American Risk Management Resources Network, LLC Issue #28

hard to build a fund that is actuarially sound. State funds that charge “premiums” that are not risk based keep bad tanks in the ground longer than the private insurance market would allow. This perpetuates an underfunding situation for state tank funds.

Some state tank funds payouts are also allocated according to severity of the loss. Therefore, should your

insured experience a loss and cleanup is required, they will be required to pay cleanup costs out of pocket or be fined by the state every day until clean up commences. Additionally, if the state does not have the funds to pay for the cleanup, your customer will be out financially for an undetermined amount of time until the state gets around to paying the reimbursement.

Avoid the State Tank Fund “Assurance” Trap with private tank insurance! Whether your client owns a gas station, auto repair store, etc. owners and operators of underground and aboveground storage tanks are required by the EPA to have proof of financial responsibility (FR). Proof of financial responsibility can be shown several different ways through bonds, financials, private insurance and state tank funds. The most popular of which are state tank funds or “assurance”. State tank funds operate like insurance pools where owners and operators can purchase coverage for relatively inexpensive premiums. Sounds like a great deal for tank owners and operators? WRONG!

While most state funds are solvent, several state tank funds are going bankrupt. This is due to tank funds being comingled with other state subsidized state programs and collectively used to pay for all of the programs. There are fundamental flaws in this funding scheme. Without risk based funding, by default safe tanks tend to subsidize risky tanks. In this situation it is

Avoiding

Common

State Tank

Fund Traps!

July 2014

Financial Responsibility for Storage Tank Owners By Angela Oroian

WWW. ARMR.NET

608-824-3340

Contact Us Today!

Why to avoid state tank funds Page 1

Private insurance solutions for storage tank owners

Page 2 Closed in place and empty tank solutions

Page 3

IN THIS ISSUE

American Risk Management Resources Network, LLC Issue #28

2

What about clients with empty or closed in place tanks? “Closed in place” vs. “Empty” Tanks What You Can Offer Your Client. Empty tank(s) are tricky and cannot be written in the private insurance market or state tank funds due to the fact that there is the risk that after underwriting the empty tank it is then refilled by the insured mid policy term. This creates troubles for the insured because they will be required by the EPA to still carry proof of financial responsibility (FR). With this said, there are options should you have a customer with tanks in this status. One option would be to get the tank(s) “closed in place” this is done by the insured and coordinated with the state regulator such as the DNR, in the state the tank is in. “Closed in place” is where the tank(s) is filled with sand and capped off with cement permanently damaging the tank ensuring it can never be filled again nor leak, etc. This also absolves the insured from FR requirements by the EPA due to their being no risk. At the completion of this process it’s advised the insured acquire from the state official documentation with the tank status of “closed in place.” The other option would be to get the tank(s) “Red Tagged” This is also facilitated through the state regulator. The state regulator comes out to the insureds property and confirms the tank is empty. The state regulator then puts a red tag on the tank(s) that are empty so distributers know not to fill the tank even if the insured tries to fill it. The “red tagged” tank(s) goes on record at with the state regulator and the insured doesn’t have to show financial responsibility and confirms that the tank cannot be filled. The benefit of “red tagging” is it is a less permanent solution to the alternative “closing in place” and can be removed by the state regulator at any time should the insured sell or decide to fill the empty tank.

Benefits of Private Tank pollution liability:

Meets the financial responsibility requirements in all 50 states

Timely claims payouts

Additional coverage options including defense, site, 3rd party BI & PD

Most state funds do not cover third party BI & BD, private insurance does!

ARMR Network, LLC offers you and your client real time knowledge of changing regulations for each state and their requirements of proof of financial responsibility. Why spend hours researching when trained experts at ARMR Network, LLC are ready and well versed in tank insurance requirements and placements.

What happens in the case of a spill? Take the New York State Oil Spill Fund for example; In the event of a spill or release “The tank owner is still responsible for the cost of cleanup. If the Oil Spill Fund pays for the cost of the tank cleanup, the Fund Administrator will make every attempt to recoup the amount of money spent from you, plus interest and penalties where warranted, including putting a lien on your clients property…The Fund is not liable for claims for third party bodily injury.” http://www.dec.ny.gov/chemical/8638.html. As of 2011, Michigan currently has no reimbursement fund and Iowa though their state tank fund is solvent there are still 840 unpaid claims in the state. (As reported by the ASTSWMO )

Tank owners and operators run the risk of waiting years for the state to reimburse clean-up costs! To avoid putting your client in a never ending spiral of underfunded state tank funds, offering private insurance lessens the headache. ARMR can help write under and above ground storage tank pollution liability insurance with premiums starting as low as $500.00. We also have access to markets writing older tanks up to 20 years old!

American Risk Management Resources Network, LLC 7780 Elmwood Ave, Suite 130 Middleton, WI 53526 608-836-9590

Interested in getting a quote? We make it easy! Completed, signed and dated application including FEIN#- HERE

The past 6 months of monthly inspection checklists for all covered/ scheduled AST and/or UST systems (required by Law)

Copies of tank and line tightness tests

Copies of cathodic protection tests- if testing is in place

Call 608-824-3340 or email Angela Dybdahl Oroian at Angela@armr.net