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Materials Recovery Facilities

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MRF Insurance Policy

Unique solutions for a unique industry

Materials Recovery Facilities, or MRFs, often employ some of the most advanced technology in the waste stream. They receive and separate thousands of tons of waste everyday and can do so with little to no noise or odor disturbance to the areas that surround these sometimes massive facilities. But for all the state-of-the-art manufacturing, technical and processing equipment housed in a MRF, sometimes what keeps it going is an accurate understanding of exposure to risk. In the waste stream, the unexpected happens, property is damaged, accidents occur and people get injured; its part of daily life in the industry. When the unexpected does happen, those facilities who have taken the time to properly prepare and have partnered with the right people, keep functioning and provide our communities with a much needed service. This article will attempt to broadly address those basic tenets of understanding and properly addressing the risks that comes with MRF operations.

It is important to remember that what happens within the MRF, is not the only process of concern. Often, a MRF is operated as part of a disposal company enterprise and the operation needs to be assessed in total. The basic building block of guarding against risk is general liability insurance; sometimes referred to as GL or CGL. This is, as the name implies, intended to safeguard businesses from those risks that are ‘generally’ faced. Obviously a MRF has risks that go well beyond this, but there is some valuable cover to a MRF in GL. General liability is going to protect a MRF when it is liable to a 3rd party on the premises. Not all MRFs interact with the public true, but they do have vendors. Perhaps a bank has sent an agent to inspect property as terms of a loan or a refinance. Maybe a natural gas refueling truck visits the property regularly. Should bodily injury or property damage occur in one of these scenarios, the MRF could be responsible and general liability would help the facility through the process. As part of a disposal enterprise, loading and unloading could give rise to potential claims against the MRF from a 3rd party. General liability is usually what insures against liability in these situations. The word usually is used here because, most often, what is being loaded and unloaded is waste and a MRF needs specific insurance to address the liabilities associated with waste.

Importance of insurance policy specifics

In the world of insurance, what is in the policy language is what binds the insurance company and the insured. The policy is a legal contract. General liability policies—and for that matter most other policies too—carry a total pollution exclusion. This means the policy will in no way respond to bodily injury or property damage related to waste. So the loading and unloading scenario in the last paragraph would need to be addressed with contractor’s pollution liability. This will grant liability cover to the MRF for activities related to waste that occur away from the MRF itself. Traditional auto liability will of course cover the liability stemming from the operation of the trucks, but the exposure to risk goes further. Transportation pollution is also of concern here for any risks that arise between points A and B. These are two of the specialty insurance products to consider that deal with exposure to risk away from the MRF; a third is products pollution liability. MRFs regularly bail and otherwise process recyclable materials to be sent to domestic and international markets. This is a MRFs ‘product’ and, since general liability is not going to cover product liability related to waste, products pollution coverage is needed to adequately address the risk.

At the site of the MRF, in addition to the general liability discussed earlier, special steps need to be taken to insure against risk. Site pollution liability is the most obvious need. This would address any issues arising from the operation of the MRF itself. Remember, for the purposes of this article pollution events are defined by an insurance policy. So these specialized policies are intended to work for a MRF where standard insurance policies would exclude cover. There could certainly be a scenario where something comes to the MRF that should not be there, such as universal waste. Should a pollution event occur at a MRF, it is likely going to be sudden. There is not an exposure to a gradual pollution event like there would be if there were storage. It is important that a site pollution policy be geared to such an occurrence. Coverage for costs incurred by the MRF to remediate the situation is just as important as the coverage to 3rd parties who may suffer or injury due to a pollution event emanating from the site. The MRF will want to have help in making the neighbors whole, to be sure, but it will also want the safety and security of cleaning up at the expense of an insurer. Materials leave MRFs and head to a landfill all the time but if the MRF does not also own the landfill, the MRF is exposed to a particular type of risk. Should something happen at that landfill, governing bodies often look to those who contributed to the contents as potentially responsible parties. A well written site pollution policy should maintain coverage for the MRFs exposure to disposal sites it does not own.

Importance of employee safety and training

No matter how sophisticated the internal process of a MRF is, there will always be employees there to ensure it operates at its fullest potential. As with most operations in the waste stream, employee safety and training are crucial to a viable business. It is important that the training programs are available in the primary languages for all employees. A sophisticated safety program will be automated, reminding that training is due and logging it electronically once completed. The program should have deliberate safety functions like lockout/tagout programs and protocols for getting injured workers back to work. Culture is the biggest part of safety in the work place. Ownership and management have to convey to the entire workplace that they care about the employees. Management must be fully involved to ensure that workers go home in the same condition in which they reported to work. A strong insurance carrier and a good brokerage should have all the tools necessary to install and maintain such a program. This is by far the most important although a sometimes under appreciated feature of a good risk management program.

A risk management program should be founded on a trusted partnership. The services of a capable risk management professional should go well beyond simply identifying areas of concern and insurance placement. Contractual obligations are common territory with MRFs and often the help of a knowledgeable professional can ease the negotiation process. A simple conversation between legal and risk management teams can save a facility from unnecessary insurance or surety costs. A risk management program that specializes in the waste stream and MRFs can access unique products for lending and surety mechanisms, sometimes avoiding the need for freezing assets in lines of credit. While the risks involved in MRF operations are unique and complicated, so too can be the risk avoidance and containment strategies for these facilities. Finding specialized help in companies and individuals who know the waste industry and MRF operations is the biggest step in the right direction to remain a profitable and safe facility for the long term.