A chemical spill from a manufacturing plant in Wixom, Michigan, recently forced the closure of one of southeast Michigan’s busiest state-run parks and put thousands of residents on alert. State officials were notified on Aug. 1 that auto supplier Tribar Manufacturing leaked “several thousand gallons” of a liquid containing 5% hexavalent chromium, a carcinogen, into the Huron River. The release, which reportedly may have started as early as the morning of July 30, required workers to evacuate a “packed” beach at Kensington Metropark, prompted an advisory for residents and pets to avoid all contact with the river, and left many locals wondering about the safety of their drinking water.
On Aug. 10, state regulators and company officials discovered an employee at Tribar overrode an alarm “460 times” during the incident and failed to alert Michigan authorities about the hexavalent chromium leak. The company confirmed the operator is no longer employed at the plant.
Health warnings remained in place as of Aug. 8 amid ongoing water testing by the state; so far, low levels of hexavalent chromium had been detected at one lake and one pond in the area.
Both the immediate and long-term costs associated with this type of pollution leak could be covered under a company’s Pollution Legal Liability Insurance, said Karim Jaroudi, Manager, Environmental, Burns & Wilcox, Toronto, Ontario.
“This was a worst-case scenario — in that it was a subsurface leak that was discovered only after it had gone offsite and caused significant impacts,” he said. “Now you could have bodily injury and property damage, cleanup, natural resource damage, fines and penalties, and potential class-action lawsuits. All of those are in the realm of reality for a company that released this chemical.”
There could be a loss of wildlife, fish, plants and all the microorganisms in the river — the entire ecosystem could be damaged. It is a huge issue, beyond the potential harm to human life.
Landmark litigation involved same cancer-causing chemical
According to the Centers for Disease Control and Prevention, hexavalent chromium is a carcinogen and can damage the eyes, skin and respiratory system. It is the same chemical implicated in the water contamination case against PG&E detailed in Erin Brockovich, the 2000 film depicting the landmark environmental lawsuit that led to a $333 million settlement in 1996 involving hundreds of plaintiffs from the town of Hinkley, California. At the time, it was the highest settlement ever recorded in a direct-action lawsuit, ABC News reported.
“This chemical got a lot of publicity with that, and I think most individuals will know how horrible it was because an award-winning movie was made about it,” Jaroudi said, noting that those living in the area of the recent hexavalent chromium spill in Michigan should take precautions seriously while the extent of the leak is investigated. “Anybody who is downstream from that spill from a water table perspective should be extremely concerned about their quality of water, particularly if they use well water.”
This was a worst-case scenario — in that it was a subsurface leak that was discovered only after it had gone offsite and caused significant impacts. Now you could have bodily injury and property damage, cleanup, natural resource damage, fines and penalties, and potential class-action lawsuits.
Another lawsuit over hexavalent chromium contamination was settled in 2020, when PPG Industries agreed to pay $5 million to residents in Jersey City, New Jersey, who claimed waste from the company’s former chromium plant lowered property values, according to the Jersey Journal. This phenomenon is known as “diminution in value” and is insurable under pollution insurance. The chemical has also raised concerns in Canada, including in a suburb of New Brunswick where a 2008 spill left some residents still wary of drinking their well water over three years later, CBC News reported in 2012.
Removing hexavalent chromium after a leak is “very difficult,” Jones pointed out. “They cannot really go in and clean this up. The solution to pollution is generally dilution,” she said. “It is going to have to run its course through the waterway. It is going to be a tough loss.”
The impact of that loss can be lessened when a company has Pollution Legal Liability Insurance, which can cover cleanup costs, third-party bodily injury and property damage, legal defense, replacing fish or other damaged wildlife, and more, Jones said. “The biggest thing we have to worry about is natural resource damages,” she said.
When someone is harmed by these kinds of chemicals, you do not wake up and all of a sudden have cancer. It could happen in 10 years, or 30 years. The company is likely going to want to determine who was exposed, make contact and start mitigating that risk now.
That is a “significant exposure” in the Michigan leak and other similar incidents, Jaroudi said. “If that river was previously populated with fish that are killed off and have to be replenished, that can end up being more expensive than one would think,” he said. For example, in December of 2021, a cotton bleaching company agreed to an almost $1.5 million settlement over an acid spill into a river that killed more than 270,000 fish, according to the state of Massachusetts.
Possible cancer diagnoses in humans, meanwhile, could take many years to develop and could play into future class-action settlements. “When someone is harmed by these kinds of chemicals, you do not wake up and all of the sudden have cancer. It could happen in 10 years, or 30 years,” Jones explained. “The company is likely going to want to determine who was exposed, make contact and start mitigating that risk now.”
Pollution Legal Liability Insurance policies have “nuanced wording,” Jaroudi said, and can even specifically address coverage for mental anguish or fear of cancer that can result from chemical exposures.
Many companies susceptible to uninsured pollution losses
Despite the potential severity of pollution incidents, Pollution Legal Liability Insurance is not typically mandated for companies unless an individual landlord or property owner requires it. This leaves many companies vulnerable to uninsured losses, as pollution expenses are usually not covered by Commercial General Liability (CGL) Insurance.
“Environmental Insurance is still a bit of a hard sell,” Jaroudi said, pointing to pollution incidents in the news like the Michigan leak as “teachable moments” for those who remain unaware of the risk. “We have been educating brokers and clients for 20-plus years, but there is still often the excusatory reaction of, ‘I am a good corporate citizen,’ or ‘I have never had a chemical release.’”
That mindset is not uncommon, Jones agreed. “They might think that because they are regulated, have a risk manager or have things controlled, they are not at risk. Oftentimes they do not carry insurance, or they self-insure,” she said. However, “pollution losses such as this could absolutely decimate or bankrupt a company.”
We have been educating brokers and clients for 20-plus years, but there is still often the excusatory reaction of, ‘I am a good corporate citizen,’ or ‘I have never had a chemical release.'
Costs can also be driven up by third-party expenses. A company responsible for a chemical leak that forces the evacuation or shutdown of nearby businesses, for example, could be liable for the lost revenue of those entities. “Individuals lost the use of their property because of this leak, and that is a cost,” Jaroudi said.
Business owners seeking Pollution Legal Liability Insurance should find out whether coverage is included for both on- and off-site pollution claims and whether preexisting conditions — or leaks that started before the policy was in place but were discovered after it took effect — are covered, he said. While insurers can tailor limits and other policy details to a client’s needs, companies with multiple locations and significant hazards may also seek out Excess Pollution Liability Insurance, Jaroudi said. This is also necessary for a client seeking limits above $25 to $50 million.
Any property owner could be affected by pollution event
The impact of a chemical leak or other pollution incident can be far-reaching, affecting neighboring properties that had nothing to do with the origin of the spill. With Pollution Legal Liability Insurance, the cost of responding to such an event can be addressed immediately, even if another entity is later found liable, Jones said. Without its own pollution policy, a company could spend years in litigation trying to recoup those costs, Jaroudi added.
“By pure virtue of having care, custody and control of a premise, you have an exposure,” he said, adding that the chemical leak that shut down a Michigan park is a clear example of this. “That is a masterclass for both the client experiencing the release and the neighbors who might think they do not have an exposure. It is very unfortunate that claims make the best sales scenarios, but now they have a very real example of why they should get the coverage.”
Product manufacturers should also consider Products Pollution Liability Insurance, which can cover costs associated with a pollution incident caused by that company’s product, Jones added. “If the product fails and causes a pollution release, the insurance can take care of that,” she said.
Transportation Pollution Liability Insurance is another key environmental coverage, along with Non-Owned Disposal Site Insurance. “That is really important, especially for a chemical manufacturer. The manufacturer of the waste is responsible for the waste product from cradle to grave — and anything outside of its natural environment is a pollutant,” Jones said. “You need to make sure your waste product is being disposed of properly.”
According to Jones, possible exclusions in Pollution Legal Liability Insurance policies can relate to PFAS, or the so-called “forever chemicals,” which the U.S. Environmental Protection Agency describes as “widely used, long lasting chemicals” that have been linked to harmful health effects but are still being studied. Exclusions could also name pest control products like Roundup, the weedkiller that was linked to cases of non-Hodgkin’s lymphoma and whose manufacturer Bayer agreed in 2020 to pay $10 billion to settle tens of thousands of health-related claims, according to the New York Times.
“It is important to have an astute insurance broker who knows if you may have those kinds of exposures,” Jones said. “We definitely look at each client on a case-by-case basis.”
At a time when this type of insurance coverage is becoming more limited or more difficult to obtain for certain exposures, those conversations should happen sooner rather than later, Jaroudi said. “It is very important to get in and get the coverage you need, and not postpone it until tomorrow,” he said. “Current trends are such that who knows what will be available tomorrow.”
This article was updated Aug. 11 to include an update on the plant operator at Tribar who was dismissed after overriding treatment alarms.