The Canadian Oil Heat Association aims to tackle some long-standing challenges with insurance and remediation
By Stephen Bennett
With the help of advisors from inside and outside the fuel oil industry, the Canadian Oil Heat Association has identified six goals and is working toward them.
“The biggest thing that is limiting us in Canada is the challenge of insurance for not only our members but our customers,” said Stephen Koch, president of the association. Part and parcel of that challenge is better management of “our environmental responsibilities,” Koch said.
COHA some 18 months ago assembled an Advisory Council comprising insurers, remediation companies, brokers, educators, lawyers, oil distributors, consumers and provincial regulators. They were charged with answering key questions, especially:
What can be done to help understand risk of spills and leaks?
How can risk of spills and leaks be reduced?
At the same time, the members of the Advisory Council looked at existing remediation practices and put forward recommendations that could reduce costs.
The six initiatives that the Canadian Oil Heat Association is supporting include four on risk reduction of spills and leaks, and two on the remediation process that “we think [are] causing some of the costs to skyrocket,” Koch said.
The six goals are: expand COHA’s GreenTech program and create a “best practice” certificate; improve fuel oil system education and information for homeowners; adoption of an installation standard for oil-burning equipment; establish an information hub with critical data on spills and leaks; reduce spill mitigation response time; and eliminate conflicts of interest in spill remediation.
For each of the six goals, COHA has formed “implementation groups” to find ways to achieve them “in an efficient and proper manner,” Koch said.
Here’s more on what is being done.
Expand GreenTech; Create ‘Best Practice’ Certificate
Over the past five years the association has established GreenTech, a certification program for technicians; now, as recommended by the Advisory Council, an implementation group is preparing to add education in new technologies and methods of equipment installation and setup, the goal being to limit risk of contact or impact that might cause a system leak or spill.
“Many people out there in Canada have their OBT [oil burner technician certificate] but they received them twenty years ago,” Koch said. There was no continuing education on new technologies and new methodologies. Some training this year resulted in Green Techs earning credits for continuing education.
The implementation group examined how the wood-burning equipment industry and its installers addressed the challenges of risk and insurance coverage, looking for parallels with the fuel oil industry.
“The insurance industry didn’t want to provide coverage if someone had a wood-burning stove that was more than ten years old,” Koch said. The wood equipment industry and installers created a best practices certificate designed “to give confidence to insurers that [an installed] product was without major risk of fire,” Koch said. The group overseeing GreenTech is looking to see if that best practices approach can be used in the fuel oil business.
“The insurers have problems with the existing [oil-burning equipment] because they don’t know the work, they don’t know how old the equipment is, they don’t know if the connections are proper,” Koch said. “They are looking for something to give them more confidence.”
The group also is exploring the feasibility of expanding GreenTech beyond technicians to others working in the fuel oil business, such as those selling tanks, and teaching them how to reduce risks. “We are in the midst of talking to educators and colleges on how best to put forward a curriculum that is going to be accepted not only by our industry,” Koch said, “but by regulators and educators.”
Fuel Oil System Education for Consumers
“We found that many consumers didn’t understand their roles and responsibilities to ensure safe operation of not only fuel oil heating, but any type of heating,” Koch said.
Consumer representatives on the Advisory Council suggested COHA and insurers together create consumer education pieces for distribution to oil-burning customers. The content of the messages to consumers was to be discussed in an initial meeting in October.
National Adoption of B139
The Canadian Standards Authority has created B139, pertaining to installation of oil burning equipment. COHA accepted it “as a major step forward in risk reduction,” Koch said, and is recommending that all jurisdictions adopt it. The tank, secondary containment within the tank, and connector pipes are also covered by B139. Newfoundland was the first province to adopt B139, Koch said, and Ontario will be implementing it effective January 2016.
There is a need for consistent data on leaks and spills to help pinpoint their causes “so that we can develop programs to help educate people,” Koch said. “We found the data collected by governments is very limited and doesn’t really give us the answers that we’re looking for.”
It was suggested that a process be put in place that allows the collection of data in one location “so everybody’s working off the same information,” Koch said.
Each province will provide Environment Canada, the federal environmental ministry, with their data, so that insurers, underwriters and the fuel oil industry “can focus on the highest risk in fuel oil escape,” Koch said. Environment Canada has agreed to participate in the implementation group for the effort, Koch said.
Claims groups, which seem to have such data, have historically held it as proprietary, and still do, Koch said. “We need to have them buy into this program. We’re working on a methodology to engage the insurers and the claims people so that we can access that information.”
While jurisdictions typically require that regulators be notified when fuel spills or leaks, “Are [regulators] collecting that information consistently between provinces and what type of information are they collecting?” Koch said. “In many cases we found it was very limited. It was just the address.” The available information often didn’t include the amount that was discharged or how it came to be discharged, Koch said, “and those are the key things that we need to know.”
Eliminate Conflicts of Interest in Spill Remediation
Many insurers retain preferred remediation companies or environmental engineering companies that are usually a subsidiary or even the same company that initially arrives at a scene to define the parameters of a spill or leak and how it’s to be cleaned up, Koch said.
In a court case stemming from a spill nearly ten years ago on a farm in Ontario, Koch said, a judge noted a lack of oversight by the insurance company that was paying for the engineering and remediation. From an estimate of less than $200,000, the cost of remediation climbed “to well over a million dollars,” Koch said. “This is one of the challenges,” he said.
“In our minds there are two options,” Koch said: legislation and regulation to eliminate conflicts and require due diligence by insurers; or court challenges to block conflicts of interest.
The former approach would likely take longer, requiring a political and legislative campaign, Koch noted. Court challenges to every conflict of interest “would put pressure upon the insurers to follow the best process and best cost to fulfill the requirements of remediation on [a] particular property,” Koch said. The aim over the next year is to ensure that “everyone understands the issue,” Koch said.
Reduce Remediation Response Time
The Advisory Council expressed concern about the time it takes to start a cleanup. There have been cases where oil “has sat on the ground for a week before anybody cleaned it up,” Koch said. “This is a very complicated issue,” he said.
“Once a spill happens it really falls upon the insurer and the homeowner to rectify the situation, and then identify other organizations… and subrogate against them for the damages,” Koch said. A problem is that in some cases insurers have a process that was developed for vehicle insurance or other types of insurance and they follow that process, which Koch said entailed sending someone out to investigate the spill, writing a report, and getting it approved by the insurance company. Then the insurer finds a company to do the clean up. “It could take anywhere from two days to two months, depending on the complexity of the spill,” Koch said.
It is widely recognized that “quick remediation processes can reduce the cost of remediation by up to 30%,” Koch said.
The goal is a process that “starts cleanup right away and gets the product stable and not migrating to other parts of the property or into the foundation,” Koch said.
“This one is a challenge because we really have no jurisdiction [regarding] how to clean it up and when to clean it up,” Koch said. “We’re really relying upon engagement by the insurance companies and the claims people to find better ways to start the process of mitigating damage.”
Koch said, “I think everybody agrees if a technician or an oil fuel distributor sees a leak they should be able to mitigate that leak as quickly as possible. But in some jurisdictions in Canada the insurer will not allow anyone to touch that until they have their review process done. It can be very costly.”