The facts

The Victor policyholder operated an agricultural chemical warehouse facility including the storage and sale of fertilizer products to local farming customers.

A large liquid fertilizer containmment area was newly constructed with wood frame components within the previous 12 months. Several above ground liquid fertilizer storage tanks and associated piping were installed within the containment area. A piping connection attached to one of the tanks suddenly failed resulting in the escape of nearly 100,000 liters of liquid fertilizer. 

Following the investigation of the loss, it was determined that the polyvinyl chloride (PVC) elbow pipe and glue was improperly installed, which allowed condensation water droplets to enter the connection. Over time, the droplets froze and eventually caused bulging and deformity of the line. When the elbow popped off from the suction inflow line, liquid fertilizer from the tank emptied and filled the wood containment area. Due to the pressure exerted on the wall, the containment failed and collapsed allowing the product to escape into the environment.

The result

The policyholder’s Victor Environmental Cleanup and Liability Insurance for Premises policy paid for the investigation, monitoring and cleanup of the soil and surface water, which spanned over a year. In total, over 7,000 metric tonnes of impacted soil and 400 cubic metres of impacted surface water were transported and disposed off-site. The total cost of the claim was approximately $2 million.

Risk factors

Risk factor #1

An emergency spill response plan is of the utmost importance for a liquid fertilizer risk as it will provide the policyholder with the guidance on what to do in the event of a spill. The plan should be shared with all personnel and be readily available. It should include clear and detailed procedures to follow in the event of a spill, fire or other incident, and should also include appropriate contacts to notify in the event of an environmental incident.

Risk factor #2

A wood containment system is not recommended for areas exposed to high volumes of liquid storage, as they could rupture in the event of a large release of product. Additional loss prevention such as video monitoring, leak detection and shut-off valves are important mitigation measures to contain or prevent the spread of a spill.

*This claim scenario is for illustrative purposes only. Please remember that only the insurance policy can give actual terms, coverage, amounts, conditions and exclusions.