ENVIRONMENTAL                                risk management plan and risk management
                                             strategy. However, local governments
INSURANCE AND                                and municipalities must understand their
PUBLIC SECTOR                                exposures.

                                               AN EXPENSIVE EXAMPLE:
Local governments and municipalities
                                               GONE BUT NOT
face a troubling range of environmental
exposures through the services they
provide and the facilities they own or
                                               A city in the Southeast has been
                                               forced to undertake a multimillion
                                               dollar cleanup of contaminated soil
    Current and former landfills,
                                               around thousands of city homes,
    waste treatment and transfer
                                               schools and businesses. The soil was
    facilities, storm water drainage
                                               contaminated with ash from old
    and sewer systems all carry broad
                                               city-run incinerators that have long
    pollution risks.
                                               since closed.
    Cities are required by the Clean
    Water Act to prevent industry from
                                               The ash contains lead, arsenic,
    polluting water and storm sewer
                                               dioxins and other toxins harmful to
    systems and they are legally liable if
                                               human health. The city may face
    they fail to do so.
                                               bodily injury claims from exposed
    Underground storage tank (UST)
                                               individuals and/or claims from
    systems owned by many
                                               residents alleging that the value of
    municipalities are common sources
                                               their property has been reduced by
    of pollution.
                                               the contamination. The cleanup
    Many cities or municipalities own
                                               exercise will take many years and
    land or facilities with a long
                                               may necessitate the relocation of
    industrial history. These sites are
                                               facilities. The remediation costs have
    ticking environmental timebombs
                                               been exacerbated by the need to
    for which the city will typically have
                                               minimize disturbance and damage to
    responsibility until the property is
                                               existing structures.
    cleaned up or transferred to a
    private party.

Most sobering of all, these risks are
                                             KEY EXPOSURES FOR
typically not covered under most             LOCAL GOVERNMENT
Property and Casualty insurance              OPERATIONS
                                                Ownership/occupation/management of
What can be done to limit environmental         real estate
exposures and protect taxpayers? The                Contaminated or brownfield
answer: a comprehensive environmental               properties
       Mold /Legionella
                                                                                 AN EXPENSIVE EXAMPLE:
       Underground /above ground storage tanks
                                                                                 SLIP-SLIDING ALONG
    Construction management
       Construction site fill
                                                                                 An oil company sued a city and
       Run off from construction sites
                                                                                 one of the city’s contractor to
       Old electrical equipment – PCBs
                                                                                 recover lost production costs
    Wastewater management
                                                                                 after an excavator ruptured an oil
       Storm water and sewer systems
                                                                                 pipeline during work on the city
       Chemical storage and process
                                                                                 sewer system. The resulting oil
       Piping and tanks
                                                                                 spill forced dozens of people from
    Public safety
                                                                                 their homes and polluted the
       Fire response and suppression materials
                                                                                 nearby shoreline, causing millions
       Mercury batteries and thermometers
                                                                                 in damages and cleanup costs. The
    Pesticide application operations
                                                                                 oil company sought damages for
       Chemical storage and application
                                                                                 the cost of cleaning up the oil spill
    Vehicle/equipment maintenance
                                                                                 and loss of business while its
       Fueling operations – storage tanks
                                                                                 wharf and terminal facilities were
       Automotive fluids/hydraulic lifts
                                                                                 shut down. Numerous residents
    Waste disposal/recycling activities
                                                                                 affected by the oil spill also
       Municipal/County owned landfills
                                                                                 filed lawsuits.
       Recycling Centers
       Non-Owned Disposal Site exposures
                                                                                 Third-party claims for bodily injury,
The consequences of an environmental loss can include:                           property damage and diminution in
                                                                                 property value
    DIRECT LOSSES Legal defense costs add up quickly; so                         Defense of third-party claims
    can unexpected cleanup expenses and damage payments to                       Transportation pollution exposures
    third parties.                                                               Mold and Legionella exposures
    INDIRECT LOSSES Pollution events can trigger a variety of                    Contracting exposures
    consequential losses; for example, contamination can render
    facilities unusable, causing business interruption losses, loss in       Policies are more flexible then ever. An
    rental income and costs associated with relocation.                      experienced environmental broker can also
    PROPERTY DEVALUATION Environmental liabilities can                       obtain coverage enhancements tailored to the
    dramatically impact the overall value of land or property.               history, operational risks and liability
                                                                             concerns of specific entities or municipalities,
Environmental insurance policies are readily available to address the        as well as help to address pollution liabilities
varied pollution risk exposures faced by cities and municipalities. As       associated with contracted activities.
General Liability and Property policies typically exclude most
pollution exposures, Environmental policies are designed to fill that         CONTACT
gap. Environmental policies specifically designed for public sector
entities typically include coverage for:                                     For additional information, visit our website
                                                                             or contact:
    Both primary and ancillary facilities
    On- and off-site cleanup of new and pre-existing pollution                Mike Balmer
    conditions                                                               Willis Environmental Practice Leader
    Business interruption resulting from pollution conditions                617 351 7530
    Both gradual and sudden and accidental pollution releases                michael.balmer@willis.com

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