Environmental Liability Risks for Marinas

As a marina owner, it is important to understand that your General Liability coverage excludes pollution. You have a significant risk of financial loss due to a fuel leak/spill from your fuel storage tanks and I wanted to provide some information on a couple of options you have to reduce/eliminate this risk.

Option 1 – Qualify and Participate in the Regulated Storage Tank Trust Fund administered by your state’s environmental agency. These programs are generally reimbursement type programs and have good coverage for a minimal cost.

Option 2 – Purchase an Environmental Insurance Policy (Site Pollution policy or a Fuel Tank Storage Liability policy).

There is an environmental policy available for your marina to protect you from liability claims related to fuel leaks/spills from your fuel storage tanks and associated piping. These policies generally pay defense costs, court judgments, testing, ongoing monitoring, cleanup costs, etc. related to claims against you for pollution due to a fuel spill. For most marina operators, a fuel storage tank liability policy will cost in the $500-$1,750 range for $1,000,000 of coverage. The premium will depend on quantity and construction of tanks, age of tanks, size of tanks, and whether the tanks are in a permeable or impermeable basin. If you would like me to quote this coverage please call me and I will be glad to do so. Please note that this fuel storage tank liability policy will not apply to the Watercraft Liability related to your work/rental boats, but only to your storage tanks and transmission equipment (piping). A site pollution policy is more expensive but provides a lot more coverage including pollution events related to fuel storage tanks, waste treatment/storage, other hazardous materials storage like oil, hydraulic fluid, etc., mold (lodging), and lead paint or asbestos. Specialized insurance markets offer these types of policies. Let me know if you are interested

I know many marina owners do not own their storage tanks, that Magnas Oil or another company actually owns the tanks. It is true that you are tied to Option 1 above as long as the tank owner remains in compliance and continues to stay qualified in every way for the Trust Fund program. However, the big weakness of this program is that in reality, the tank owner has the coverage, and you are dependent on them for coverage. The Trust Fund doesn’t provide any coverage for legal fees, so if you were named in a lawsuit related to the pollution event, you would have to pay all your attorney related fees out of your own pocket. If you lost a lawsuit, and a judgment levied against you, there would be no coverage under the Trust Fund unless you had applied to the trust fund as a fuel system operator prior to the pollution event. The oil company who owns the tanks would have coverage but unless you were also participating in the fund as a fuel system operator, you would not have any coverage. If you are in this situation, you should request that the oil company provide a written contract that addresses liability related to the fuel tanks and system and you should also apply to the state to participate in the fuel storage tank cleanup fund.

Ask yourself if you are prepared for a significant fuel spill? If you aren’t sure, please take some time and research your state’s fuel tank cleanup fund and ask your agent for a fuel storage tank liability policy quote.

Doug Timmons, CIC, CMIP

Marina and Resort Insurance Specialist

Commercial Risk Service