Please understand that the following is meant as a general guideline for identifying where your business may have insurance risks. It also provides suggestions on how to reduce those risks. It is not meant to determine whether a business is or is not insurable. McCaleb-Metzler can insure your business whether you do or do not fit the below description.
Description of operations: Refineries process crude oil into a variety of petroleum products. Petroleum wholesalers receive the products from the refineries and distribute them to retailers. The product may come by railroad tanker, car or truck. The product may be in bulk or packaged in containers. The products include gasoline, diesel, fuel oil, motor oil and other types of specialty oils. Bulk storage stations include tank fields with underground pipelines.
Some wholesalers also own retail gasoline stations or convenience stores.
Property exposuresdepend on the type of petroleum product handled. The gasoline distributor normally has extensive bulk storage. Gasoline emits highly flammable fumes that must be controlled to prevent explosions. Underground tanks are the least prone to explosion but many tanks are above ground for environmental reasons. Filling the tanks and dispensing fuel from the tanks can cause static electricity buildup that can lead to explosion unless properly bonded and grounded. Petroleum products in containers for sale are less volatile as long as the containers are kept sealed and the temperature controlled. Greasy rags and equipment used to clean up spills could contribute to spontaneous combustion. Since electronic equipment and wiring can spark, it should be in conduit and maintained in excellent condition.
Crime exposuresare mainly from employee theft. Most petroleum wholesalers use cardlock systems for monitoring purposes and to eliminate the need for drivers to carry cash. Internal monitoring and external audits are needed to maintain discipline in the accounting function and to prevent misappropriation of funds.
Inland marine exposures are mainly from goods in transit. The wholesalers’ job is to move the product. The main exposure is overturn of the vehicle resulting in a loss of the product. Accounts receivable, valuable papers and records and computer exposures vary according to the type of operation and should be evaluated and considered.
Premises liability exposures are limited because the public usually does not have easy access to a wholesaler. If tank storage is present they may pose an attractive nuisance hazard needing appropriate safeguards to prevent trespassing. Off premises exposures and loading and unloading exposures are covered under the commercial automobile policy.
Environmental impairment exposures are significant. The tanks must meet EPA standards that include regular inspections and monitoring. Truck overturns can also cause off-site environmental disasters. Drivers must be trained in and capable of performing needed and appropriate cleanup operations.
Completed operations liability exposuresare mainly due to misdelivery. The wrong fuel placed in a tank has consequences ranging from inconvenience to tragedy. Gasoline placed in an airplane fuel tank will cause the plan to crash. The insured must have controls in place to monitor the fuels received from the refinery and delivered to customers.
Automobile exposures are the primary exposure for petroleum wholesalers. Drivers usually make multiple deliveries during a single shift. Vehicles are large and awkward and drivers must navigate them over interstates, state highways, rural winding roads and congested city streets. Tankers often have compartments so that many different types of fuel can be loaded on a single vehicle at the same time. Drivers are responsible for loading the correct fuel into the tankers and placing into the correct tank at the customer’s premises.
Driver training, regular MVR checks, drug testing and scheduled vehicle maintenance are industry standards.
Workers compensation exposures are mostly from the petroleum itself. The fumes can be toxic so appropriate precautions are needed. Employees can slip and fall due to product spills. The drivers can sustain skin irritation and burns when loading and unloading. A driver can be seriously burned or killed if the vehicle overturns or explodes.
Minimum recommended coverage:
Building, Business Personal Property, Goods in Transit, Accounts Receivable, Valuable Papers, Computers, Employee Dishonesty, General Liability, Employee Benefits Liability, Environmental Impairment Liability , Umbrella Liability, Automobile Liability and Physical Damage, Hired and Nonownership Auto Liability, Workers Compensation
Other coverages to consider:
Business Income with Extra Expense, Employment Related Practices, Directors and Officers – for profit, Stop Gap Liability
Reprinted copyrighted material with permission by the Rough Notes Company, Inc.
