v»EPA
United States
Environmental Protection
Agency
Underground Storage Tank
Technical Compendium
References:
Financial Responsibility
U.S. EPA Office of Underground Storage Tanks
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The compendium contains interpretations and guidance letters sent out by the Office of Underground
Storage Tanks. These references are cited within the underground storage tanks technical compendium at
http://www2.epa. gov/ust/undcrground-storagc-tank-tcchnical-compcndium.
Contents
October 15, 1990 memorandum to Mr. Naylor
Undated letter to Mr. Mandel
October 24, 1991 letter to Ms. DeLibero
Jan 11, 1991 letter to Mr. Stanovich
March 29, 1991 note to Mr. Naylor
March 29, 1991 letter to Ms. Ehiert
April 6, 1989 letter to Mr. Franki
April 6, 1989 letter to Mr. Ziegel
March 28, 1991 memorandum to Mr McLaughlin
April 1, 1991 memorandum to Regional Program Managers
August 3, 2018 memorandum to UST Industry Stakeholders; State UST, LUST, and Fund Program
Contacts; Tribal UST Contacts
Underground Storage Tank Technical Compendium
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A \ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
| WASHINGTON, D.C. 20460
\ PROi^°
October 15, 1990
OFFICE OF
SOLID WASTE AND EMERGENCY
RESPONSE
MEMORANDUM
SUBJECT: Discussion of "Occurrence" and "Property Damage"
FROM: Sammy K. Ng, Chief /s/
Regulatory Analysis Branch
TO: Wayne S. Naylor, Chief
Underground Storage Tank Section, Region III
I am writing in response to your request for clarification of the terms "occurrence" and
"property damage" particularly as related to Virginia's interest in these terms. Both John
Heffelfinger and I have discussed the issues with Joanne Cassidy, but I wanted to provide you
with something in writing for your future discussions with the State.
Occurrence.
Virginia is interested in what situations UST releases would be considered "one"
occurrence versus those cases in which releases might be considered two or more occurrences.
Insurance industry practice is to consider aH contamination discovered during a single site
investigation to be "one" occurrence, regardless of the number of tanks/piping that may be
leaking. For example, if two tanks are discovered to be leaking during the same site investigation,
it doesn't matter whether they are part of the same UST system, i.e., manifolded, or two separate
tanks — the insurance industry considers it to be one occurrence, with one deductible payable by
the UST owner, and one cleanup conducted.
One State has chosen to define "occurrence" in their State regulations that directly reflects
the insurance industry's approach, as follows:
"Occurrence" means an incident which results in a release from an underground storage
tank system, and any other releases which may be occurring simultaneously at the facility
at which the UST system is located.
On the other hand, leaks discovered at different times from the same UST system, as a
result of unrelated investigations would be considered "two" occurrences.
Our understanding is that Virginia wants to define leaks discovered at the same time from
two separate tanks in the same excavation to be two occurrences. Under their State fund, this
would require two deductibles from the tank owner, but also leave the State responsible for
paying per occurrence coverage tip to the fund limits for each occurrence (an outcome the State
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may not desire). Although Virginia is free to make this interpretation, we believe it makes more
sense to follow insurance industry practice in this case. For example, "wrap-around' insurance
coverage for the deductible would likely be more available if the State considered all
contamination found during a single site investigation to be one occurrence, otherwise, an insurer
(or guarantor or tank owner who is self-insuring) would face great uncertainty in providing "per
occurrence" coverage for the deductible.
Property Damage.
Virginia has apparently raised a question regarding the definition of "property damage."
The Federal rules define the term as follows:
"Property damage" shall have the meaning given this term by applicable state law, This
term shall not include those liabilities which, consistent with standard insurance industry
practices, are excluded from coverage in liabilities insurance policies for property damage.
However, such exclusions for property damage shall not include corrective action
associated with releases from tanks which are covered by the policy.
The State's concern is over the last sentence, which says that corrective action costs can't
be excluded from property damage coverage. The confusion over this sentence lies in the fact
that up until our regulations were issued, insurers did not provide any coverage for "on-site
corrective action. Coverage for bodily injury and property damage were considered third party
claims. Coverage for "off-site corrective action was provided under the property damage portion
of the policy, when we wrote the FR regulations, we wanted to make sure that "on-site"
corrective actions would also be covered. We assumed that such coverage would also be
provided under the property damage portion of the policy and, thus, included the last sentence in
the above definition.
We also wrote our regulations around the artificial distinctions of "corrective action" and
"third party liability" created by Congress in the statute. The insurance industry has, for the most
part, responded to these categories and now writes policies covering "corrective action" (both on-
site and off-site) and "bodily injury/property damage liability." while we require corrective action
coverage be obtained, we recognize that it still may occur under various portions of policy
coverage. We recommend that Virginia follow the more recent industry trend of covering both
on-site and off-site corrective action under the definition of corrective action.
cc: Ron Brand
Mike Williams
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A \ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
| WASHINGTON, D.C. 20460
\ PROi^°
OFFICE OF
SOLID WASTE AND EMERGENCY
RESPONSE
Mr. Christopher E. Mandel, Director
Risk Management Division
National Headquarters
American Red Cross
Washington, DC 20006
Re: American Red Cross compliance with 40 CFR 280 Subpart H
Dear Mr. Mandel:
I apologize for the delay in providing you with written confirmation of our phone
discussion on May 10, 1991 regarding your request for a determination of whether the American
Red Cross can meet the requirements of 40 CFR 280 Subpart H (Financial Responsibility
requirements) through the use of the financial test of self-insurance.
As I had mentioned during our phone conversation, it is our conclusion that, based on a
comprehensive review of the regulations as they now stand, the American Red Cross does not
quality for the following reasons:
o As recognized in your letter (of October 4, 1990), the American Red Cross does
not meet the reporting requirements of 40 CFR 280(b) (4). First, the financial
statements of the American Red Cross, although publicly available, are not
provided to the securities and Exchange Commission (SEC), the Energy
Information Administration (EIA), or the Rural Electrification Administration
(REA), as required under 40 CFR 280(b) (4) (i). The regulations require this
specific reporting to ensure both that the implementing authority has ready access
to current financial statements and that the financial statements are developed in a
format that allows verification of compliance with the requirements of the financial
test. Because the American Red Cross does not report to these agencies, the
requirement that the implementation have ready access to the financial statements,
if needed, is not met.
Second, as a non-profit agency, the American Red Cross is not awarded an asset
size classification by Dun & Broadstreet. Under 40 CFR 280(b)(4)(ii) an asset size
classification of 4A or 5A would be an acceptable substitute for submittal of
financial statements to the SEC, the EIA, or the REA.
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The American Red Cross's financial statements are not developed according to the
Generally Accepted Accounting Principles (GAAP) that were assumed during
development of the financial test of self-insurance. First, the "fund" accounting
used by non-profit agencies such as the Red Cross recognizes separate funds that
are legally restricted to specific purposes (e.g., the donor restricted fund).
Such restrictions limit the ability to make parallels between financial statements for
private corporation and non-profit agencies. Second, the accounts receivable of
approximately $250 million does not appear to have been adjusted for
unrecoverable amounts. We would anticipate that accounts receivable of this
magnitude would contain some proportion of unrecoverable amounts, particularly
if the amounts reflect nonbinding pledges rather than debts for services rendered.
Although we have not undertaken an examination of the accounting practices to
identify all discrepancies between corporate financial accounting and accounting
for non-profit agencies, these two differences are enough to show that the financial
statements prepared by the American Red Cross do not adhere to the practices
assumed by EPA when the financial test of self-insurance was developed.
For these reasons, we are unable to approve the use of the financial test of self-insurance
for the American Red Cross.
As You may be aware, EPA, on August 14,1991, proposed an additional extension of the
deadline for non-marketers to comply with financial responsibility requirements until December
31, 1992 (56 FR 40292). Although EPA had strong reasons for proposing the extension,
promulgation is not assured. I have enclosed a copy of the, proposed rule for your information.
Your comments on the proposal will be most welcome.
I hope that this letter answer your questions. If I can be of further assistance, please give
me a call at (703) 308-8882.
Yours truly,
/s/
Sammy K. Ng, Acting Director
Policy and Standards Division
Office of Underground Tanks
Enclosure
cc: Lee Tyner, Office of General Counsel, EPA
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A \ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
| WASHINGTON, D.C. 20460
\ PROi^°
October 24, 1991
OFFICE OF
SOLID WASTE AND EMERGENCY
RESPONSE
Ms. Shirley A. DeLibero
Executive Director
NJ TRANSIT
McCarter Highway and Market Street
P.O. Box 10009
Newark, N.J. 07101
Dear Ms. DeLibero:
You have requested that EPA clarify NJ TRANSIT'S classification as an underground
storage tank ("UST") owner in order to determine which methods for assuring financial
responsibility are available to NJ TRANSIT. You ask specifically about classification as a state or
local government. In answering this question, I start from the premise that all owners and
operators cf petroleum USTs must comply with the Subpart H Financial Responsibility
regulations unless they are exempted under one of the express provisions of section 280.90. See
40 CFR § 280.90(a). NJ TRANSIT does not qualify at a state agency under 280.90(c) because
the debts of NJ TRANSIT are not the debts of the State of New Jersey. You acknowledge this in
your letter. Thus NJ TRANSIT must comply with the provisions of 40 CFR § 280.93.
If NJ TRANSIT is not a state agency under the UST regulations, the next question is
whether it is a local government. Local government entities are required to meet the financial
responsibility provision.. At the time the agency initially promulgated the financial responsibility
rules it said that local government includes special purpose local entities which are generally
designated as either public authorities, transit authorities, or power authorities. The Agency
restated and clarified its view of what constitutes a local government in the June 18, 1990
preamble to the proposed additional mechanisms for local governments to demonstrate financial
responsibility. As with the 1988 role, the preamble again mentions transit authorities as an
example of special purpose local governments (55 FR 24695) and suggests that the category
includes districts created by State enactment (55 FR 24696). Thus it would appear that NJ
TRANSIT qualifies as a local government for the purpose of the financial responsibility
regulations.
Section 280.91 sets out the schedules by which owners and/or operators of USTs must
comply with the financial responsibility provisions. Assuming that NJ TRANSIT is a local
government, NJ TRANSIT will be required to comply by a date one year after the promulgation
of additional mechanisms for use by local government entities to comply with the financial
responsibility requirements for USTs containing petroleum. 55 FR 46025 (October 31, 1990). As
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a local government, NJ TRANSIT would be eligible to use any of the mechanisms in the existing
rules, or any new mechanisms promulgated specifically for local governments.
I hope that this letter answers your questions. If I can be of further assistance, please
give me a call at 703/308-8882.
Sincerely,
/s/
Sammy K. Ng, Acting Director
Policy and Standards Division
Office of Underground Storage Tanks
cc: Lee R. Tyner
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A \ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
| WASHINGTON, D.C. 20460
\ PROi^°
January 11, 1991
OFFICE OF
GENERAL COUNSEL
Craig F. Stanovich, CPCU
Vice President
BRALEY AND WELLINGTON INSURANCE AGENCY CORP.
44 Park Avenue
Worcester, MA 01609
Dear Mr. Stanovich:
I am responding to your November 27, 1990, letter to Mr. Sammy Ng regarding the
financial responsibility requirements for underground storage tanks (USTs).
EPA's financial responsibility requirements for USTs are set forth at 40 CFR Part 280,
subpart H (1990). Coverage for corrective action is required by 40 C.F.R. 280.93. If the owner
or operator chooses insurance as the means of demonstrating financial responsibility, the policy
must comply with 40 C.F.R. 280.97. Note that 40 C.F.R. 280.93(d) allows an owner or operator
to use separate mechanisms or separate combinations of mechanisms to demonstrate the different
categories for which assurances of financial responsibility are required.
Your letter asked whether coverage for on-site corrective action is required. As explained
in the preamble to the final financial regulation, it is. 53 Fed Reg. 43322, 43348 (Oct. 26. 1988).
Thus coverage limited to "the existence of imminent and substantial danger to third parties
resulting from a pollution condition" would not be sufficient to provide the required corrective
action coverage.
You inquired further about the meaning of the phrase "subject to the terms, conditions,
limits, and limitations of liability and exclusions of the policy." The phrase quoted above is not
exactly the phrase required by the regulations. In a rule published on November 9, 1989, EPA
added to the required language of both the endorsement and the certificate of insurance for
insurance intended to provide evidence of financial responsibility the phrase "in accordance with
and subject to the limits of liability, exclusions, conditions, and other terms of the policy." The
preamble explained that this was added "to clarify that these instruments do not narrow or
broaden the scope of coverage provided in the policy itself." 54 Fed. Reg. 47081 (November 9,
1989).
If you have further questions, I can be reached at 202/245-3710.
Sincerely,
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/s/
cc: Sammy Ng
Lee R. Tyner
Attorney
Solid Waste & Emergency
Response Division (LE-132S)
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March 29, 1991
NOTE TO: Wayne Naylor
At the same time that we were considering your request to define "corrective action," we
received a request from Region 8 that required us to tackle that issue (in addition to some others)
The issue of corrective action, particularly as it relates to coverage that State funds must provide
(your issue in West Virginia, I believe) is discussed in the attached response to Region 8. I hope
it satisfies your needs. If not, or if you want to discuss it further, please give me a call (FTS 382-
7903)
/s/
Sammy Ng
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OFFICE OF
SOLID WASTE AND EMERGENCY
RESPONSE
MEMORANDUM
SUBJECT: Review of Wyoming Definition of "Release"
FROM: Sammy Ng, chief
Regulatory Analysis Branch
TO: Debbie Ehlert
UST Program Manager, Region 8
Maureen Doughtie of your staff recently sent us a copy of
Wyoming's UST statute. she requested our opinion on the definition
of "release" as it appears in Wyoming's statute, particularly as it
applies to State financial assurance fund coverage and
acceptability as a compliance mechanism under the Federal financial
responsibility (FR) regulations. We have reviewed the definition
in this Context, as well as its implications for State Program
Approval stringency.
The Wyoming statue defines the term "release" as:
"...any spilling, leaking, emitting, discharging,
escaping, leaching, or disposing from an underground
storage tank into groundwater, surface water or
subsurface soils in amounts exceeding twenty-five (25
gallons" (emphasis added).
The question is whether Wyoming can exclude releases under 25
qallons from its regulatory program and still qualify for State
Program Approval or approval of its State fund as a FR compliance
mechanism. We believe that their definition may be acceptable in
the context of State fund approval, but not for State Program
Approval. The rationale for each of these opinions is discussed
below.
State Program Approval
The Federal definition of release (Part 280.12) is identical
to Wyoming's except for the 25 gallon exclusion in Wyoming's
statute. Although we established reporting triggers at the 25
gallon level for aboveground releases, Subpart E of EPA's UST
regulations requires that spills or overfills of any size must be
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
March 29, 1991
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immediately contained and cleaned up, and, if not then it must be
reported to the implementing agency. Thus, while reporting is not
required for small spills (< 25 gallons), UST owners and operators
who experience them are regulated under Subtitle I and must take
appropriate action under Subpart E -- Release Reporting,
investigation and confirmation.
The State Program Approval regulations and objectives do not
appear to provide any relief in this case. Part 281.34 says:
"In order to be considered no less stringent ... the state
must have requirements that ensure all owners and operators
conform with following:
(a) promptly investigate all suspected releases;
(b) Ensure that all owners and operators contain and clean up
unreported spills and overfills ..."
Based on this discussion, we believe that Wyoming's definition of
release would be less stringent than the Federal program allows.
State Fund Approval for FR
EPA's financial responsibility rules require UST owners or
operators to demonstrate FR for taking corrective action and for
third party liability. We allow States to submit their assurance
funds to EPA for approval as full or partial coverage mechanisms to
satisfy this requirement. The issue we face with Wyoming's
definition of release is whether the State fund has to cover
releases less than 25 gallons in order to be approved.
Specifically, the question to be answered is whether EPA's
requirement to respond to releases less than 25 gallons is defined
as "corrective action."
In order to provide "corrective action" coverage, a State fund
needs to cover, at a minimum, those activities required on the part
of owners or operators under Subpart F of EPA'S UST rules.
Although EPA has never formally defined the term "corrective
action" in our rules, Subpart F — Release Response and Corrective
Action for UST Systems Containing Petroleum or Hazardous Substances
— is generally viewed as the "corrective action" section of the
rules. This viewpoint is supported by other parts of the technical
standards and preamble, which repeatedly make reference to "...
begin corrective action in accordance with Subpart F." Thus, it
can be argued that until an owner is forced into the subpart F
section of the rules, he is not performing corrective action, per
se .
Since the requirement to respond immediately to releases less
than 25 gallons is found in Subpart E of the UST rules —Release
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Reporting, Investigation, and Confirmation — it can be reasonably
argued that the state fund is not obligated to cover these
activities, because they are not required to be performed under
Subpart F. Thus, we believe that Wyoming's fund does not have to
cover releases less than 25 gallons in order to be approved as an
FR compliance mechanism (provided that it meets all other State
fund review criteria).
Given the nature of the issue you presented and our belief
that other Regions may be interested in the response, as it relates
both to State Program Approval and State fund approval, we are
sending copies to them for their information. If you have any
questions regarding the above, or wish to discuss these issues
further, please call John Heffelfinger at FTS 382-2199.
cc: UST Program Managers, Regions 1-7, 9-10
Dave Ziegele
Mike Williams
OUST Desk Officers
Jerry Parker
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A \ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
| WASHINGTON, D.C. 20460
\ PROi^°
April 6, 1989
Mr. Christopher J. Franki
Insurance Buyers' Council, Inc
22 West Road
Baltimore, Maryland 21204
Dear Mr. Franki:
This is in response to your letter dated March 15, 1989 in
which you ask for clarification of a number of issues relating to
the financial responsibility requirements for petroleum
underground storage tanks.
• EPA defines tangible net worth as the tangible assets
that remain after deducting liabilities; such assets do
not include intangibles such as goodwill and rights to
patents or royalties.
o The standard definition of working capital is current
assets minis current liabilities.
• Unused borrowing capacity is not considered part of the
standard definition of working capital.
The non-profit community service corporation that your firm
represents is considered a non-marketer. If the corporation has
more that $20 million in tangible net worth then it should have
complied with the financial responsibility regulation on January
24, 1989; if it has less than $20 million in tangible net worth
it must comply by October 26, 1990.
The self-assurance test for local governments that Stephanie
Bergman of my staff mentioned may not apply to non-profit
organizations; it will be directed more towards general purpose
governments (cities, counties, towns) and special purpose
governments (school districts, sewer districts, power
authorities, transit authorities). If the non-profit
organization can meet the criteria in a self-assurance test, then
it can use the mechanism to comply with the financial
responsibility requirements, otherwise, there are additional
mechanisms like insurance and state funds that the organization
can use to comply with the requirements by October 2 6, 1990.
OFFICE OF
SOLID WASTE AND EMERGENCY
RESPONSE
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I hope this information has been helpful. If you have any
additional questions, please give me a call at 202-382-7903 or
Stephanie Bergman 202-382-4614.
Sincerely,
/s/
Sammy Ng , Chief
Regulatory Analysis Branch
Office of Underground Storage Tanks
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A \ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
| WASHINGTON, D.C. 20460
\ PROi^°
April 6, 1989
OFFICE OF
SOLID WASTE AND EMERGENCY
RESPONSE
Mr. Dean B. Ziegel
Rivkin, Radler, Dunne & Bayh
EAB Plaza
Uniondale, New York 11556
Dear Mr, Ziegel:
This letter is in response to your letter dated December 28,
1988 in which you ask for confirmation of a number of issues
related to the financial responsibility requirements for
petroleum underground storage tanks (USTs).
• A firm with more than $20 million in tangible net worth
that does not report to the Securities and Exchange
Commission, Dun & Bradstreet, Energy Information
Administration or the Rural Electrification
Administration must comply with the financial
responsibility requirements for petroleum USTs on October
26. 1990.
• A firm "reports" to Dun & Bradstreet if:
- the firm provides to Dun & Bradstreet information about
the firms net worth or information that can be used to
determine the firm's net worth; or
- Dun & Bradstreet publishes a rating for the firm.
If you have any additional questions please call me at 202-
382-7903.
Sincerely,
/s/
Sammy K. Ng, Chief
Regulatory Analysis Branch
Office of Underground Storage Tanks
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A \ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
| WASHINGTON, D.C. 20460
\ PROi^°
March 28, 1991
OFFICE OF
SOLID WASTE AND EMERGENCY
RESPONSE
MEMORANDUM
SUBJECT: Release on Monies from Fully Funded Trust that is Funded with Marketable
Securities
FROM: Sammy K. Ng, Chief /s/
Regulatory Analysis Branch
Office of Underground Storage Tanks
TO: Chet McLaughlin, Chief
State Program Section
Underground Storage Tank Program
EPA Region VII
This is in response to your question concerning the amount of money that is appropriate to
release from a fully funded trust fund that is partially funded with marketable securities. The
Federal financial responsibility regulations (Section 280.102) state that, "If the value of the trust
fund is greater than the required amount of coverage, the owner or operator may submit a written
request to the Director of the implementing agency for release of the excess."
Upon receipt of such a request, we suggest that in the case of a fully funded trust fund that
is funded in full or in part by marketable securities, those securities should be valued at the lower
of cost or market value until such time as the loss or gain is realized.
We appreciate Alma Moreno's input on this decision. If you have any additional questions
or require additional clarification, please phone me at FTS 382-7903. Given the general nature of
this question, I am sending a copy of this memorandum to all of the other Regional Program
Managers.
cc: Dave Ziegele
Regional Program Managers I - X
Desk Officers
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A \ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
| REGION VII
\ pROi^° 726 MINNESOTA AVENUE
KANSAS CITY, KANSAS 66101
April 1, 1991
MEMORANDUM
SUBJECT: Fisca Oil Co., Inc.
FROM: Alma Moreno, Environmental Engineer
Underground Storage Tanks (UST) Program, Region VII
TO: UST Regional Program Managers, Regions II - VI
Fisca oil Co., Inc. requested that the Region VII UST Program release monies in excess of
$2 million held in a fully funded trust fund. At that time, we contacted each affected Region to
verify that a similar request had not been submitted to each, and that Fisca Oil Co., Inc. was in
compliance within that Region. Region VII coordinated this request because Fisca Oil Co., Inc. is
headquartered in Region VII. Since the trust was partially funded with marketable securities,
valuation became an issue.
After discussions with and the approval by the Office of Underground Storage Tanks
(OUST) the criteria used to value the marketable securities was "the lower of cost or market
value." Based on this criteria and the February 28, 1991 trust accounting, the Regional
Administrator authorized the trustee, Commercial National Bank of Kansas City, Kansas, to
refund $252,774.45 to the Grantor.
Attached is a copy of the trust agreement and certificate of financial responsibility which
were reviewed and found to comply with the financial responsibility regulations. Also included is
a copy of relevant correspondence and the letter sent to the trustee by the Regional Administrator
and the February 28, 1991 trust accounting.
Attachments
cc: UST Regional Program Managers, Regions I, VIII, IX, X - with attachments
Sammy Ng, OUST - with attachments
Lela Hagen, OUST - with attachments
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UNIT H x 11 ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D,C, 20460
August 3, 2018
OFFICE OF
LAND AND EMERGENCY
MANAGEMENT
MEMORANDUM
SUBJECT: Underground Storage Tank Insurance Policies - Voluntary Exclusions and
Self-Insured Retentions
FROM: Tony Raia. Director
Release Prevention Division, Office of Underground Storage T anks
TO: UST Industry Stakeholders
State UST, LUST, and Fund Program
Contacts Tribal UST Contacts
I am writing to provide you with important information about underground storage tank (UST)
insurance policies, specifically whether voluntary exclusions and self-insured retentions meet the
financial responsibility (FR) requirements of 40 CFR 280. I request that you please share this
information with UST owners and operators (referred to as owners) in your states, territories, and
Indian Country.
As you know, insurance provides a critical role in providing financial responsibility for
underground storage tank owners and operators in many states and Indian Country. To ensure
owners are buying and retaining appropriate coverage for their UST systems, it is important that
they understand and be attentive to the underlying language, terms, and conditions of their UST
insurance policies. Several people asked EPA to evaluate certain provisions in UST insurance
policies. Below I discuss whether voluntary exclusions and self-insured retentions meet the
financial responsibility requirements of 40 CFR 280, talk about certificates of insurance, and
provide additional resources about insurance.
Voluntary Tank Removal And Voluntary Tank Site Investigation Exclusions In
UST Insurance Policies
Insurance policies may include language that lists certain conditions or situations where the
insurance company is not required to pay a claim. These circumstances are listed as exclusions.
Some exclusions, such as non-payment for claims to pay a state fine for non-compliance meet
the federal financial responsibility requirements of 40 CFR 280. Exclusions for payments for
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voluntary tank removals and voluntary tank site investigations do not meet the FR requirements.
There is no standard voluntary tank removal or voluntary site investigation insurance language.
The definitions of voluntary tank removal and vol untary investigation are unique to each
insurance carrier.
If a tank removal or tank site investigation reveals contamination from an UST release, the UST
insurance policy must not exclude insurance coverage for the cleanup of the release or any third-
party damages that may result. If such an exclusion is part of the insurance policy, the insurance
policy does not meet the federal financial responsibility requirements of 40 CFR 280, Subpart H.
Examples Of Exclusion Language for Voluntary Tank Removal And Voluntary Tank
Site Investigation
"any claim arising out of, caused by, resulting from, contributed to. or in any way related
to any pollution incident discovered during any voluntary tank removal of any
underground storage tank system"
"This policy does not apply to any claim arising out of or discovered as a resul t of any
removal or replacement of any underground storage tank system."
"any claim arising out of release ari sing from, di scovered, or exacerbated as a result of a
voluntary investigation of environmental conditions or any storage tank system."
Examples Of Voluntary Tank Removal And Voluntary Tank Site Investigation
Definitions
"Voluntary removal means the removal of any underground storage tank system whether
in part or in its entirety with no prior knowledge of a failure in or pollution incident from
the underground storage tank system."
"Voluntary investigation means any investigation of environmental conditions or storage
tank system undertaken, instigated, or directed by the insured of any actual or prospective
tenant, landlord, lessor, lender, lessee, purchaser or agent thereof of a scheduled facility
utilizing sampling or testing of soil, groundwater, or surface water."
Self-Insured Retentions In UST Insurance Policies
A self-insured retention is the dollar amount an owner must pay before the insurance policy
starts paying. Under a self-insured retention policy, an owner pays the cleanup, third party
damage, and legal costs until the total amount of the self-insured retention limit is reached. Only
after that point does the insurance provider pay for costs covered by the policy. This is different
from a deductible, in that the deductible is part of the policy coverage limit. The federal UST
regulation requires insurance providers pay first dollar coverage for deductibles without waiting
for the insured to pay that amount. The insurance provider may then collect the deductible from
the owner. The reason is so corrective action is not delayed. However, since self-insured
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retentions are not part of the policy coverage limits, they are not covered by the protection of the
first dollar coverage provision.
For example, for a $ 1 million policy with a $100,000 self-insured retention, an owner pays the
first $100,000, which is the self-insured retention amount; only after that full amount has been
paid will the insurer pay up to $ 1 million under the policy. If the owner does not or cannot pay
the self-insured retention amount, the insurance coverage is not activated; this effectively
nullifies financial responsibility coverage for the release. Whereas, if an owner has a $1 million
policy with a $100,00 deductible, the insurance provider is immediately required to pay for
corrective action costs even if the owner has not spent $100,000 in costs. The insurance provider
then collects the amount of the deductible from the owner.
EPA determined that an insurance policy with a self-insured retention may be only a partial
financial responsibility mechanism. If the self-insured retention is applied to a claim made after
the inception date, it does not fulfill the financial responsibility requirements of 40 CFR 280 on
its own. Instead, an owner would have to use a combination of mechanisms to comply with
financial responsibility requirements. An owner would have to show proof of financial
responsibility for the amount of the self-insured retention.
If the self-insured retention is applied only to claims during the period prior to the inception date
or back to the retroactive date, the policy fulfills the financial responsibility requirements of 40
CFR 280, Subpart H, since coverage is only required for the current policy period. Though EPA
strongly encourages owners use policies with retroactive dates.
Verification
The federal LIST regulation at 40 CFR 280, Subpart H requires owners or operators to keep a
signed certificate of insurance. This certificate, when signed by the insurance provider, verifies
that the insurance policy provides the required first dollar coverage and extended reporting
period. However, the certificate of insurance form in 40 CFR 280 does not show whether the
policy is subject to a self-insured retention or any exclusions. Owners must have the actual
policy or declarations statement to determine if the policy is subject to payment of a self-insured
retention or contains any exclusions. Owners and operators must verify that an insurance policy
used to comply with FR requirements contains only acceptable exclusions. An EPA or state
inspector may require an owner to submit the policy and document acceptable financial
responsibility.
Resources About UST Insurance
I recommend the Association of State and Territorial Solid Waste Management Officials '
(ASTSWMO's) Guide to Tank Insurance for information about other important policy
provisions. This guide presents examples of UST insurance policy language that could impact
the extent of coverage under the policy; see http://astswmo.org/guide-to-tank-insurance/.
Another helpful resource is EPA's List of Known Insurance Providers for Underground Storage
Tank Owners and Operators at
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https://www.epa.gov/ust/list-known-insurance-providers-underground-storage-tank-owners-and-
operators. This document contains contact information for insurance companies, brokers, and
agents offering UST insurance.
For More Information
If you have questions about the federal requirements for UST insurance, please contact Cho-Yi
Risher at risher.chovi@epa.gov or 202-564-0672.
cc: ASTSWMO
EPA Regional UST Program Managers
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