Canadian Underwriter

Gushing over oil storage

October 18, 2020   by Michael Freill, President, Mark 1 Engineering

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Canada has seen many significant improvements in oil heat storage systems over the past decade. Among the biggest is a new installation standard that promises to help reduce the number of costly oil spill claims for insurers.

Ten years ago, the heating oil industry in Canada was increasingly dealing with the negative fallout of spill and leaks from heating oil storage systems. Homeowners were experiencing significant damage to their homes due to oil leaks; insurers were paying millions of dollars in claims with no signs of improvement in area of safety regulations.

For years, Insurance Bureau of Canada (IBC), an association representing Canada’s home, car and business insurers, appealed to provincial governments to step in and regulate the industry. The idea was to create safety standards for oil storage that would lead to a reduction in spills.

Back in 2009, I pointed out in an article published in Canadian Underwriter that data from the province with the toughest regulation, Prince Edward Island, was not showing any improvement compared to non-regulated provinces. Regulating an industry when you don’t understand what’s going wrong wasn’t leading to the desired result, which was fewer claims. And so, the tack changed: Key stakeholders committed to collecting failure data and determining what was going wrong. Then they would look to a national technical code committee to recommend solutions.

IBC spearheaded a massive study in 2008 to determine the cause of oil leak claims for its members. Four years later, the insurers’ association presented its data to the Canadian Standards Association (CSA) B139 technical committee in Montreal. Comparing the IBC data with 10 years of PEI spill data, the results were essentially the same: 85% of the heating oil system failures and 91% of the overall claim costs were associated with tank systems installed outside the home. Only 15% of heating oil system failures and 9% of claim costs were associated with tank systems installed inside the home.

Armed with the IBC’s data, the PEI government, the Canadian Coast Guard, and the CSA B139 technical code committee worked to identify cost-effective solutions for addressing the common failures for storage systems located both inside and outside the home.

For the 2015 CSA B139 code edition, the CSA committee came up with a number of code changes to address all of the key areas where deficiencies in the design and/or equipment had led to a failure. The new standard, CSA B139-15, significantly changed the requirements for oil storage installations both inside and outside the home.

For tanks located outside, it called for more robust foundations, double-bottom steel tanks and/or fibreglass construction, and no more copper lines at the bottom. Copper lines need to be top draw or large steel/flexible stainless steel pipes can be used on bottom draws.

As for inside installations, tanks must be placed in specially-designed containment trays, regardless of the tank type (this is for overfill and connection protection). Filters need containment protection and must be corrosion-resistant. Oil burners can be fitted with specially-designed containment devices where filters are typically installed. In addition, the entire inside oil tank system can be protected with secondary leak detection alarms, which act like smoke detectors should a leak occur.

Given all of the enhancements to the installation standard — including vastly improved storage tanks, filters, lines, containment systems, and leak detection alarms — the oil storage system today is vastly different than it was even before 2015. The risk of a damage claim today from a tank system installed according to this new standard has been almost entirely eliminated.

Oil heat is still one of the most economical and practical sources of space heating in urban and rural areas where natural gas is not served. Propane is a great cooking fuel, but it’s very expensive to use for space heating. And it must be sourced almost entirely from rail cars — something that has proven to be a challenge based on the limited storage capacity and the problems moving petroleum by rail. Heating oil (diesel) on the other hand does not suffer from these challenges and plenty of storage capacity exists.

A couple of important notes to insurance companies who underwrite this business:

  •  Communicate to homeowners that the best location for their oil storage system, if at all possible, is inside the home. This takes Mother Nature and vandalism out of the risk equation.
  •  It’s very important to communicate to the homeowner that the CSA B139-15 installation code is the minimum installation standard. Follow up and request pictures of the new installation to make sure it is installed correctly and to code. Some unscrupulous contractors may cut corners to get the business, while other bad actors may even ignore the codes completely. Make it clear to the homeowner to check the final installation.

The P&C industry has achieved its goal of having provincial governments regulate the installation of oil heat systems. The only thing left to do is for provincial governments to adopt and enforce the latest code standard.

Data collection was the key to making this happen. IBC is reporting that claims are continuing to decline significantly. As oil heat systems get replaced with the new standard, the incidents should pretty well disappear.

Michael Freill, is president of Mark 1 Engineering Ltd., in Dartmouth, N.S.

Feature image via Dufresne

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