Oil Tank Leaks

Service: Insurance
Subject: Facilities
Setting: Property

Sector: Chronic Care

Healthcare organizations require alternative power sources as a means to maintain power for various vital services during interruptions. Most organizations use diesel generators with fuel maintained in underground or above-ground storage tanks as the alternate power. Costly claims and environmental damage occur when tanks and/or the associated piping system leak. Leaks usually occur due to corrosion, installation failure and fuel overfilling. Organizations should have monitoring and leak detection systems and practices in place.

HIROC excludes coverage for any environmental impairment arising out of the ownership, operation or use of underground tanks and associated piping installed in excess of 15 years at the inception of the Composite Healthcare Insurance Policy or any of its renewals.

Data and Information

Oil Leaks Claims Facts

  •  Oil leaks is the 3rd highest ranked risk for chronic care, complex continuing care and rehabilitation facilities/hospitals and the 5th highest ranked risk for nursing homes, personal care homes and long term care facilities;
  • The highest claim in this area settled for over $1,000,000.

Common Themes Seen in HIROC Claims Files

  •  Lack of compliance with the tank manufacturer’s recommendations and/or provincial/local government’s regulations and standards for operation and maintenance of oil tanks; 
  • Use or re-use of old/obsolete underground oil storage tanks;
  • Poor contract management practices (expired, not signed or dated, no indemnity clause, or limit of liability limited to the value of the contract, modifications to services not clearly outlined/dated/ signed);
  • Loss of work orders, maintenance records, repair and service agreements, emergency service calls and contracts;
  • Delays in calling repairs and service;
  • Work orders with unspecified maintenance and/ or instructions;
  •  Delays in notifying insurer and regulatory authority following suspected oil leak resulting in increased cost of remediation.

HIROC Claim Examples

Case 1

An underground diesel fuel tank was installed by a community based organization in the mid 1980s to provide back-up power supply to the facility. Twenty years later, during routine precision leak testing, the facility noted a discrepancy between amount of fuel used versus amount that was supposed be in the tank. The suspected loss was reported to HIROC two years later. The tank was removed and a temporary tank was installed. The facility was requested by the safety authority to submit a remediation strategy. The soil testing in the area of the tank confirmed that the contamination of the surrounding soil bed was greater than 5 meters deep. The ground water and soil on nearby residential and city property were also contaminated. As ordered by the safety authority, the facility was required to delineate the parameters of the contamination and bore holes on the facility property, residential property and catch basins. Over the course of a couple of years, oil was removed through the drill holes reducing the contamination. In addition to the costs of the investigation and remediation activities, the facility received a demand for compensation from the owner of the residential property impacted by the leak

Case 2

A nursing home employee observed an oil slick like material on the surface of a river next to the facility’s main building. The river emptied into a near-by lake. The local city officials were contacted. The material was determined to be hydraulic oil, the type used as a lubricant for machinery. The lengthy investigation (involving petroleum companies, city officials and the Ministry of Environment) concluded that the pipe on the facility’s elevator leading to the oil holding tank had clogged leaking hydraulic oil. The facility had a pre-existing ground water issue around the base of the elevator shaft. The leaked oil mixed with the ground water. The sump pump used to manage the water emptied a drainage pipe that flushed out to the river and ultimately the lake. Extensive and costly soil and river/lake mediation strategies were implemented. Periodic soil testing revealed an unexpected high level of contaminants – it was believed that prior oil leaks had occurred. The elevator company that serviced the nursing home was cross claimed.

References

  • HIROC claims files. y Canadian Council of Ministers of the Environment. (2003). Environmental code of practice for aboveground and underground storage tank systems containing petroleum and allied petroleum products.
  • Canadian Environmental Protection Act: The Storage Tank Systems for Petroleum Products and Allied Petroleum Products Regulations. (2008). Canada Gazette Part II, 142(13).
  • Canadian Standards Association. (2006). Ontario installation code for oil-burning equipment. 
  •  ECRI Institute. (2000). Flammable and combustible liquids. Healthcare Hazard Control, Physical Plant 9.
  • ECRI Institute. (1996). Underground storage tanks. Healthcare Risk Control Risk Analysis, 3, Environmental Issues, 16.
  • Environmental Protection Agency. (2005). Operating and maintaining underground storage tank systems: practical help and checklists.
  • Environmental Protection Agency. (2005). Straight talk on tanks: leak detection methods for petroleum underground storage tanks and piping.
  • Environmental Protection Agency. (1995). Musts for USTs: a summary of federal regulations for underground storage tank systems.
  • FM Global. (2011). Ignitable-liquid handling. Understanding the Hazard.
  • FM Global. (2011). Storage tanks for flammable liquids. Property Loss Prevention Data Sheet, 7-88.

Mitigation Strategies

Reliable Processes

  • Ensure all fuel tanks meet provincial/local regulation’s performance standards and requirements for (including corrosion protection, as applicable):
    • Fiberglass-reinforced plastic;
    • Steel;
    • Steel/fiberglass-reinforced plastic.
  • Ensure aboveground tanks are:
    • Located on ground sloping away from main facility buildings and plant utility installations. On hilly terrain, provide drainage or dikes to bypass buildings or installations at lower levels;
    • Provide containment for tanks containing oils or fuels by remote impounding, dikes around the tanks or secondary containment;
    • Control vegetation and soil erosion around the tank area;
    • Where tanks are arranged in more than two adjacent rows or in an irregular pattern, provide greater spacing between tanks, additional dikes or roadways so all tanks are accessible to emergency responders or maintenance personnel/contractors.
  • If secondary containments are used, consider the following:
    • Are provided with drainage to remove liquid from contained areas at a minimum slope of 1% away from tanks toward a sump, drain box or other means of disposal located at a safe distance from the tank. Ensure drains are prevented from entering natural water courses or public sewers;
    • Have a means, accessible to the delivery operator, for determining the level of liquid in the tank;
    • Are provided with a means to prevent overfilling by sounding an audible and/or visual alarm when the liquid level in the tank reaches 90% of capacity; 
    • Are protected against vehicle impact by suitable barriers except where the tank is specifically listed and marked as having passed vehicle impact testing;
    • Are spaced a minimum of 1.5 m from building walls or openings.
  • Ensure underground tanks are:
    • Buried at least 1.5 m away from building foundations and 0.6 m from other tanks and pipelines. Where possible, choose a location farthest removed from below-grade open areas such as pits and basements under buildings;
    • Adequately anchored where groundwater conditions are not ideal and where flooding is possible;
    • Covered with 0.6 m of earth, except under concrete paving at least 100 mm thick, where 0.3 m of earth is sufficient;
    • Also, provide an additional 0.3 m of cover at tank locations over which heavy vehicles pass. Reinforce paving over the tank and extend at least 0.3 m beyond the tank perimeter in all directions to transmit the superimposed load to foundations beside the tank;
    • Protected against corrosion by:
      • Providing at least 150 mm of well compacted clean gravel or sand around the tank;
      • Locating tanks above groundwater level;
      • Providing a protective coating on steel tanks. The base coat, often applied by the manufacturer, serves as a primer. The outer coating, applied in the field, must be compatible with the base coat;
      • Patch-painting any portions of the protective coating that is damaged during installation;
      • As an alternative to protective coatings, using cathodic protection in conformance to applicable standards (e.g. CAN/ULC S603.1, NACE Standards).
  • Ensure tanks are monitored for leaks using one or more of the following methods:
    • Inventory monitoring;
    • Routine monitoring of the interstitial space of a double-walled tank;
    • Vapour wells for monitoring soils in the excavation zone;
    • Groundwater monitoring wells;
    • Automatic tank gauging equipment;
    • Other equivalent methods as approved by applicable codes and standards.
  • Ensure appropriate documentation/logs including:
    • Name of the inspector and date of inspection;
    • Location and tanks being inspected;
    • Condition and age of the tanks, valves and piping;
    • Quantity of fuel in the tanks;
    • Condition of leak detection and spills prevention systems (e.g. cathodic protection system, valves, overfill protection, secondary containment, dikes, berms).