Let’s Talk: Airport Fixed Base Operators and Environmental Incidents

Source: https://axaxl.com, December 11, 2018
By: Samantha McCree, AXA XL Senior Underwriter

From supplying support equipment to refueling and de-icing operations to managing fuel storage facilities to hangars, and more, thousands of fixed base operators (FBOs) provide vital support that keep US and Canadian airports operational. Because of FBOs important role in supporting air travel, AXA XL’s Samantha McCree has developed her expertise to help FBOs remain operational. As a senior underwriter on AXA XL’s North America Environmental insurance team, Samantha helps FBOs in the US and Canada manage their environmental risks to assure that a spill or other pollution incident does not hinder their operations. See how she does it.
How did you develop your underwriting specialty focused on FBOs?
McCree: After graduating with a civil engineering degree from Drexel University, I worked at an engineering firm and one of the things I was tasked with was inspecting above and below ground storage tanks. That experience was helpful when I joined AXA XL as an environmental underwriter more than 19 years ago. Many FBOs contend with the effective management and maintenance of storage tanks. Therefore, my hands-on experience with tank integrity and management was a plus, especially when it came to underwriting environmental insurance coverage for FBOs’ environmental exposures. Having a background in engineering has been very helpful in serving FBOs and underwriting appropriate pollution coverages. Engineers want to know what makes things tick. We’re very observant – and we like digging into the details. That’s what I do on a daily basis. Over time, I’ve become very familiar with the environmental risks that my FBO clients face and more importantly, the best ways they can minimize potential environment liability and damage to their reputation and bottom line.
What are the environmental risks facing FBOs today?
Every FBO is impacted by environmental exposures such as releases from underground and above ground storage tanks, vapor intrusion, de-icing operations, oil and fuel spills. Many FBOs believe that their General Liability (GL) policy will pay for an environmental incident. However, environmental cleanups are typically not covered under GL policies because they often have pollution exclusions
Another challenge for FBOs is the fact that they do not own the hangar or the land on which they operate. They lease the facilities and the land from the airport owners who grant them the right to operate at the airport and provide aeronautical services. This presents challenges. Often the leases include a clause stating that the FBO “is solely responsible and fully liable” for all fuel leaks or spills – and for any damage resulting from the spill. Many also include indemnification clauses requiring FBOs to “hold harmless and indemnify” the airport, the city, the county or any other governing entity – essentially saying that the airport and/or owners are not liable for the FBO tenants’ spills – and perhaps even spills that originate elsewhere on the airport property and migrate onto or under an FBO’s leasehold. An environmental incident could be enough to force the FBO out of business.
How can an FBO’s lease agreement or contract influence an environmental incident?
One recent claim comes to mind. An airport and their FBO used a hydrant system (underground fuel delivery pipeline) for many years. During maintenance of the system, a leak in the fuel hydrant system was discovered. Over a long-period of time, jet fuel leaked undetected. Over time, significant contamination of the aquifer occurred, resulting in a remediation order from the local/ county environmental authority. Although, the airport had initially installed and operated the hydrant system, the current FBO’s contract made it responsible for preventing and responding to spills/releases and overall environmental compliance. Fortunately, AXA XL’s claims counsel and consultants worked with the FBO and airport to reach a settlement and develop a remediation work plan. A long-term remediation project involving monitored natural attenuation for 20 years was implemented. Costs are expected to exceed $400,000, but are still significantly less expensive than an active groundwater treatment system.
How do FBOs benefit from tapping into AXA XL’s environmental expertise?
They really like our specialized environmental expertise. We know their business, the risks they face and can offer risk mitigation strategies that fit their specific needs. We don’t just sell them an environmental policy, we ask them to talk about what they do and how they work before we design an insurance plan. Another big advantage is our environmental claims handling capabilities, particularly remediation services and legal advice to assist in a cleanup, as illustrated in the claims example that I shared.
And we’re always looking for ways to improve our service and product offerings. For instance, because our clients needed financial assurance certificates for state and federal oversight, we recently introduced a unique, three-year certificate to address those concerns. We’ve also begun expanding our environmental products and services through a special cross-sell effort with AXA XL aviation underwriters. Our goal is to provide environmental coverage and expertise to help our FBO clients and those involved in aviation. There’s still a lot of opportunity out there for environmental specialty insurers like AXA XL – and we have a lot to offer FBOs and the aviation business in general.

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