September 19, 2016

My client owns some property that is currently leased to others who use the site as a small grocery store. If the tenants were to put in an underground storage tank for gasoline sales, would endorsement CG 24 15, the limited pollution liability extension endorsement provide sufficient coverage for my client in the event of a pollution claim? Or, should we provide an underground storage tank policy for our client?

Colorado Subscriber

CG 24 15 replaces the pollution exclusion (f) found in the standard CGL form. It provides limited protection, subject to an aggregate limit shown in the endorsement’s schedule, for some on-premises exposures that could face a landowner. Under the standard CGL form, coverage for bodily injury or property damage arising out of the dispersal, discharge, release, or escape of pollutants at or from premises owned by any insured is excluded. CG 24 15 deletes this part of the pollution exclusion thereby giving coverage to a landowner like your client. However, that same endorsement declares there is no coverage when a pollutant escapes at or from a storage tank or other container that is below the surface of the ground and that subsequently is exposed by erosion or excavation, allowing the pollutant to escape at a premises owned by any insured.

So, while your client would have some limited liability protection if the storage tank leaks gasoline by using CG 24 15, that protection is gone if the storage tank is somehow exposed and the pollutants then leak out and cause damage.

As for the underground storage tank policy, CG 00 42, that policy states that damages and injuries due to the escape of pollutants from an underground storage tank are covered, subject to listed exclusions. CG 00 42 is a claims-made policy so the bodily injury and property damage have to occur after the retroactive date shown in the declarations and before the end of the policy period, and of course, a claim for damages has to be made in writing during the policy period or any extended reporting period.

If you use either CG 24 15 or CG 00 42, your client will have liability coverage on a limited basis. You should consult with your client and the insurer to obtain the better choice.

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