Claim Scenarios for Manufacturing Facilities

Claim Scenarios for Manufacturing Facilities

Many of our agents work with owners and operators of manufacturing facilities. This class of business faces a unique set of exposures stemming from the activities that are part of their daily operations, the premises on which the operations are performed, and the handling/distributing of the products being manufactured. Here are some examples of claims we've come across affecting manufacturing facilities -- feel free to use these when discussing potential exposures with your clients!

• A printed circuit board line in a manufacturing facility historically used a chlorinated solvent as a degreasing cleaning agent. During facility renovations, it was noted that the concrete underneath the degreasing machine was cracked and smelled of solvent. Subsequent investigation noted extensive on and off-site contamination of groundwater with TCE and PCE. The general liability policy purchased from a standard carrier declined the claim based on an absolute pollution exclusion. The total cleanup exceeded $710,000.
   
• While a utility worker was using denatured alcohol to clean tools, a co-worker carelessly tossed a cigarette butt, which ignited the alcohol vapors. The utility worker sustained extensive burns. Despite the facts that the alcohol carried flammable warnings on the label and the claimant was not using the product for its intended purpose, a court found the chemical distributor and chemical manufacturer liable for failing to specify that the vapors were flammable. Damages exceeded $650,000.
   
• A manufacturer began expansion of the production line area. During excavation, oily soils with a “petroleum” odor were discovered. Further investigation uncovered an old, undocumented sludge drying pit, which the previous owner used in the 1940s. The manufacturer had to remove and remediate the soil at his expense. Cleanup costs exceeded $400,000.
   
• A manufacturer stored baghouse dusts containing heavy metals in an uncovered dumpster behind the facility. Whenever it rained, stormwater mixed with the dusts, forming a slurry, which ran off-site. Soil testing of a nearby stream bank showed high levels of lead, cadmium and mercury. The contaminant source was determined to be the dumpster run-off. The manufacturer was responsible for cleanup costs exceeding $250,000.
   
• A manufacturer stored a drum of caustic chemicals next to a drum of highly reactive acid. When a forklift disturbed the drums, their contents were released, causing a violent reaction. Fumes spread over neighboring properties and destroyed all the plants at the nursery next door. The nursery owner submitted a claim totaling more than $35,000 for business interruption and loss of goods.
   
• An explosion and fire at a pharmaceutical manufacturing company killed six employees and injured dozens of others. The incident was triggered by a toxic mix of chemicals that burst into flames and ultimately precipitated an explosion that blew out the walls of the facility and damaged a neighboring factory. After the fire was extinguished, a cloud of noxious fumes remained across a 10-mile wide stretch, forcing hundreds of local residents to evacuate and local businesses to close. The company ultimately settled the multiple lawsuits generated by the incident, paying out more than $60 million.

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To see claim scenarios for other risks, visit our claim scenario webpage.