Commercial UST Reinsurance Program
- Why It Was Created
- How Reinsurance Works
- How Claims Are Filed
- Who Is Eligible For Coverage
- How The Premium Cost Is Determined
- Insurer Contact Information
- WAC (Washington Administrative Code)/RCW (Revised Code of Washington)
Why It Was Created
The Legislature found that many owners and operators of underground storage tanks (USTs) could not purchase pollution liability insurance either because private insurance was unavailable, at any cost, or because owners and operators could not meet the rigid underwriting standards of existing insurers. The Commercial Underground Storage Tank Reinsurance program was created by the Washington State Legislature in 1989 and commenced operation in September of that year.
PLIA was established to provide pollution liability insurance that is available and affordable, thereby allowing owners and operators to comply with the financial responsibility regulations of the federal Environmental Protection Agency (EPA) and the Washington State Department of Ecology.
How Reinsurance Works
PLIA enters into contracts with private insurers
to market pollution liability insurance to the owners and operators
of the USTs located in Washington State. PLIA acts as the reinsurer
for those private insurance companies. Reinsurance, in the case of the
pollution liability insurance program, means that PLIA shares a portion
of the cost of settling claims with the contracted insurance companies.
Those insurers are required to provide pollution liability insurance
coverage to owners and operators of petroleum USTs located in
Following is a simplified example of the PLIA reinsurance concept:
(1) XYZ Insurance Company provides a pollution liability insurance policy in the amount $1,000,000 to Tony Tank-Owner in Toutle.
(2) PLIA reinsures $925,000 of the $1,000,000 policy. This means that XYZ Insurance Company is responsible for only the first $75,000 in coverage of a claim, and PLIA for costs over $75,000 up to the policy limit of $1,000,000.
(3) A commercial reinsurance company would charge about 70% of the primary insurance policy premium for assuming such a large portion of the risk. The result would be an insurance premium for Tony Tank-Owner that would be approximately twice as high. (Every insurance policy, whether auto, liability, homeowner, life or health, is reinsured. The additional cost associated with reinsurance coverage is just not normally apparent to the policyholder.)
(4) PLIA charges XYZ Insurance Company only 1% of the primary insurance policy premiums (not 70% or more) for taking such a large risk. PLIA requires XYZ to pass the reinsurance premium savings on to the policyholder. Thus, Tony Tank-Owner and other petroleum storage tank operators throughout the state pay lower pollution liability insurance premiums than they would without the benefit of PLIA assistance.
How Claims Are Filed
In the event of a claim, the tank owner would contact their insurance company. The insurance company would determine if the claim was valid under the terms of the policy. If valid, they would work with the owner or operator to determine a plan for corrective action. An assessment would be made to determine the cleanup required on the property where the tank is located, if any third-party damage needs to be corrected, and if any bodily injury was caused by the incident.
Once corrective action has been taken, the insurance company would then look to the owner or operator for reimbursement of the amount of the deductible and to PLIA for reimbursement of any amount the claim exceeded the retention level of the insurance company.
The participating insurance companies are responsible directly, or through an agency or broker, for marketing and sales, tank testing and underwriting requirements, rating and pricing, issuing policies, claims management and risk management.
Click here for more details regarding claims procedures.
Who Is Eligible For Coverage
Insurance Policies are available to any owner or operator whose tanks meet the minimum EPA technical requirements, are properly registered with Ecology and meet minimum leak detection standards. Coverage can be provided for UST sites where petroleum contamination or a pre-existing leak is known to exist. Such sites may be insured under the program only if the owner or operator has a plan for proceeding with corrective action. Where pre-existing contamination has been identified, the owner or operator at the time of filing a claim would have the burden of proof that the claim is not related to that pre-existing release.
How The Premium Cost Is Determined
Factors to be taken into consideration to determine premium include location, age of tank, tank design and construction, distance to surface water, distance to the water table and other related factors. Premium credits will generally be given for low deductibles, cathodic protection, secondary containment systems, leak detection and monitoring devices and other related factors.
Insurer Contact Information
Broker: Griffin Underwriting Services, (509) 466-8700, Michele Williams
WAC and RCW
The Commercial Underground Storage Tank Reinsurance Program is also governed by the Revised Code of Washington - RCW 70.148.020 and the Washington Administrative Code - WAC 374-30-030.
Disclaimer and Privacy Statement
Copyright © 2003 Pollution Liability Insurance Agency - All Rights Reserved