XL Presents Fuel Leak Claim Example

XL Insurance’s insured, a mechanical contractor, was retained as a subcontractor during construction of a medical center.  The insured subcontracted the underground storage tank (UST) installation, fuel line connections to the existing building, and associated engineering work to another contractor.  Part of that subcontracted work included removal of soil that was initially placed over the fuel line and replaced with a more protective concrete layer.  After this work was complete, a leak in the fuel line was discovered.  More than 1,500 gallons of fuel entered the fuel line trench and migrated under the adjacent building pad of the new medical center wing.

XL’s environmental claims department provided immediate response, uncovering evidence that the leak was caused when the soil was removed and replaced with concrete.  Additional evidence showed that the leak detection system was not properly functioning so when the fuel was released no alarm sounded and the pump did not automatically shut down.  It was determined that if the leak detection system had operated properly, only 500 gallons of fuel would likely have been released.

XL’s insured’s subcontractor was at fault because they hit the fuel line when removing soil and/or pouring concrete. In addition, the leak detection system design, which they subcontractor was responsible for did not function properly, resulting in liability for the insured.  XL paid approximately $700,000 under the insured’s Contractor’s Pollution and Professional Liability Policy to complete remediation and two years of on-site monitoring expenses, thus, keeping the project schedule on track and avoiding further liability associated with delays.

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