Includes guidance on occurrence (see Compendium's Question 1), tangible net worth (see Compendium's Question 7), and value of a trust fund funded by marketable securities (see Compendium's Question 9).
Explains unacceptability of voluntary tank removal and voluntary tank site investigation exclusions (see Compendium's Question 10), self-insured retentions (SIRs) (see Compendium's Question 11), and loading and unloading exclusions (see Compendium's Question 12). Such unacceptable provisions in a policy are inconsistent with Florida and adopted federal regulations.
This guidance is applicable to both USTs and ASTs.
Guide to Tank Insurance - prepared by Association of State and Territorial Solid Waste Management Officials (ASTSWMO) [see "View Publication"]
Provider Companies - Self-nominated list of companies providing financial assurance for Solid Waste facilities in Florida includes several companies offering standby trust fund agreements. This may be useful to Storage Tank owners or operators.
Note: Nothing herein is intended to modify DEP rules or formal guidance documents. These FAQs are subject to change and are regularly being corrected and updated.
Why do we have financial responsibility (FR) for storage tanks?
Financial responsibility requirements ensure that owners and operators of regulated petroleum storage tanks have the financial resources to pay for the cost of corrective action and compensating third parties for bodily injury and property damage that might result from a discharge from a petroleum storage tank system. [Reference: Rules 62-761.420 and 62-762.421, Florida Administrative Code (F.A.C.)]
Storage Tank regulations regulate Underground (UST) and Aboveground (AST) tanks that store regulated substances, but only:
USTs that have a capacity greater than 110 gallons [Rule 62-761.100(1), F.A.C.]
ASTs that have a capacity greater than 550 gallons [Rule 62-762.101(1), F.A.C.]
There is a caveat for any facility with a regulated aboveground storage tank: the facility capacity will include all tanks with petroleum-based products, including those ASTs with a 550 gallon capacity or less.
There are additional exemptions! Following is a very abbreviated (and sometimes generalized) list of petroleum storage tanks that do not require financial responsibility (FR). Complete lists and most details are in Rules 62-761.300(2) and 62-762.301(2), F.A.C. (Rule paragraph references are included with each exemption listed [e.g., "(e)" references Rules 62-761.300(2)(e) and 62-762.301(2)(e), F.A.C.].) Definitions in Rules 62-761.200 and 62-762.201, F.A.C., further characterize some exemptions.
On-site heating oil tanks with a capacity of less than 30,000 gallons (see specifics) (e)
When is financial responsibility (FR) required for a new tank or facility?
DEP rules require financial responsibility (FR) for regulated petroleum storage tanks. A tank is identified as a petroleum storage tank with registration. In practice, DEP requires FR at the time of first receiving product. FR is required to be maintained until the storage tank system is properly closed in accordance with DEP rules. [References: Rules 62-761.420(2), and 62-762.421(2), F.A.C.] [return to FAQ list]
Do Out-of-Service tanks require Financial Assurance?
Most insurance companies will not cover out-of-service tanks. Before a tank is registered out-of-service, the owner or operator needs to make sure the tank will continue to be covered by an FA mechanism. If the current provider will not cover the tank, another form of financial responsibility needs to be found.
The owner or operator who demonstrates FR must be one (or more) of the following 'persons' [Reference: Rules 62-761.420(2) and 62-762.421(2), F.A.C.]:
A guarantor (such as a parent company) can demonstrate financial responsibility using a Guarantee. When completing Form 62-761.900(3) Part B, the owner or operator (from the list above) is identified, and the guarantor must complete and pass the financial test (Part A); the owner or operator must obtain a standby trust fund agreement (Part H).
Variations on this guidance are possible for governmental agency owners or operators, allowing for the use of other form parts.
Another person (such as a mortgage holder) wanting to provide the required financial responsibility in the form of insurance must have the policy identify one of the above identified 'persons' (facility owner, etc.) as an insured (or as an 'additional named insured'); the Certificate of Insurance [Form 62-761.900(3) Part D] will identify (only) the owner or operator as being the Insured.
The owner or operator identified on the FR documentation must also complete the Certification of Financial Responsibility (C.F.R. - Part P).
The C.F.R. does not have to be signed by the same individual who signs other FR documentation.
What must the financial assurance (FA) document cover?
Financial assurance documentation for both USTs and ASTs must cover both “corrective action” and “compensating third parties … caused by accidental discharges”. Coverage may be divided between multiple mechanisms. [Reference: 40 CFR 280.93(a) and (d)] [return to FAQ list]
Where do I send financial assurance (FA) documentation?
An owner or operator must maintain FA mechanisms and required supporting documentation at the facility site or at the business office. If not kept at the facility, they shall be made available at the facility or another agreed upon location upon five business days notice by a department or county inspector. The original should never be sent to Tallahassee for filing. Send a copy if you are requesting guidance.
You must send a copy of your financial documentation to DEP (or Inspectors) under certain situations, per 40 CFR 280.110:
When there is an identified release from a tank required to be reported
When the provider company goes bankrupt or otherwise loses their authority to issue the FA mechanism and the owner or operator fails to obtain alternate coverage with 30 days of receiving notice of the event
What is "gap insurance" and "retroactive coverage"?
The term “gap insurance” is informally used to describe coverage put in place to cover the gap from when one insurance policy expires to when the next insurance policy period of coverage starts.
The Tanks Financial Responsibility program requires there to have been continuous coverage from when tanks are registered or from when an owner or operator begins their responsibility. [Reference: Rules 62-761.420(2) and 62-762.421(2), F.A.C.]
Our informal usage should not to be confused with guarantee asset protection (GAP) automobile coverage.
The insurance industry uses the term "retroactive coverage" to cover some amount of time before the current period of coverage and can be purchased to meet the 'continuous coverage' requirement or to otherwise protect an owner or operator from potential liability.
The requirements for retroactive coverage are more lenient than for current period coverage - for example, it may include “Self Insured Retention” or other exemptions (making the owner or operator relatively more liable for discharges deemed to have happened during the retroactive period).
Financial assurance instruments other than Insurance (i.e., bonds, financial tests, etc.) do not require "retroactive coverage" when there is a gap between instrument 'periods of coverage' (e.g., if the insurance policy expired on June 30 and letter of credit became effective on August 1). A financial test (self-insurance), for example, puts 'all responsibility' onto the firm, irrespective of when anybody determines a discharge occurred, so in essence, any gap 'disappears.' There may, however, be enforcement consequences for there having been a gap in financial assurance coverage. [return to FAQ list]
Do some insurance policies contain confidential information and therefore do not need to be shown to inspectors?
While some policies may contain information deemed to be confidential in nature, no portion of an insurance policy may be kept from a Department inspector when that insurance policy is used to demonstrate financial responsibility.
The adopted federal code requires the owner or operator using insurance to meet their financial responsibility requirements to “maintain a copy of the signed insurance policy or risk retention group coverage policy, with the endorsement [Form 62-761.900(3) Part C] or certificate of insurance [Form 62-761.900(3) Part D] and any amendments to the agreements.” Without showing ‘the policy that is with the certificate of insurance’ to the Department inspector, they are not demonstrating they are maintained together. [reference: 40 CFR 280.111(7)]
The certificate of insurance and endorsement allow the following [Certification paragraph 2.c.]: “Whenever requested by the Florida Department of Environmental Protection (FDEP) Secretary or the Secretary's designee ("designee"), Insurer agrees to furnish, to the FDEP Secretary or designee, a signed duplicate original of the policy and all endorsements.” Clearly the Department has the right to view the entire document.
Under the Public Records Act, DEP is responsible for protecting information defined as confidential or otherwise prohibited from public inspection or copying. [return to FAQ list]
Can I continue to use my existing "Code of Federal Regulation (40 CFR 280) wording" mechanisms?
Mechanisms that remain current and were issued before January 11, 2017 [before Rules 62-761 and 62-762 required the use of Form 62-761.900(3) parts] do not need to be replaced, unless mistakes are identified.
An 'evergreen' financial assurance instrument issued prior to January 2017 but only recently found to have errors (such as not explicitly including all required coverage - for example, using "and/or" language) must be replaced with a current part of Form 62-761.900(3).
Amendments to acceptable 'old' mechanisms can update the facility list, etc.
Mechanisms with expiration dates (that don't automatically renew) will need to be replaced with appropriate parts of Form 62-761.900(3) when they are replaced or renewed.
Mechanisms signed after October 13, 2019 must use forms with effective date "October 2019". [return to FAQ list]
What are the Financial Test and related instruments "Period of Coverage" dates?
Period of Coverage Calculator (Excel) for financial test (Part A or Part J) and government fund (Part O). See "Local Government Bond Rating Test (Part I)" below for the period of coverage.
A financial test (FT - Part A) must be completed during the first 120 days of the fiscal year, so the period of coverage (entered on the Certificate of Financial Responsibility - Part P - C.F.R.) will be the current fiscal year plus 120 days (e.g., 1/1/2020 – 4/30/2021). The audited year ended the day before the period of coverage begins.
An amended or revised FT (e.g., due to the addition of a facility) will have the same period of coverage as the original FT. (Supporting documentation will not change.)
Data on the FT includes information derived from the previous fiscal year's audited financial statements.
Local government completing a financial test (either Part A or Part J), the period of coverage is the current fiscal year plus 180 days (e.g., 10/1/2019 – 3/29/2021).
Local Government Fund (Part O), the period of coverage is also the current fiscal year plus 180 days. (For this instrument, no data from audited statements is required.)
Local Government Bond Rating Test (Part I), the period of coverage is from the published date of the bond rating to the end of the month, 12 months later (e.g., 9/15/20 - 9/30/2021).
For Guarantees (Parts B, L and N), the C.F.R. period of coverage matches the associated instrument (FT, etc.) period of coverage.
Does continuing FR coverage represent a ‘stacking’ obligation where the first year’s coverage is (for example) $1 million, the second year’s coverage is $2 million and the third year’s coverage is $3 million (etc.)?
No. Any incident (“occurrence”) can cause the FR issuer to pay up to the “per occurrence” amount. Anything beyond that is payable by the owner/operator. Similarly, if there were multiple occurrences during a (fiscal) year, up to the “annual aggregate amount” would be payable by the issuer of the FR instrument. During year ‘two’, only new occurrences would be eligible for drawing on the FR instrument.
There could be $3 million drawn in three years on a bond with a multi-year life and a $1 million annual aggregate amount, but only $1 million if the first two years had no occurrences. [This discussion does not deal with the nuances of payments due associated with occurrences discovered at the end of a fiscal year.]
An occurrence can be sudden (ruptured seam on an aboveground tank) or nonsudden (pinhole in an underground tank that did not get noticed for several years). [return to FAQ list]
Why is "and/or" wording not allowed?
The phrase "and/or" is frequently legally ambiguous. (Who decides if it is "and" or "or", and when do they get to decide it?)
Several blanks on the form parts have directions to enter "Phrase A and/or Phrase B". Drop down boxes make clear that the term "and/or" is never to be entered into the blank. With a two-phrase option, the choices will be
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