UNDERGROUND STORAGE TANK POLICY–DESIGNATED TANKS SAMPLE INSURANCE PROPOSAL LANGUAGE

(November 2022)

REPRINT PERMISSION

PF&M subscribers in any form are permitted to reprint the following sample insurance proposal language when preparing insurance presentations for their commercial insurance customers. Other uses require permission from The Rough Notes Company, Inc.

PROPOSAL DISCLAIMER

The following paragraph or similar language needs to be included in all insurance proposals:

Consult the policy for definitions and limitations. The terms of this proposal do not represent contract terms. The policy is subject to company underwriting practices.

TIPS FOR USING THIS PROPOSAL LANGUAGE

This proposal language is not intended to be an entire insurance proposal. A client specific section that includes the name and address of the insured, the insurance company(s) and the agent, and information about them, a list of locations, limits, deductibles, and similar customer specific items are not included and should be prepared.

The intent of any insurance proposal is not to be a reproduction of the insurance policy but to give a summary of possible coverages.

Paragraphs that explain coverages unique to this coverage form or policy may be the most important addition to your insurance proposal and sales effort. Coverage examples can be tailored to your individual customer. Be careful when altering any proposal language not to expand coverage beyond what the policy intends.

This proposal should be combined with proposals for other lines of business, such as commercial property, commercial general liability, workers compensation, and umbrella liability for a complete account proposal.

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Underground Storage Tank Policy–Designated Tanks Available Endorsements and Their Uses

Underground Storage Tank Policy–Designated Tanks Endorsements Checklist

SAMPLE PROPOSAL LANGUAGE FOR THE INSURANCE SERVICES OFFICE (ISO) UNDERGROUND STORAGE TANK POLICY–DESIGNATED TANKS

INTRODUCTION

The Underground Storage Tank Policy–Designated Tanks was developed to respond to meet the EPA requirement that underground storage tank owners/operators have minimum financial resources to deal with possible tank incidents. Both the owner and the operator of an underground storage tank that contains petroleum products, as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), are eligible to purchase this coverage.

CERCLA defines an underground storage tank as any tank with 10% or more of its volume located below ground. This definition also includes any piping attached to the tank and applies in cases where the tank itself is physically above ground but has a significant amount of piping, plumbing, pumping, or other equipment below grade level.

UNDERGROUND STORAGE TANK COVERAGE

The policy directs the reader to two very important items of information. The first explains that the bodily injury and property damage coverage is written on a claims-made basis and that the corrective action costs coverage is written on an incident-reported basis. The second is that the defense expenses are limited. Instead of the unlimited defense outside of policy limits in most liability coverage forms and policies, defense payments are limited to the amount stated on the declarations and explained under Defense Expense Payments.

INSURING AGREEMENT

COVERAGE A–BODILY INJURY AND PROPERTY DAMAGE

The insurance company agrees to pay amounts the insured is legally required to pay as compensatory damages caused by or that result from bodily injury or property damage that his insurance covers. An underground storage tank incident that occurs on or after the retroactive date and before the expiration date must cause the injury or damage. The insured must be found liable for the injury or damage in a suit or other legal proceedings in the coverage territory or in a settlement the insurance company agrees to. The claim for damages as a result of the injury or damage must be made against the insured in writing during the policy period or any extended reporting period endorsed to the policy.

COVERAGE B–CORRECTIVE ACTION COSTS

The insurance company agrees to pay amounts the insured is legally required to pay for corrective action costs that result from an underground storage tank incident that this insurance covers. The incident must occur on or after the retroactive date and before the expiration date. The named insured must report the incident in writing during the policy period or during any extended reporting period endorsed to the policy.

EXCLUSIONS

Exclusions must be examined carefully, since many of them have conditions, exceptions, limitations, or restrictions not stated below.

• Expected or Intended Injury

Coverage does not apply to bodily injury or property damage expected or intended by the insured.

• Contractual Liability

There is no coverage for bodily injury or property damage in cases where the insured must pay damages based on its assuming liability in a written contract or agreement. Coverage does apply to liability for damages the insured has without a contract or agreement.

• Workers Compensation and Similar Laws

There is no coverage for any requirement or obligation of the insured imposed by any workers compensation, disability benefits, unemployment compensation, or similar law.

• Employer’s Liability

Bodily injury to an employee of the insured as a result of employment or performing duties related to conduct of the insured’s business is excluded. Bodily injury to specified relatives of that employee as a consequence of his or her bodily injury is also excluded.

• Damage to Property

Coverage does not apply to property damage to any property the named insured owns, rents, or occupies. This includes costs or expenses the named insured or any other party incurs to repair, replace, improve, or maintain that property for any reason. This exclusion also applies to property sold, given away, or abandoned, property loaned to the named insured, and personal property in the named insured's care, custody, or control.

• Failure to Comply With Environmental Laws

There is no coverage for bodily injury, property damage, or corrective action costs that arise out of an underground storage tank incident that results from or is attributable in any way to the named insured's or any insured's failing to comply with any environmental law from any governmental entity. The failure to comply must be a willful or deliberate act or omission by the named insured or any of its members, managers, partners, or executive officers.

• Corrective Actions

The Corrective Action Costs coverage provided does not apply to such costs or other expenses:

• That result from any intentional underground storage tank incident
• That result from actions taken to report, investigate, or confirm a release of the contents of an insured tank
• To replace any tank or to repair or upgrade tanks that do not have to be replaced
• That represent any financial penalties or forfeitures that any governmental agency enforces
• To replace any quantities of material lost from an insured tank
• That represents any part of work done to restore, enhance, or maintain an insured tank where it is located
• War

There is no coverage for bodily injury or property damage caused directly or indirectly in any way by war, undeclared war, and civil war. This includes warlike action by a military force. This exclusion also applies to actions a government takes to prevent or defend against an expected or actual attack by any government or other authority that uses military personnel or agents. It also applies to rebellion, revolution, insurrection, or unlawful seizure of power and the action the government takes to prevent or defend against any of these.

• Electronic Data

Coverage does not apply to damage to electronic data. This includes loss of, loss of use of, damage to, corruption of, inability to access, or inability to manipulate electronic data. Electronic data is defined as information, facts, or programs used with computer software or any other media used with electronically controlled equipment. This exclusion does not apply to the named insured’s liability for damages due to bodily injury.

OUR RIGHT AND DUTY TO DEFEND

The insurance company has the right and duty to defend the insured against any suit that seeks damages because of bodily injury or property damage. This duty extends to those actions that seek payment of corrective action costs. The action must be covered by this insurance in order for the duty to apply. The insurance company must pay or reimburse for defense expense but only as this coverage form provides.

The insurance company is not obligated to defend or pay for suits for costs or damages that this insurance does not cover. It can investigate any incident or settle any suit for injury, damage, or costs that may result.

The duty to defend and pay or reimburse is limited. It ends at the earliest of when the limit of insurance that applies is used up by paying judgments, settlements, payments, or reimbursements or when the Defense Expense Amount is used up. It applies to both claims or suits pending at the time as well as those filed afterwards.

DEFENSE EXPENSE PAYMENTS

These payments or reimbursements are limited to the Defense Expense Amount on the declarations. They apply even if the insured assumes control of the defense of a suit. The insured may take control by mutual agreement with the insurance company or by court order. The change in control can occur before or after the Limit of Insurance is used up. The Defense Expense Amount is the same as the Aggregate Limit if there is no Defense Expense Amount on the declarations. If the insured assumes control of the defense before the Defense Expense Amount is used up, the insurance company reimburses it for up to the Defense Expense Amount that remains.

SUPPLEMENTARY PAYMENTS

With respect to claims paid or suits defended that this insurance covers and where a limit of insurance applies, the insurance company pays the following:

• Interest that accrues on the full amount of any judgment after it is entered but before the insurance company pays, offers to pay, or deposits with the court the part of the judgment that is its responsibility that is within the limits of insurance
• Expenses for first aid administered to others at the time of an accident. However, this is for only bodily injury that this insurance covers.
• Prejudgment interest that is the insured’s responsibility on the part of any judgment the insurance company pays. However, it does not pay any prejudgment interest that accrues during the period of time after it makes the offer if it offers the limit of insurance.

These payments do not reduce the Limits of Insurance or the Defense Expense Amount.

NO OTHER OBLIGATION OR LIABILITY

The insurance company does not have any other obligation or liability to make payments or perform acts or services unless specifically provided for elsewhere in the policy.

WHO IS AN INSURED

The named insured's form of business determines who is an insured. If the form of business is:

• An individual, then the named insured and the individual's spouse are insureds but only for conduct of the business that the individual owns solely
• A partnership or joint venture, then the named insured is an insured. Its members and partners and their spouses are also insureds but only with respect to their duties as partners or members of the named insured’s business.
• A limited liability company, then the named insured is an insured. Its members are insureds but only with respect to conduct of the named insured’s business. The insured's managers are also insureds but only with respect to their duties as managers.
• Any other organization then the named insured is an insured. Executive officers and directors are also insureds but only with respect to their duties as such. Stockholders are also insureds but only with respect to their liability as stockholders.

The following are also insureds:

• The named insured's employees but only for acts within the scope of their duties as they relate to conduct of the named insured’s business.

No employee is an insured for bodily injury:

• To the named insured, the named insured's partners or members, or to a co-employee when that co-employee is in the course of his or her employment or performing duties related to conduct of the named insured's business
• To a designated relative of that co-employee as a consequence of the paragraph above
• Where an obligation exists to share damages with or to repay another party that must pay damages because of an injury described in the paragraphs above

No employee is an insured for property damage to property owned, occupied, used by, rented to, in the care, custody or control of, or physically controlled for any reason by the named insured, its employees, partners, or members.

• Any party that has proper temporary legal custody of the property of a deceased named insured. However, this is only for liability that arises out of or caused by maintaining or using that property and until a proper legal representative is appointed.
• A properly appointed legal representative has all the named insured's rights and duties if the named insured dies but only to the extent of its duties as such.

Insured status is denied any party or entity that is not listed as a named insured on the declarations.

LIMITS OF INSURANCE

• The most the insurance company pays are the Limits of Insurance on the declarations. This is regardless of the number of insureds, claims made, suits brought, number of parties that make claims or bring suits, or requests or demands that seek corrective action costs or that require action by the named insured.
• The most the insurance company pays for the total of damages for all bodily injury, property damage, and corrective action costs is the Aggregate Limit on the declarations.

• The insurance company pays only damages and corrective action costs that exceed any deductible amount on the declarations. Subject to the Aggregate Limit, the most it pays in any one underground storage tank incident for all damages because of bodily injury, property damage, and corrective action costs is the lesser of the Underground Storage Tank Incident Limit or the total of the damages and corrective action costs.

If the total of the damages and corrective action costs is less than the Underground Storage Tank Incident Limit, the insurance company pays all of any deductible amount. The named insured then promptly reimburses the insurance company for that amount. Each payment made for damages and corrective action costs reduces both the Underground Storage Tank Incident Limit and the Aggregate Limit.

The limits apply separately to each consecutive annual period and to any remaining period of less than 12 months. This begins with the inception date on the declarations, unless extended after issuance for any additional period of less than 12 months. If that occurs, the additional period is treated as part of the last preceding period for the purpose of determining the limits of insurance.

DEFENSE EXPENSE AMOUNT

• The Defense Expense Amount on the declarations is the most the insurance company pays for defense expense. This is regardless of the number of insureds, claims made, suits brought, number of parties that make claims or bring suits, make requests or demands, or underground storage tank incidents.
• Defense expense payments and reimbursements reduce the Defense Expense Amount. However, they do not reduce the Limits of insurance and are not subject to the deductible.
• The Defense Expense Amount applies separately to each consecutive annual period and to any remaining period of less than 12 months. This begins with the inception date on the declarations, unless extended after issuance for any additional period of less than 12 months. If that occurs, the additional period is treated as part of the last preceding period for the purpose of determining the Defense Expense Amount.

CONDITIONS

• Bankruptcy

The insurance company is not relieved of its obligations if the insured or its estate becomes bankrupt or insolvent.

• Duties in the Event of an Underground Storage Tank Incident

If a claim or demand for coverage occurs:

• The named insured must inform the insurance company as soon as possible of an underground storage tank incident that may result in a claim, request, demand, or proceeding to impose an obligation for bodily injury, property damage, or corrective action costs. Notice of an incident is not notice of a claim under Coverage A and is not a report of an incident under Coverage B unless the notice meets the reporting requirements for Coverage B.
• The named insured must provide prompt written notice of the claim, suit, request, or demand to the insurance company.

Every insured involved in or with an underground tank incident must:

• Immediately send the insurance company copies of requests, demands, notices, summonses, and other legal documents it receives in conjunction with the claim or suit.
• Authorize and grant approval for the insurance company to obtain records and other information.
• Cooperate with the insurance company as it investigates or settles the claim or defends against the suit, request, or demand.
• When the insurance company requests, help it enforce any right against any person or organization that may be liable to the insured for covered injury or damage.

Under Coverage A, no insured may voluntarily make any payments, assume any obligations, or incur any expenses other than first aid without the insurance company's consent. If it does, it does so at its own cost or expense.

• Legal Action Against Us

No party has the right to join the insurance company in any way or to bring it into a suit that claims damages from an insured. No party may sue the insurance company unless all policy terms and conditions have been met. The company can be sued to recover on an agreed settlement or on a final judgment against the insured. However, it is not liable for damages or corrective action costs not subject to payment under the policy's terms or that are more than the limit of insurance that applies. An agreed settlement is a settlement and release of liability that the insured, the insurance company, and the claimant or the claimant's legal representative sign.

• Other Insurance

The insurance company's obligations to pay are limited if there is other valid and collectible insurance that applies to the loss, as follows:

• Primary Insurance

This insurance is primary except when Excess Insurance applies. If this insurance is primary, the insurance company's obligations are not affected unless any other insurance that applies to the loss is also primary. In that case, this insurance shares with that insurance as outlined under Method of Sharing.

• Excess Insurance

This insurance is excess over any other insurance effective before this policy period that covers bodily injury or property damage on other than a claims-made basis, or corrective action costs on other than an incident reporting basis if there is no retroactive date on the declarations or if the policy period of the other insurance continues after this policy's retroactive date.

When this insurance is excess, the insurance company does not have a duty to defend the insured against any suit if the other insurance has that duty. If no other insurance company defends, and all or part of this policy's Defense Expense Amount is available, the company will attempt to provide a defense according to policy provisions. In that case, it is entitled to the insured's rights against the other company or companies.

When this insurance is excess, it pays only its share of any amount of loss that exceeds the total amount that all other such insurance would pay for the loss if this insurance did not exist. It also pays the total of all deductible and self-insured amounts under all other such insurance.

The insurance company shares any remaining loss with any other insurance not included in this Excess Insurance Condition that was not purchased specifically to apply in excess of this policy's limits of insurance.

• Method of Sharing

If the other policy permits contribution by equal shares, this insurance does as well. Each insurance company contributes equal amounts until it exhausts its limit of insurance or the loss is paid, whichever occurs first.

If the policy does not include contribution by equal shares, contribution is by proportional limits. With this approach, ratios are determined based on each company’s limit as a percentage of the total applicable limits and the loss is then apportioned between the various policies.

• Premium Audit
• All premiums are calculated according to the insurance company's rules and rates.
• The advance premium is only a deposit premium. At the end of each audit period, the insurance company determines the actual earned premium for the period and notifies the first named insured. The date for the company to receive the premium billed is the due date on the billing notice. However, if the advance and audit premiums are more than the earned premium, the insurance company refunds the excess to the first named insured.
• The first named insured is required to keep the records and information the insurance company needs to do the premium calculations and must send copies of them to the company when it requests.
• Representations

When the named insured accepts this policy as issued, it agrees that the statements on the declarations are complete and accurate, are based on representations it made to the insurance company, and that the policy is issued based on them.

• Separation of Insureds

Other than the Limits of Insurance, the Defense Expense Amount, and any rights and duties that apply specifically to the first named insured, this insurance applies to each named insured as if it was the only named insured and separately to each insured against whom claim is made or suit is brought.

• Transfer of Rights of Recovery Against Others to Us

Any rights the insured has against others to recover all or part of any payment the insurance company made transfer to the insurance company. The insured must preserve those rights and not do anything after the loss to impair them. The insurance company can request that the insured bring suit or transfer those rights to it and help it enforce them.

• Policy Issued to Comply With Law or Regulation

The insurance company agrees to furnish the director of an implementing agency a signed duplicate copy of the policy and all endorsements that apply when requested to do so.

• Cancellation
• The first named insured can cancel at any time by giving the insurance company advance written notice of its intent to do so.
• The insurance company can cancel at any time by sending written notice of cancellation by certified mail to the first named insured's last known mailing address. Cancellation for nonpayment of premium or misrepresentation is effective 10 days after the notice is received. It is effective 60 days after the notice is received if it is for any other reason. Longer notice periods may be substituted in place of these periods.
• In case of cancellation, the insurance company sends the first named insured any return premium due. If the insurance company cancels, the refund is calculated on a pro rata basis. If the first named insured cancels, the refund may be calculated on a different basis. In any case, the cancellation is effective even if a refund has not been offered or made.
• Nonrenewal

If the insurance company decides not to renew, it sends written notice to the first named insured at least 60 days before the expiration date. The notice is either delivered or sent by certified mail to the first named insured's last known mailing address.

• Financial Responsibility and Reimbursement

This policy is issued to certify the named insured complies with the federal Environmental Protection Agency financial responsibility requirements. These are imposed because the named insured owns or operates underground storage tanks. The insurance company agrees to comply with such financial responsibility requirements when it issues the policy. The named insured agrees to reimburse the insurance company for payments it makes that this policy does not cover but that our required by this condition.

• Examination of Your Books and Records

The insurance company may examine and audit any of the named insured's books and records but only the ones that relate to this coverage. The examination and audit can be done at any time during the policy period and for up to three years after the policy expires.

• Inspections and Surveys

The insurance company has the right to make inspections and surveys at any time, to report its findings to the named insured, and to recommend changes it feels should be made. However, it is not obligated to do so. Anything done in this regard relates only to its findings of the risk's insurability and the premiums to charge. It does not make safety inspections or attempt to perform duties of parties that provide for the health or safety of workers or the public. It does not warrant that conditions are safe or healthful or comply with any law, regulation, code, or standard.

This condition also applies to any rating, advisory, rate service, or other organization that also makes insurance inspections, surveys, reports, or recommendations for insurance purposes.

• Premiums

The first named insured pays all premiums and receives any return premiums.

• If You Are Permitted to Retain Defense Counsel

This condition applies if the Limit of Insurance and the Defense Expense Amount have not been used up and the named insured receives the right to retain defense counsel by either mutual agreement or court order. The insurance company retains the right to settle, approve, or disapprove the settlement of any claim or suit and appeal any judgment, award, or ruling at its own expense and at its discretion. The named insured and any other involved insured must continue to comply with the Condition for Duties In The Event of an Underground Storage Tank Incident and other policy provisions. The named insured must instruct its defense counsel to furnish the insurance company with information it requests or requires to evaluate suits under this policy. That counsel must also be advised to cooperate with any counsel the insurance company selects to monitor or associate with in defending those suits.

• Transfer of Duties When a Limit Of Insurance or the Defense Expense Amount Is Used Up

This condition provides detailed instructions about the procedures to follow to transfer the duties of defense from the insurance company to the named insured in cases where the Defense Expense Amount is used up. This condition protects the named insured from defaults and periods when it is not represented by counsel.

EXTENDED REPORTING PERIODS

Extended Reporting Periods are only in insurance policies or coverage forms written on a claims-made basis.

• The insurance company provides one basic and one optional supplemental reporting period option in cases where this policy is cancelled or not renewed. They are also available if this policy is renewed or replaced with insurance that has a retroactive date later than the one on the declarations or that does not apply to bodily injury or property damage on a claims-made basis or corrective action costs on an incident-reported basis.
• These Extended Reporting Period options do not extend the policy period or change the coverage provided. They apply to only bodily injury, property damage, and corrective action costs due to an underground storage tank incident that started before the expiration date but not before the retroactive date. Extended Reporting Periods may not be cancelled once they are put into effect.
• This policy automatically provides the Basic Extended Reporting Period at no additional charge. It begins on the expiration date and lasts six months. The six months does not apply to claims that any subsequent insurance coverage insures. It also does not apply even if they are not covered but would have been covered if the limits of insurance or defense expense amount had not been used up. The basic reporting period does not reinstate or increase the Limits of Insurance or the Defense Expense Amount or extend the policy period.
• An optional two-year supplemental extended reporting period is available if the named insured requests it when the policy expires and pays the additional premium when it is due. The endorsement is similar to the basic reporting period except that it provides a new aggregate for the limits of insurance and a new defense expense amount.

DEFINITIONS

Refer to the policy for a list of defined terms.