Requires homeowners' insurance policies to insure against direct and indirect damages relating to a discharge of petroleum

BILL NUMBER:A8562 REVISED 4/6/10

Title of bill

An act to amend the navigation law, in relation to claims against insurers for petroleum spills

Purpose

Protects homeowners from the onerous costs related to the reme- diation of petroleum leaks on residential property. Unless the insurer prevails on the affirmative defense, the standard homeowner's insurance policy should cover the claim.

Summary of provisions

Section 1 amends section 190 of the Navigation Law to add the following:

(a) requires all homeowners' policies of insurance to cover the cleanup and removal costs and all direct and indirect damages relating to a discharge of petroleum;

{b) establishes an affirmative defense against a claim for coverage of the costs and damages relating to a discharge of petroleum if the insured had actual knowledge of a condition which a reasonable person would have understood to pose an imminent risk of a discharge of petro- leum and that the insured failed to take reasonable steps to prevent the discharge;

(c) requires insurers to provide notice in every homeowner's policy. newly issued or renewed which insures against damage to property that states in part "You have a responsibility to prevent a discharge from your petroleum tanks and associated pipelines": and

(d) establishes that nothing in this section shall be construed to limit any pre-existing right in which the insured may have had compensation from the insurer for cleanup and removal costs and all direct and indi- rect damages relating to the discharge of petroleum.

Section 2 provides for an effective date of the first of January next succeeding the date on which it shall have become a law.

Background and justification

There are approximately 2.3 million resi- dences in the state that rely on home heating oil or kerosene to heat their homes. Sometimes the tank or lines may leak, rupture or otherwise fail, allowing oil to enter the soil and groundwater and/or surface water. Remediation is often expensive and includes soil excavation, tank removal and replacement, drinking water filtration, alternate water supplies and groundwater treatment and monitoring. Under New.York State's Oil Spill Act, the homeowner is strictly liable for the spill or leak and the cleanup costs.

Petroleum leaks or spills are very serious threats to the environment, but additionally they can bring financial ruin to homeowners.

Spills that occur on residential properties can cost anywhere from several thousand dollars to hundreds of thousands of dollars to clean

up. Many of these spills involve petroleum storage systems whose tanks or lines have leaked, and as a result, the oil has seeped into the soil and impacted groundwater which typically is a source of drinking water for the surrounding community. Remediation may include soil excavation, tank removal and replacement (if the tank was the source), as well as groundwater monitoring Or treatment. These cases are rare but are devas- tating to the financial wellbeing of the homeowner as the homeowner is strictly liable for the leak or spill, and the subsequent clean-up costs.

Insurance companies have routinely included absolute "pollution exclu- sions" in all homeowner policies and refused to cover these costs. These cases, though they often constitute a severe financial burden to indi- vidual homeowners, are limited and should not impose a burden on insur- ance companies.

This legislation requires these costs to be covered in homeowner poli- cies.

Legislative history

New Bill.

Fiscal implications

None to the State.

Effective date

This act shall take effect