regardless of fault or when a pollution incident may have occurred, the current and past owners of the properties in question are personally liable without question or limitation. The 2003 judgment extends liability to the owners of the livestock, as well. Even if an operation is incorporated, there is still a legal channel to the private assets of the owners. This legal precedent can, and has, completely bankrupted many family-owned businesses; many times the personal property and land owned by the entity is also surrendered to provide funding for investigation and cleanup. This scenario does not contemplate legal fees and third party bodily injury and property damage claims that may result from pollution conditions.

Athena Insurance and Financial Services has access to a leading provider of environmental insurance programs. The MGA has developed a pollution legal liability (PLL) policy to protect CAFOs from the implications of Federal, state and local environmental laws and costly class action suits. The PLL policy includes the following coverages:

On-site and off-site cleanup of pollution conditions
On-site and off-site third party bodily injury and property damage resulting from pollution conditions
Legal defense expense
Coverage for aboveground and underground storage tanks
Coverage for the transportation of wastes
Coverage for the disposal of wastes (Superfund Liability)

Policy limits are available from $1,000,000 to $100,000,000. Deductibles range from $10,000 to $100,000. Coverage is available in all locations throughout the United States.

For further information about this program, please contact Athena Insurance and Financial Services at 209-223-1870

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