Warehousing firms confront environmental liability every day whether known or not. Specifically, they face environmental exposures in three major areas: operations, transportation, and disposal. Each area must be explored to identify risks that may expose the organization to environmental liability.
As outlined below, there are various types of risks that can present environmental liability to organizations that are in the warehousing industry. One example is an Amazon warehouse where three workers were sickened by a cleaning chemical in 2020. A chemical reaction occurred when the staff was mixing chemicals, and the sickened employees experienced respiratory-related symptoms, including coughing. Evacuations took place, and two of the sickened employees were treated and released from the hospital while one remained hospitalized.
In fact, a recent review of the book of insureds at RT Specialty's Environmental and Construction Professional Practice between 2020 and 2021 found that the mixing of chemicals on-site was the second largest driver of environmental claims for warehousing clients. The leading cause was third parties abandoning waste or materials on the property itself, leading to extensive cleanup at the property and investigation into the vertical and horizontal extent of the contamination that migrates off the property in oil and groundwater.
Other risks that can expose warehousing organizations to environmental liability include the following.
Liability arising from both on- and off-site historical use, such as improper disposal of waste products, leaking underground tanks (known or unknown), unremediated residual contamination from small leaks or spills, etc.
Liability associated with local or regional soil/groundwater contamination, regardless of the source of contamination.
Improperly maintained equipment containing polychlorinated biphenyls (PCBs) and transformers. PCBs tend to be immobile in soil; this may lead to surface contamination at and beyond property boundaries.
Improper housekeeping and preventive maintenance resulting in residual contamination of soil and groundwater.
Inadequate underground and aboveground tank inventory and/or management programs can lead to groundwater contamination.
The improper storage of incompatible materials may lead to on-site releases and/or a potential explosion. Owners may not even be aware of what materials are being stored by lessees.
The malfunction of oil/water separators, releasing petroleum-contaminated water into bodies of water or waste streams.
The malfunction of ammonia-based refrigeration systems, resulting in air emissions and creating third-party inhalation hazards.
Storage of hazardous and nonhazardous products/materials (e.g., pesticides, paints, solvents, or cleaning compounds). The improper segregation of such products/materials can produce toxic events if they are released from their packaging and mixed with others.
The inadequate protection around storm or drainage grates, leading to untreated discharge of stored materials or waste.
Corroded wastewater/stormwater sewer systems resulting in subsurface contamination over a period of time.
Depending on the age of the structure, it could contain exposed asbestos, lead paint, etc., exposing third parties as well as employees to unwanted environmental hazards.
Spills or releases during the loading and unloading of product from rail cars, trucks, etc.
Spills of contents (e.g., fuel, product, equipment maintenance fluids, or process materials) during transport.
Resulting pollution from collisions with various structures (e.g., pole-mounted transformers or aboveground tanks).
The cleanup and liability associated with the disposal of waste/materials at disposal facilities or recyclers. This may expose the organization to Superfund liability.
Another key exposure area pertains to the warehousing properties themselves; many warehouses have likely operated at the same premises for more than 50 years. During this time, the past improper disposal of waste or materials may have caused adverse soil and groundwater conditions that may not even be known to the organization or surrounding property owners.
Even if the environmental assessments are performed to assist in identifying the hazards, they usually only entail Phase I inspections and cursory walk-throughs, which seldom reveal significant environmental issues such as the on-site disposal of maintenance chemicals, cleaning chemicals, vehicle fluids, fuel storage, and the like. So, no matter the locale or industry, no organization should ever underestimate the value of properly devised and implemented risk management strategies. The problem is that these tools often become an afterthought while all the organization's operations are being put in place—a problem that has produced a wide array of costly delays and financial issues for many unprepared warehousing properties.
In conclusion, while environmental liability insurance is an effective way to finance any resulting loss, it doesn't prevent the event from occurring. Such environmental incidents could not only have a disastrous financial impact on the company, they could also destroy the reputation and image that organizations work so hard to establish.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.
Warehousing firms confront environmental liability every day whether known or not. Specifically, they face environmental exposures in three major areas: operations, transportation, and disposal. Each area must be explored to identify risks that may expose the organization to environmental liability.
As outlined below, there are various types of risks that can present environmental liability to organizations that are in the warehousing industry. One example is an Amazon warehouse where three workers were sickened by a cleaning chemical in 2020. A chemical reaction occurred when the staff was mixing chemicals, and the sickened employees experienced respiratory-related symptoms, including coughing. Evacuations took place, and two of the sickened employees were treated and released from the hospital while one remained hospitalized.
In fact, a recent review of the book of insureds at RT Specialty's Environmental and Construction Professional Practice between 2020 and 2021 found that the mixing of chemicals on-site was the second largest driver of environmental claims for warehousing clients. The leading cause was third parties abandoning waste or materials on the property itself, leading to extensive cleanup at the property and investigation into the vertical and horizontal extent of the contamination that migrates off the property in oil and groundwater.
Other risks that can expose warehousing organizations to environmental liability include the following.
Another key exposure area pertains to the warehousing properties themselves; many warehouses have likely operated at the same premises for more than 50 years. During this time, the past improper disposal of waste or materials may have caused adverse soil and groundwater conditions that may not even be known to the organization or surrounding property owners.
Even if the environmental assessments are performed to assist in identifying the hazards, they usually only entail Phase I inspections and cursory walk-throughs, which seldom reveal significant environmental issues such as the on-site disposal of maintenance chemicals, cleaning chemicals, vehicle fluids, fuel storage, and the like. So, no matter the locale or industry, no organization should ever underestimate the value of properly devised and implemented risk management strategies. The problem is that these tools often become an afterthought while all the organization's operations are being put in place—a problem that has produced a wide array of costly delays and financial issues for many unprepared warehousing properties.
In conclusion, while environmental liability insurance is an effective way to finance any resulting loss, it doesn't prevent the event from occurring. Such environmental incidents could not only have a disastrous financial impact on the company, they could also destroy the reputation and image that organizations work so hard to establish.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.