Canadian Underwriter

Claims conference speakers offer advice on residential fuel oil leaks

February 8, 2013   by Greg Meckbach, Associate Editor

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Claims adjusters dealing with residential fuel oil spills should think twice before allowing anyone to move a tank and should always keep a damaged tank for evidence, speakers at a recent conference suggested. 

“They get really mad and yell at you if you touch that tank,” Vas Kanellos said of Ontario’s Technical Standards Safety Authority, which regulates fuel suppliers and appliances that use fuels. Kanellos suggested there would not be a problem if someone responding to an oil leak moves a tank because it’s an immediate danger.

“But you’d better have a damn good reason for moving that tank,” said Kanellos, manager of Ottawa-based Kanellos Consulting Inc., whose services include supervision for site remediation.

Kanellos made his remarks during a session Wednesday at the Ontario Insurance Adjusters Association (OIAA) claims conference in Toronto.

During the session, titled Fuel Oil Spill Pollution Remediation and Subrogation, Kanellos noted residential fuel oil spills usually cost insurance clients at least $250,000.

His co-panelist, Mark Charron, agreed.

“I have rarely seen an oil spill case, even a minor one for a residential homeowner, that at the end of the day hasn’t cost at a minimum of a quarter of a million dollars,” said Charron, an Ottawa-based lawyer for Gowling Lafleur Henderson LLP specializing in civil litigation and insurance.

Charron has done subrogation work for insurers but now defends clients, such as fuel distributors and suppliers, against subrogated claims from insurance companies. He had some words of advice for claims professionals dealing with oil spills that could result in subrogated claims.

“Don’t lose the tank,” Charron said, adding he defended a fuel oil supplier in a subrogated claim, where an adjuster retained an engineering firm to inspect a tank. When he asked the lawyer for the plaintiff insurance carrier if he could look at the tank, the lawyer initially said he could.

“A couple of weeks later I get a call from the lawyer for the subrogating insurer for the homeowner, and he says to me, ‘Is there any chance that your client might offer something by way of an economic settlement?’ The translation of that is, the insurer doesn’t have to pay me to defend and (can) get rid of the thing early. I say, ‘Why do you ask?’ He says, ‘Well, we don’t have the tank anymore. We lost the tank.’ Being the intelligent person that I am, I said, ‘No chance.'”

Usually insurance carriers will sue three to four co-defendants, such as a manufacturer, inspector, supplier and/or installer, Charron suggested.

“In a residential context … you’ve got to start with the homeowner and what the homeowner expected was going to happen,” he said. “Was fuel to be delivered on an on call basis or on a regular basis? Was there a maintenance contract in place with the fuel distributor, supplier? That’s how you determine who you’re going to go after” to recover the money paid to the claimant.

Kanellos suggested spills can get more expensive if the response is delayed.

“It’s important that you get there as quickly as possible,” he said. “Nature does its thing, it mixes with soil, it mixes with water, and then it’s much more difficult to get out.”

It gets more expensive, he suggested, if the oil gets underneath the home and even more expensive if it gets in bedrock. Furthermore, Kanellos suggested, the farther oil travels from a property, number of regulatory agencies with jurisdiction increases.

While the regulator dealing with spills on one’s own property in Ontario is TSSA, once it gets off the property, the Ministry of Environment gets involved. Spills that travel into the St. Lawrence River can also involve federal agencies, Kanellos suggested.

Kanellos added much of the concern over residential fuel oil spills goes back to the Love Canal in Niagara Falls, New York due to concerns about the effects of benzene on human health.

According to the New York state health department website, nearly 22,000 tons of toxic waste was dumped into the Love Canal until 1953, before it was sold to a local board of education. The canal was covered over and redeveloped as a residential neighbourhood in the 1950s. Twenty years later, residents started reporting chemical contamination and the state declared the site a public health emergency in 1978.

Kanellos said Wednesday a major pollutant from the Love Canal was benzene, which is still used in residential fuel oil.

“The Love Canal in North America was the big kicker.”

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