The coverage form is not intended to be used for dry products such as grain, but for liquids such as vegetable oil, flavorings, manufacturing and lubricating oils, liquid fertilizer, or other domestic liquids—”domestic” in the sense of located within or transported within the United States, its possessions and territories, Puerto Rico, and Canada.

Following is a discussion of the form, including underwriting considerations.

Topics covered:

Introduction

Underwriting considerations

Insuring agreement; covered property

Property not covered; covered causes of loss

Additional coverages

Exclusions

Limits of insurance; deductible

Additional conditions

Definitions

Introduction

Insurance Services Office inland marine form IH 00 83 12 13 is designed to insure storage tanks and their contents on an open peril basis. The form can be combined with CM 00 01 commercial inland marine conditions and IL 00 17 common policy conditions to form a complete policy.

ISO advises that under the Nationwide Marine Definition, domestic bulk liquid policies that cover tanks and their contents can qualify for inland marine coverage. There are states, though, that have not adopted the 1976 version of the Marine Definition; these states may require that Basic Group I and Basic Group II (refer to the ISO Commercial Property/Fire Manual) coverage be written on a separate property policy. See, for example, New York State . Although ISO rules permit a small property with a single freestanding tank to be written on the tank storage coverage form, New York rules would not allow this.

The tank storage coverage form, as noted, can be used to insure both the tank itself and its contents. Coverage is on an open perils basis, with very few exclusions.

Underwriting Considerations

The ISO underwriting information does not indicate whether the form can only be used with above ground tanks, or whether underground tanks are acceptable. Therefore, insurers contemplating coverage should decide if they wish to insure above ground as opposed to underground tanks, or whether it does not matter.

Information in the ISO Inland Marine manual does give guidelines for insuring the storage tank exposure. A single tank might not present much of a problem, since loss to the tank or the contents would be limited in nature, depending, of course, upon the cost of the contents. For example, given the current cost of a barrel of oil, a tank of blended lubricating oil could double in final price in any given time frame. “Tank farms” (a term describing a multiple-tank location), on the other hand require review of all physical aspects, such as spacing between tanks, construction of the tanks, evaluation of the location itself (susceptible to earthquakes or flood?), piping apparatus, and maintenance procedures. Procedures for protection against fire and theft should be evaluated. The method of containment—earth or concrete—around the tanks should be considered. The ISO guidelines also address the importance of evaluating the management. Who has access to the tanks? How is inventory recorded?

Many times tanks are used not only to store, but to blend products. Therefore, anyone in charge of this process must be knowledgeable and careful, lest the wrong products are carelessly blended, resulting in an explosion or other disaster.

Both the EPA and the various states regulate tanks. The EPA requires that non-transportation-related facilities with a total above-ground oil storage capacity of greater than 1,320 gallons meet Spill Prevention, Control, and Countermeasure (SPCC) requirements. These requirements also apply to vegetable oil. For an example of state regulation, see the Minnesota Pollution Control Agency's Web site. It has a database with information on registered above ground and underground storage tanks, including tank characteristics (go to http://www.pca.state.mn.us/cleanup/ast.html), which could be a valuable underwriting tool for an insurer offered an application for insurance on a facility in this state.

The insurer providing this coverage will no doubt develop its own underwriting guidelines, as well as loss control measures.

Insuring Agreement; Covered Property

A.Coverage

We will pay for loss of or damage to Covered Property from any of the Covered Causes of Loss.

1.Covered Property

Covered Property, as used in this Coverage Form, means the following property described in the Declaration:

a.Storage “tanks” that:

(1)You own or lease from others; and

(2)Are at a location described in the Declarations; and

b.Bulk liquids that are:

(1)Owned by you; or

(2)The property of others in your care, custody or control;

but only if contained in a “tank”.

Analysis

The form covers storage “tanks,” as defined (see Definitions, later in this article) and their contents. The contents must be liquid, as already noted. The tanks can be owned or leased, but must be at the location described in the Declarations. The contents can be owned by the named insured, as when, for example, a large manufacturer of chemical products has its own “tank farm,” or the contents can be owned by another entity but in the tank owner's care, custody, or control. This might well be the case when a number of businesses do not wish to have their own tanks on their own premises, but would rather rely on a professional to provide storage.

Property Not Covered; Covered Causes of Loss