Ice Rink Insurance << ALERT >>- Ammonia Incidents - New Case Law Removes Liability Insurance Coverage

Mon Jan 13 11:31:00 GMT 2003

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Because of several recent landmark legal decisions, ice rinks with ammonia
systems will likely be denied any liability 
coverage for any damage, injury, or death resulting from an ammonia leak
regardless of cause. Basically, these new 
court rulings in favor of insurance providers mean those who own, operate,
sell, or have stamped drawings as 
professional architects and engineers now do not have insurance coverage
for claims resulting from an ammonia 
incident with most standard liability or errors and omissions insurance.
More information and actual case-law summaries, 
scroll down.

Who Is Affected By This Ruling Against Ammonia Leaks As A Non-Covered
Insurance Claim?

Imagine an NHL arena with 16,000 fans having an unusual ammonia leak
resulting in evacuation, potential injury, or 
even death and not having any insurance company to ward off the legal
bills and medical claims. Imagine a community 
recreational rink with several hundred people public skating with a
similar event. Even if not one person were severely 
injured other than the need for oxygen or examination, their residual
physiological or psychological claims would hit our 
industry without any insurance coverage. Without coverage, such a claim
could severely impact the deepest pockets 
of an entity like the NHL. The thought of being so exposed from a
liability viewpoint is unthinkable. However, because 
of some recent events in the legal system, those with ammonia based
refrigeration systems and typical liability 
insurance policies now face this very situation. 

Based upon the precedence tested at State Supreme court levels, few
businesses operating in or for the ice-rink 
industry with ammonia refrigeration systems are covered. If, after reading
this information, you are still an unbeliever, 
contact your insurance provider and ask for written confirmation of
coverage. We wish these acts were not true as 
they could have an affect on many operators. After the call, you will
become a believer fast and see why this is such a 
critical alert for the ice-rink industry.

On January 20, 1999, in Ducote v. Koch Pipeline, No. 98-CC-0942, a
majority of the Louisiana Supreme Court ruled 
that when an insurance policy contains an "absolute pollution exclusion",
"The plain language of the insurance 
contract precludes coverage for bodily injury or property damage arising
from a polluting discharge...regardless of 
whether the release was intentional or accidental, a one time event or
part of an on-going pattern of pollution." 

To run any business without liability insurance would be considered
economic suicide. For those who have installed or 
own ammonia-based systems you are naked from an insurance standpoint
unless you immediately purchase a 
“Pollution And Remediation Legal Liability (PARLL) policy. The frightening
detail is that insurance providers say the 
PARLL policy will be extremely expensive if one can even obtain such a
policy. The writer contacted representatives 
from K&K Insurance, Rice 
Specialty Insurance, and Richardson Insurance who all confirmed these new
rulings to be an issue for those at risk 
with a hazardous material incident such as an ammonia leak. 

What Changed With Ammonia Specifically And Why?

With environmental claims providing probably the greatest ongoing exposure
for any one type of claim in the history of 
the industry, itÂ’s clear why insureds and insurers have employed every
conceivable argument in their coverage 
interpretation battles. Billions (some say a trillion) are at stake, with
the coverage results sometimes turning on how 
many justices prefer one dictionary definition over another. To stave off
future litigation, in the mid `80Â’s, insurers 
removed the qualified pollution exclusion  from CGL policies and crafted a
new “absolute pollution exclusion.” While the 
intended purpose of the new exclusion was to minimize litigation of
pollution-related claims, the absolute pollution 
exclusion is now the most litigated coverage issue. With the above noted
case going to the supreme court level, with 
the ruling resulting in ammonia leaks not being covered, along with
several other states equally ruling, it appears the 
debate over “Ammonia Emitted From A Refrigeration System” is over. Those
of us in the ice-rink industry who have an 
ammonia system must reside themselves to the fact that any future claim
will likely be denied meaning they have no 
insurance to protect them from one of the most high risk systems in their

Quoting one insurance provider who specializes in the ice-rink industry:

“This is a major issue. The insurance industry has changed 
dramatically since the 9-11 event. In the past, insurance 
companies may have settled small claims that they are simply 
unwilling to settle voluntarily today. No serious ice-rink claim has 
yet tested the insurance industry since the 9-11 tragedy. Given the 
recent case law that specifically excludes coverage for “Ammonia 
Emitted From A Refrigeration System,” we as brokers cannot 
represent coverage under current General Liability Policies.  We 
also are concerned if the special insurance can be obtained at all, 
and if so, it could double insurance rates for ice rinks.”

So, Who Is At Risk?

Literally anyone associated, past or present, with an operating ammonia
refrigeration system! Some may say an 
ammonia refrigeration system is safe if properly installed in accordance
with all code requirements. This insurance alert 
is not meant to open the debate on ammonia safety or risk. We all believe
automobiles are considered very safe today, 
but who would own and drive one without having adequate insurance? No one! 

Why Ammonia? Ammonia is classified as a highly toxic and highly hazardous
by both the EPA and OSHA. It is 
regulated under the Hazardous Chemical Reporting Law for any complex over
100 lbs which all ice rinks fall under. 
See the EPA Ammonia Alert at the end of this document for all the rigid
requirements of legal ammonia use. Ammonia 
and the extreme governmental classifications and legal statutes governing
its use provided an ample arsenal for the 
insurance providers to argue pollution exclusion with. For the legal cases
to be argued all the way to the state (the 
supreme court in some cases) regarding ammonia claims, the fact of any
ammonia claim being excluded has been 
tested. To date, three major cases have been argued. With each win for the
insurer, the likelihood of policyholders for 
future claims becomes increasingly dismal. Based upon the recent events,
it is the opinion of top insurance experts that 
most claims for injury or damage from ammonia will be denied. 

This means if a worker, skater, patron, or community member is killed,
hurt, or makes claims of long lasting medical 
illness, the chance of having the insurance company fight any claim
legally, much less payout on a claim, will not occur 
based on standard general liability policies. Even if a claim is without
any merit by a disgruntled employee who simply 
smells ammonia typical of some ammonia mechanical rooms, all expert fees
and legal costs will come out of the 
pockets of the defendants. Even the simple legal defense of a claim
without merit could cost in upwards of hundreds 
of thousands of dollars depending upon the case's complexity. And, this is
if you win the  case on your ammonia claim. 
For claims, which are covered, the insurance provider assumes the  legal
cost of defense. Now with no insurance, only 
you will pay. Boiler and equipment policies also do not normally provide
protection under this ruling for an ammonia 
leak. Only a special pollution policy would provide the protection, which
all ammonia owners thought they had in the 
past with general liability policies. Those at risk include but may not be
limited to the following: 

A)  Any architect/engineer to a project, as the professional of record,
since they, too, have no coverage for claims 
under these new rulings. Errors & Omissions insurance policies typically
mirror the same exclusions as general liability 
policies for commercial businesses. Even if a professional is able to
obtain a pollution policy now, which is 
questionable, they are still responsible without coverage for all ammonia
systems installed prior to having such a policy 
instated. Professional designers when told about this new case law offered
extreme skepticism whether they would 
specify ammonia systems any longer.

B)	Ice rink owners and operators with ammonia systems. Not only do they
not have insurance coverage, their 
installing contractor, architect/engineer, or even service provider also
likely will not have coverage they can rely upon.

C)	All contractors and service providers who either installed or support
ammonia systems.

D)	Any financing institution, which provides funding for the ice arena,
past or future. One accident and claim 
could result in collapse of the business without
insurance coverage.

E)	 All persons living in a community where an ammonia system is installed
and considered in the risk area as 
defined by the EPCRA (Emergency Planning And Community Right-To-Know) zone
according to law since they have 
no protection with claims without an insurance provider to assure payout
on claims.

F)	Local planning and zoning boards since they could be at risk for
permitting ammonia systems should an 
incident occur where no insurance is provided to protect it citizens. In
such a situation it would not be reaching in 
todayÂ’s society for claims to be made against the planning board for
permitting such systems.

G)	Any insurance broker writing policies for ice rinks that does not
clearly disclose the exclusion of ammonia-
based systems being covered.

Other Topics & Information In The Report Include:

1)	Now That You Know You May Not Have Insurance, How At Risk Are You?
2)	What Can Cause An Incident With Ammonia Systems?
3)	A New Leak Risk - Ammonia Theft May Cause Releases And Injuries
4)	What About Contractors Installing And Promoting Ammonia Systems?
5)	How Does This Case Law Precedence With Ammonia Refrigeration Systems
Affect Financial Relationships?
6)	Is Disclosure Of Insurance Gap A Requirement?
7)	What Is a "Pollutant" As Defined By Your Insurance Policy?
8)	Pollutants As Available & Defined Through The International Risk
Management Institute
9)	What About An Ice Rink Ammonia Leak From Corrosion?
10)	Impact With Protection From Ice Rink Indoor Air Quality Claims
11)	Sample Claim Scenario With PARLL
12)	Ammonia Gas Release Coverage Provided Only Because Of PARLL (Pollution
and Remediation Legal 
13)	If Special Insurance Can By Bought And How Much Will It Cost?
14)	What About Other Refrigerant Leaks Other Than Ammonia?
16)	Pollution Exclusion Enforced by Louisiana Supreme Court
17)	Numerous Case Law Summaries
18)	Hazardous Material Alert From The EPA (Environmental Protection
Agency) and OHSA.

The referenced report was assembled by John Burley. It contents are the
result of an investigation of legal cases along 
with the consultation of experts within the insurance field.  This report
is not to be interpreted or substituted for 
appropriate legal or insurance advice. You should consult with trained
professionals who are engaged in your specific 
legal or insurance matters for conclusions or actions relevant to your
businesses best interests.  If you have any 
question or want clarification of the facts contained within this
document, we urge you to contact your lawyer and 
insurance provider. Get confirmation in writing now to avoid risk later
from your insurance provider. John Burley is 
president of Burley's Rink Supply and has been engaged in the ice-rink
industry for over 20 years and is a leading 
authority regarding ice-rink design, construction, and operations. John
Burley can be reached at 1-800-428-7539. A 
complete copy of the FREE report can be requested in PDF format by
replying with the word “REPORT” in the subject 

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