Biofuel and ethanol refineries have a good working understanding of the need to take steps to avoid workplace accidents and damage to the refinery infrastructure. The insurance to cover these claims is also well understood. Workers’ compensation insurance covers injuries to employees; liability policies cover injuries to visitors, contractors, and third parties who are injured while at the facility; and property casualty insurance and business interruption insurance covers damage to the facility. But what about the risks posed by the transportation of goods both to and from the facility? Some of these risks arise from transporting products and other risks arise from the products themselves. In either case, these risks may be excluded by many of the standard policies.
Trucking and Railroad – Damage to Vehicles, Property, and People.
The transportation of biofuels usually requires the use of train cars or trucks. Liability can arise if a carrier’s vehicles are damaged on the facility grounds. As an example, poor road conditions and unclear signage can contribute to accidents on the facility. Releases of sulfuric acid and methanol (used to refine biofuels) and gasoline (used to denature ethanol) can escalate the size and complexity of the claim. The facility’s management should make sure that it has adequate insurance. Standard property casualty policies may not cover damage to trucks and trains owned by third parties because that property is not owned, controlled or leased by the facility.
Standard liability policies frequently exclude incidents involving train derailments or collisions. If the facility owns railroad tank cars, then management should check to make sure that there is coverage in place to cover not only the cost of repair but also any liability or demurrage claims that may arise if an injury or derailment is caused by a defect in the tank car. If coverage for damages to or caused by railroad trains is excluded, then the company should buy a special endorsement or policy.
Releases of Product
Transportation of finished biofuels and byproducts can also pose a liability risk. This risk is greatly reduced if the product is being carried by a common carrier on its equipment. Generally, the common carrier will be liable for accidents involving its own equipment and drivers. However, depending on the tariff or contract, the shipper may have a duty to secure the load properly. If the facility owns the trailer or tank car, then any equipment problem that contributes to an accident or release of product can also generate secondary liability even if it is being transported by a common carrier.
If product is released during transport, there are possible civil, administrative, and criminal penalties that can be assessed by state and federal agencies if the release can be traced back to a failure of the refinery to properly load and secure the product. For releases that are large enough to require removal and remediation, then there may also be liability to state and federal agencies that respond and third parties whose property may be affected. Standard policies may specifically exclude any claims arising from the release of a “pollutant.” Finding environmental insurance that will cover those claims can be very challenging. Lower-tier environmental insurance policies contain so many exclusions that they are nearly worthless. There is also no point in buying an environmental insurance policy if it excludes releases that take place during transport or cleanup costs. It is hard to believe that an environmental policy would exclude emergency response and removal costs, but they are out there.
Pursuing the Insurance.
The story does not end with the identification of an insurance policy that appears to cover a given claim. There is an old adage that insurance companies are in the business of collecting premiums and not paying claims. If the claim is small, insurance companies reject the claim knowing that the cost of litigation for the insured to recover on the claim will eat up the recovery. If the claim is large, they reject the claim knowing that when faced with prospect of costly and drawn-out litigation that the insured may be capitulate and take less than the full value of the coverage. In either case, the refinery may have to go to court in order to get the coverage that it has paid for.