Why noxious gas release claims can be costly

Toxic gas leaks may not happen often in Canada but if it happens to your client, it can result in a large third-party liability claim, a managing general agent warns.

A styrene gas leak from an LG Polymers in India earlier this month killed 12 and sent more than 300 to the hospital, the Associated Press reported at the time. The May 7 tragedy comes nearly 26 years after a leak of methyl isocyanate from a Union Carbide plant in Bhopal killed more than 4,000.

The leak earlier this month happened on the outskirts of Vishakhapatnam while workers were preparing to restart the facility after a coronavirus lockdown was eased, AP said.

“An accidental release of toxic inhalation hazards can result in a very large insurance claim,” said Karim Jaroudi, Toronto-based product specialist, environmental insurance for MGA Burns & Wilcox Canada, in an interview. Jaroudi was commenting in general and not specifically on the LG Polymers accident in India.

“Release of toxic inhalation hazards is a risk for a wide variety of commercial and industrial operations,” said Jaroudi.

Examples include chemical, petrochemical and fuel operations and where there is bulk storage. With bulk storage there is a hazard of fire and resulting toxic inhalation hazard, said Jaroudi

A chlorine release in 1979 from a derailed tanker car near Toronto resulted in one of the largest ever evacuations in Canadian history. On Nov. 10, 1979, about 200,000 people — most of them Mississauga residents — had to leave the area suddenly after a Canadian Pacific freight train hauling chemicals from the Sarnia area derailed near Dundas Street and Mavis Road.

In 2005, a train derailment in Graniteville, S.C., resulted in a chlorine release that killed nine and injured hundreds, many permanently. That incident resulted in the evacuation of more than 5,000 people living and working within a 1-mile radius of the release area, the U.S. Department of Justice reported earlier.

In one case, ammonia was accidentally released from a plant, said Jaroudi, without naming the company involved or the location. In that instance, the wind pushed the ammonia gas into a residential subdivision and this resulted in many people falling ill. This is an example of non-fire related, air emissions risk, Jaroudi said.

The cost of a toxic inhalation hazard release can include liability for bodily injury, liability for third-party property damage, and liability for a neighbour’s business interruption, said Jaroudi. Another risk is fines and penalties from regulators.

In the event of fire, if suppression fluids are used, there could be a large cost to clean up the sub-surface of the soil. This, Jaroudi said, is because fluids are being contaminated with pollutants released in a fire.

Feature image via iStock.com/Stephen Barnes