For years, many of us have been discussing the potential issues associated with
naturally occurring environmental hazards or substances such as silica,
mercury, arsenic, pyrite, and probably the most prevalent, asbestos. All these
naturally occurring substances have hazardous properties associated with them,
so they are typically defined as pollutants or hazardous substances.
In fact, nearly all are recognized as or contain toxic substances as defined
by the U.S. Environmental Protection Agency (EPA) and therefore present unusual
exposure to many property owners, developers, and contractors. The purpose of
this article is to bring attention to some of the various and more obscure
naturally occurring substances present in our environment that can expose
organizations to environmental liability and the potential problems they may
cause with a construction firm's contractors pollution liability (CPL)
coverage.
It's There, We Just Don't See It
Even though they can wreak havoc with any entity owning, developing, or
building on real estate, we often are unaware of how exposed we may be to the
different naturally occurring minerals and substances found in our environment:
mercury, arsenic, asbestos, radon, and so forth. Most of these substances are
discovered during development or construction. It is only then that we realize
the potential catastrophic impact on an organization or community as a result
of disturbing such substances.
Naturally occurring asbestos has seen the most recent media exposure in the
past year. One article tells of an El Dorado County, California, family that
built its dream home near a vein of tremolite—a mineral containing naturally
occurring asbestos. The thought of raising a family near such a carcinogenic
hazard squashed whatever dreams family may have had, and they simply walked
away from the property. Little is said in the article about any potential
liability tied to the actual sale or construction of the home; nonetheless, it
made a significant impact in the lives of those involved.
Another press article tells of a general contractor in Virginia who was
building a "box store." The excavation subcontractor removed material
from the job site and used the material as fill at three other sites. It just
so happened that the material they removed was soil containing remnants of an
asbestos-containing mineral called Actinolite.
The Stuff To Be Aware of
As you will see in this discussion of a few of the more obscure
substances/minerals that can be labeled hazardous, each region of the country
produces its own unique environmental hazard. For construction firms, the
biggest exposure is disturbance of this material through excavation,
street/road construction, and any other intrusive type work.
Mercury
Mercury is present in the environment as a result of both natural processes
and human activities. Natural sources of mercury include volcanoes, hot
springs, and natural mercury deposits. Sources related to human activities
include coal combustion, waste incineration, certain industrial activities, and
some mining activities. Although mercury is only a trace constituent of the
fossil fuels we burn, these processes alone result in the release of
approximately 48 tons of the toxin into the atmosphere in the United States
each year. Natural sources of mercury release three times that amount on an
annual basis.
According to the EPA, mercury is a human neurotoxin. Developing fetuses and
small children are at greatest risk from exposure. The principal route of human
exposure is through consumption of mercury-contaminated fish. When mercury
enters an aquatic environment, it may encounter conditions that cause its
conversion to methyl mercury. Methyl mercury is taken up by aquatic organisms
and tends to concentrate as it moves up the food chain. This process is
referred to as biomagnifications (from bacteria to fish-eating fish) and can
result in high mercury concentrations in predatory fish such as striped bass
and sharks, and in fish-eating birds and mammals.
In California, environmental mercury issues are primarily related to
historical mining operations that had occurred up until the early 1980s. During
this time it is estimated that nearly 100 million kilograms of mercury were
produced within the state and large quantities of mercury were distributed into
the environment. Cinnabar is a naturally occurring mercury sulfide found in and
around Santa Clara County. It was the main ore of mercury mined by many of the
California mining companies for the past 150 years. Cinnabar is generally found
in a massive, granular, or earthy form, and is bright scarlet to brick-red in
color. Sometimes mistaken for weathered brick from construction activities,
cinnabar is more crystal-like.
Pyrite
Pyrite or iron sulfide or "Fool's Gold," FeS2 for true
geologists, is one of the most common sulfide minerals. Because of its rather
high sulfur content, when exposed to the atmosphere (oxygen) or water, pyrite
forms sulfuric acid. The most notable operations that create such an
environment are mining operations—resulting in what we have all heard before as
acid mine drainage.
There have also been a number of instances where acid drainage was created
as a result of construction activities. One in particular occurred in
Pennsylvania in 2004—the official name was the PA 26 Relocation Project, also
known as I-99. It was a $195 million project connecting to other expressways in
central Pennsylvania, a 1.4 mile stretch. In February of 2004, construction
came to a stop when contractors exposed substantial amounts of pyrite, causing
uncharacteristically high amounts of acid drainage into the surrounding area.
The acid drainage ended up contaminating several streams and potable water
wells of residents in the area. The environmental impact statement apparently
missed this geologic formation.
The project was and is still shut down. In September 2006, the Pennsylvania
Department of Environmental Protection (PA DEP) approved remedial plans to
address the problem, and the work has recently begun to remove a majority of
the pyrite material at a cost of approximately $26 million. The remaining
material will be covered with an engineered, impermeable material to prevent
exposure to rainwater and oxygen. Once remediation is complete, construction is
expected to resume on I-99.
Most notable presence of pyrite is in the Northeast United States, Illinois,
and Missouri. There may be other pyrite varieties or other sulfide containing
minerals (consider those areas that are heavily mined for coal) that can
produce the same effects in other parts of the country.
Asbestos
Naturally occurring asbestos (NOA) is much more prevalent in the United
States than once thought. NOA is found in the various minerals that produce the
carcinogenic fibers like chrysotile, crocidolite, amosite, anthophyllite,
tremolite, actinolite, and serpentinite. Undisturbed, these minerals can have
little to no impact on the environment and human health; however, weathering,
mining, and real estate development/construction emit asbestos fibers into the
atmosphere, exposing the workforce and communities to unknown respiratory
hazards. As we should all know by now, asbestos causes cancer of the lungs and
of the lining of internal organs. In addition, asbestosis and mesothelioma are
other asbestos-related diseases that inhibit lung function.
Similar to the last two hazards, NOA can become an issue for virtually any
construction firms performing intrusive-type operations. According to the U.S.
Geological Survey, 27 of the 50 states contain some form of NOA containing
minerals. NOA can be found in various mineral deposits in the East, from Maine
to Alabama, and in the West, predominantly in California. Apparently, San
Benito and Fresno Counties in California are located on one of the largest
naturally occurring asbestos deposits in the world. Popular to motorcyclists
and other off-road vehicles, this area is underlain by a 30,000-acre serpentine
deposit. Serpentine just happens to be the state rock of California.
Silica
When we refer to "silica," we are usually referring mostly to the
crystalline form otherwise known as silicon dioxide (SiO2). There are other,
noncrystalline forms of silica, but since most of the issues are centered on
the inhalation of the crystalline form, we'll focus on that form.
There are three major forms of crystalline silica that are most common in
the workplace: quartz, tridymite, and crystobailite. The most common we can
probably all relate to is quartz. Quartz can be found in virtually all soil in
nearly every part of the country. The "rock" sandstone is composed of
quartz and can be found in many areas throughout the country except for
southern coastal areas where most beaches are made up of limestone.
Tridymite and crystobalite are simply polymorphs of quartz. In other words,
they are composed of the same elements but have different chemical structures.
An easy example to help understand what is meant by polymorph would be
tridymite. Tridymite, while somewhat rare, can be found in many volcanic rocks.
In this example, the heat associated with volcanoes acts as the catalyst that
"morphs" or changes the chemical structure of the quartz into rocks
containing tridymite. Crystobalite is not too different than tridymite. To put
this into some type of context and to bring some vision to this issue, consider
the eruption of Mount St. Helens back in the 1980s. Those people that may have
been exposed to silica and contracted silica-related respiratory injuries would
most likely have been inhaling tridymite or crystobalite in the dust after the
explosions. Those people in and around the collapse of the World Trade Centers
in 2001 would mostly be inhaling quartz coming from the concrete dust. The
point is simple. Although all are different in chemical structure, all forms of
crystalline silica can eventually be deadly.
When it comes to identifying or locating silica, it's simple. It's
everywhere!
Arsenic
Arsenic, or As, is a naturally occurring element found throughout the
earth's crust. Due to weathering, volcanic eruption, mining, smelting
operations, agriculture and real estate development/construction activities, it
is believed that all soil contains some amount or level of arsenic. As a
result, everyone is exposed to some level of As. According to the EPA, arsenic
has been linked to cancer of the bladder, lungs, skin, kidney, nasal passages,
liver, and prostate. In addition, non-cancer effects can include thickening and
discoloration of the skin, stomach pain, nausea, vomiting, diarrhea, numbness
in hands and feet, partial paralysis, and blindness. Although not used in
residential construction (still used in industrial) anymore, arsenic's most
widely use was as a preservative in pressured treated lumber—the copper
chromated arsenic (CCA) process.
Naturally occurring arsenic has been found in the ground water of almost
every aquifer of Wisconsin. Of the water wells drawing from these aquifers,
water sample results indicate about 3.5 percent of these wells have
concentrations exceeding the current public drinking water standard of 50 ppb.
Concentrations detected in several existing wells in this region are in the
thousands of ppb and represent some of the highest found naturally occurring in
the world.
According to the Geological Society of America (GSA) elevated levels of As
have also been found in Massachusetts, Michigan, New Hampshire, Rhode Island,
Maine, and some western states.
Implication in Contractors Pollution Liability Coverage
When looking for financing alternatives for environmental loss, many
organizations now move in the direction of environmental liability insurance.
It has become less expensive, broader in scope, and easier to secure than a few
years ago. While this is a sound alternative, there are a number of pitfalls
that one may encounter when securing such insurance, regardless of whether it
is obvious or not. One of the most common pitfalls is exclusionary wording for
naturally occurring substances, like the materials identified above. This makes
a complex issue even more complex.
Specifically addressing the contractors pollution liability (CPL)
marketplace (from environmental or remediation contractors to general and
specialty trades/subcontractors), there are several ways exposure to naturally
occurring hazards may be excluded. Some are fairly recognizable as
straightforward exclusions. Others are more cryptic—coming in the definition of
pollutants or pollution conditions. For example, one insurer applies a specific
exclusion for naturally occurring substances in the exclusions section of the
policy that can have significant impact on coverage:
This insurance does not apply to claims or losses based upon or arising out
of any naturally occurring substances in their original location and
unaltered form, or altered solely through naturally occurring processes or
phenomena.
Another insurer will exclude by definition. In its definition of pollution
conditions, the definition does not include naturally occurring substances,
therefore negating coverage for such exposure:
- Pollution Conditions means the emission, discharge, dispersal, release or
escape of pollutants, provided such are not naturally occurring. The entirety
of any such emission, discharge, release or escape or any series of
continuous, repeated, or related emissions, discharges, releases or escapes
shall be deemed to be one pollution condition.
Even though the underwriters may describe their intent is to cover such
claims, either way, such exclusions can have a tremendous impact on coverage
when the claims attorney gets a hold of the policy. And, of course, intent is
never provided in writing.
Conclusion
Buying a CPL policy is a very sound alternative for financing environmental
loss; however, if you don't know the pitfalls of such policies (they are
manuscript and there are about 75 different CPL forms offered by about 20
different companies), you can be putting your organization at risk—even as you
are trying to protect it. This is more significant for those firms performing
intrusion type work and/or subcontract to other companies that perform
intrusive type work, and triple to those performing such operations in the
areas identified above.