Managing environmental risk can take many different forms asorganizations wrestle with challenges that vary widely depending onthe industry they are in, the rules under which they operate andthe loss-prevention strategies that work best for the specificperils they face.

At one company, regulatory changes could mean a risk managerwill need to retool his organization’s insurance program. Atanother entity, the risk manager might focus on making Pollutioninsurers comfortable with his company’s risk profile. And at somecompanies, having the right Environmental program in place iscrucial to securing clients.

Here’s a look at how some risk managers approach Environmentalinsurance.

REGULATORY CONCERN AT ELECTRIC UTILITY

Tucson Electric Power (TEP), like other electric utilities, isawaiting the Obama administration’s decision on the U.S.Environmental Protection Agency’s (EPA) proposal to reclassify coalash as hazardous waste.

This byproduct of the electricity-generation process currentlyis considered a solid waste. With that solid-waste label, utilitiescan sell much of their coal ash to manufacturers such as cement anddrywall producers for use in their products. Of the more than 130million tons of coal ash generated annually in the United States,43.5 percent is recycled today, the American Coal Ash Associationreports.

The EPA, however, is concerned the heavy-metal content in coalash is dangerous to human health—especially if the waste migratesfrom a disposal area into drinking water. If coal ash were to bereclassified as hazardous waste, then the agency would haveauthority under the Resource Conservation and Recovery Act toregulate the byproduct from its generation to its disposal.

Critics of the proposal say it would driveaway users of the byproduct, nearly doubling the amount of wastethat would have to be disposed of.

TEP discards its coal ash in clay-lined pits on its ownseveral-hundred-acre site in rural northwest Arizona, where theutility’s power-generation facility also is located.

For TEP’s Karl Zimmel, manager of risk-management services, themain concern is the impact the regulatory change would have on theutility’s Pollution insurance program.

As part of his annual examination of emerging risks, Zimmelplans on conducting a “deep dive” into TEP’s Environmental exposureand current Pollution Liability insurance program this year todetermine whether TEP is adequately covered, given thefinancial-responsibility provisions in the Resource Conservationand Recovery Act (RCRA).

Under RCRA, hazardous-waste generators and variouswaste-handlers must prove they have the financial wherewithal tocover the cost of cleaning up environmental contamination and tocompensate third parties for their related bodily injuries andproperty damage.

Since the mid-1980s, TEP has purchased its General Liabilitycoverage from Bermuda-based mutual Associated Electric & GasInsurance Services Ltd. (AEGIS). The AEGIS policy coversthird-party Pollution claims above TEP’s $2 million self-insuredretention as long as a loss is attributable to a pollution incidentat TEP’s power facility. If a pollution incident occurs duringtransportation of a contaminant or after its disposal, the policydoes not respond.

Even if the EPA’s coal-ash proposal is not adopted, TEP willanalyze whether a stand-alone Pollution Liability insurance policy“makes sense” for the utility, says Zimmel.

ACE-ING ENVIRONMENTAL COVERAGE

ace hardware corp. has not had any Pollution losses, andDirector of Risk Management Bill Montanez says the company’sEnvironmental risk is very small.

Still, Ace has purchased a three-year Environmental policy thatcovers 14 or so distribution centers throughout the United Statesas well as Ace’s two paint-production facilities, both located inIllinois. Ace’s main exposures are its 350 tractor-trailer trucksand the above-ground tanks that hold chemical solvents at thepaint-production facilities, Montanez says.

Despite Ace’s successful loss-prevention measures, it purchasescoverage because it is “a very conservative company,” Montanezexplains. “At the end of the day, I don’t want to be delivering anysurprises to the CEO and shareholders.”

Meanwhile, each owner of Ace’s 4,100 U.S. franchise storesdetermines individually whether to purchase the coverage. Few do,Montanez says.

INCREASING INSURER COMFORT WITH HCA’S RISKS

the hospital corp. of America (HCA), thelargest private operator of health-care facilities in the U.S., hashad minimal Environmental losses over the past 10 years—a fact thathas allowed HCA to gradually purchase broader coverage asunderwriters have become more comfortable with the company’s risks,according to risk-management officials Joe Haase and Shirley FullerCooper.

A decade ago, HCA could purchase only Underground Storage Tankcoverage, notes Fuller Cooper, assistant vice president ofinsurance.

But HCA’s coverage today is extremely broad, covering risks thatinclude medical waste, says Haase, vice president of risk andinsurance.

HCA’s policy, for example, would cover even the environmentaldamage that could result from a crash at a hospital helicopterambulance pad, Haase notes.

COVERAGE IS KEY TO SECURING CLIENTS AT CANADIANCONTRACTOR

clients of edmonton, Alberta-based PCL Constructors Inc., whichworks on industrial and commercial projects in the United Statesand Canada, “quite frequently” demand that the contractor obtainPollution coverage, says Hugh McLellan, vice president of riskmanagement.

PCL tiers its coverage, and “no one insurer takes a significantamount of risk,” McLellan says.

Project owners in Canada routinely have been requiring Pollutioninsurance over the past 15 to 20 years, but increasing numbers ofU.S. clients began demanding the coverage in the past five to 10years, he says.