Pollution Risks: Exposures Municipalities Should Address
By Lauren Onello, Alliant Public Entity
Public entities face a myriad of pollution liability exposures that are either excluded or not included in their other insurance programs. These exposures can lead to significant financial and reputational consequences if not proactively addressed. Learn more about the leading pollution risks facing public entities and how to mitigate them through effective risk management and insurance solutions.
Understanding Pollution Exposures that Public Entities Face
Municipalities face complex pollution liability exposures that can result in bodily injury and property damage claims from the public. Along with human safety exposures, municipalities must prepare and act effectively when pollution incidents arise that can cause environmental damage, which can amount to millions of dollars in financial losses.
Specifically, municipalities can be held financially responsible for:
Site investigation
Remediation expenses
Civil fines and penalties
Natural resource restoration expenses
Lawsuits
Additionally, liabilities can come from financial commitments for prolonged long-term regulatory cleanup programs administered by the U.S. Environmental Protection Agency (USEPA). After CERCLA, also known as the Superfund act, was passed in 1980, the EPA was granted authority to investigate and oversee the cleanup of sites contaminated by hazardous substances, while holding responsible parties financially liable for remediation. This included the EPA’s creation of the National Priorities List (NPL), a list of priority sites for cleanup throughout the U.S. with known or threatened releases of hazardous substances.
Approximately 20% of all sites on the NPL involve municipalities or municipality-generated waste streams, often due to historical use of municipal landfills that received industrial waste. Under federal regulations like the Resource Conservation and Recovery Act (RCRA), the "cradle-to-grave" principle makes waste generators legally accountable for their hazardous materials forever.
Municipalities must ensure their own facilities (e.g., wastewater plants, vehicle maintenance fleets, healthcare systems) track and properly dispose of their waste, in accordance with and in compliance with local, state and federal laws, as they can be held liable even if they are no longer in possession of their hazardous substances. Pollution legal Liability (PLL) and environmental insurance programs offer various coverages, one of which being non-owned disposal sites coverage affording municipalities insurance for their hazardous waste, even when it is no longer in their control.
Top Municipality Pollution Risks Across Public Entity Types
Municipalities manage a wide range of owned, operated and leased properties within their real estate portfolios, increasing the need for loss control strategies across a diverse spectrum of exposure classes. Below is a breakdown of the different operation types typically controlled by municipalities and the pollution liability exposure possibilities associated with each.
PLL policies have the ability to cover sites owned, operated or leased by a municipality and can insure contracting work the municipality conducts such as pesticide or herbicide spraying, or other work the public entity conducts on non-owned locations.
Landfills/solid waste facilities, transfer stations, material recovery facilities, composting facilities, waste-to-energy facilities, incinerators, TSDF and household hazardous substances facilities contain various environmental liabilities. Since all landfills eventually will leak into the environment, as concluded by the EPA, it is critical to mitigate the following exposures before significant environmental damage is caused:
Leachate contamination on site and in neighboring soil and groundwater
Hazardous air emissions
Transportation spills
Methane migration
Odor
Municipalities can be responsible for hefty fines and penalties, third-party bodily injury or property damage lawsuits, along with remediation efforts to bring contaminants below EPA regulated cleanup action levels.
Healthcare systems can include hospitals, doctors’ offices, specialty clinics, adult centers, assisted living and rehabilitation centers. These sites primarily house immunocompromised individuals who may be more prone to severe bodily injury from contaminants in their environment. Mold and legionella or Legionella pneumophila are significant threats in healthcare facilities which can cause illness, require remediation and lead to business interruption plus evacuation expenses during the cleanup.
Consider the following case study that demonstrates the impact of pollution risks in a hospital. In 2019, a deadly mold infestation spurred a class-action lawsuit against Seattle Children’s Hospital. The infestation resulted in six children’s deaths since 2001, with the lawsuit alleging systematic air- handling systems’ maintenance problems leading to patients being impacted by Aspergillus, a common type of mold.
Pollution liability policies have both mold and legionella as defined pollutants. These policies can also offer legal costs, defense costs and supplementary costs outside the limits of insurance, providing limits to be used for legal expenses that do not erode the policies’ occurrence or aggregate limits. The incurred costs associated with relocating patients, plus the loss of daily income during the cleanup of a pollutant incident are both covered under a PLL policy.
Water and wastewater treatment plants are integral pieces of essential infrastructure for the United States. Compromised plants can risk public health and ecosystems. Environmental liability exposures for these plants include:
Chemical Handling and Storage:
Accidental releases of treatment chemicals such as chlorine, ammonia, methanol or inadequately treated effluent can contaminate nearby surface water and groundwater.
Inadequate or excessive treatment of water released to the public for consumption can cause bodily injury, lawsuits and unfavorable public perception.
Large aboveground tanks contain large quantities of chemicals which can leak or become an explosive risk.
Infrastructure and Operational Failures:
Pipeline leaks, severe weather, flooding or equipment failure can force untreated sewage to overflow into nearby communities or local waterbodies.
Lack of regular sewer and water line maintenance can cause backup or overflow impacting third party properties.
Odor claims can arise from permit exceedance or toxic air emissions.
Pollution liability programs insure the municipality for onsite and offsite pollution incidents along with water pollution coverage for the water that is distributed to the public. Many cities, towns and counties have been pulled into class action lawsuits as the defendants due to contaminants being found in the public’s tap water.
Several environmental risks can impact education systems and result in high payouts, including:
Mold
Legionella
Aboveground storage tank leaks
Historical contamination
Consider the following school district mold exposure case. In 2019, a California school district was sued after students and teachers developed asthma and chronic sinus infections due to black mold growth in classrooms. The case settled for $39 million, providing funds for medical care, school renovations and cleanup, and compensation for affected families.
Environmental impairment programs can cover pollution risks to education systems along with third-party bodily injury.
Many municipalities own and maintain airports spanning from general aviation airports to larger commercial services airports. Airports are notoriously contaminated with the forever chemical PFAS (per- and polyfluoroalkyl substances). They also are home to tank farms, underground storage tanks, underground fuel lines and deicing operations. All of these operations hold high risk for an environmental incident.
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How Pollution Legal Liability (PLL) Can Help Mitigate Your Pollution Risk
Municipalities have an array of locations which all hold substantial environmental liability. Pollution liability policies can provide end-to-end coverage against these risks, including:
First and third-party cleanup
Third-party property damage
Third-party bodily injury
Non-owned disposal sites
Emergency/crisis costs
Business Interruption
Transportation
Above and underground storage tanks
Obtaining environmental impairment liability is essential to protecting a municipality and its elected legislative body from high-cost nuclear verdict claims. Even less severe pollution claims can negatively impact a municipality’s reputation. At Alliant, our environmental specialists bring decades of experience in identifying specific environmental risks across municipalities and developing tailored risk management programs to reduce exposure. We leverage a robust network of A-rated environmental insurance carriers to deliver comprehensive pollution coverage that protects the future of your organization.
Connect with Alliant Public Entity to evaluate your municipality's pollution exposure and secure end-to-end coverage against environmental risks.
This document is provided for general informational purposes only and does not constitute legal, tax, accounting, insurance, brokerage, risk management, or other professional advice. You should consult your own legal counsel or other qualified professional advisors regarding your specific circumstances, and receipt of this document does not create any client, advisory, fiduciary, brokerage, or other professional relationship with Alliant Insurance Services, Inc. This document is provided “as is” without warranty of any kind, and Alliant Insurance Services, Inc. disclaims any liability for any loss or damage arising out of or relating to reliance on this document.
