Financial Assurance Types
Different types of facilities must provide different types of financial assurance. There are four types of financial assurance: closure clean-up, third-party liability, post-closure safety, and any corrective action. The specific activities at a facility will determine the type(s) of financial assurance that facility needs to have.
Financial Assurance for Closure
This type of assurance covers the costs of closing down a facility, removing any waste that’s left behind, and cleaning the surfaces and equipment. This is the most common type of financial assurance. If a company is required to have a closure plan, it needs this type of financial assurance. There must be enough financial assurance to cover a facility’s closure cost estimate.
Figuring out how much financial assurance a company needs can be tricky. Once a company develops a Closure Cost Estimate, Ecology will need to approve that estimate. Businesses can hire someone to develop this estimate or can use the free Excel spreadsheet below. Make sure to include every activity and cost associated with closing the facility and taking care of everything left behind. The most important aspect of preparing a cost estimate is to remember that the estimate must be a “third-party” estimate. That means businesses must include costs of how much a separate company would charge to clean up the site. Although a company could possibly clean up their own site for less, the cost estimate needs to include the higher prices. This is because financial assurance assumes the waste-handling company has gone out of business and isn’t around to do the cleanup work. Financial Assurance for Closure needs to be enough to allow Ecology to hire someone else to do the work.
Financial Assurance for Third-party Liability
Third-party liability financial assurance is a set amount of coverage that will pay neighbors and visitors in case there is an accident at a facility. This type of financial assurance will compensate those people if they are injured of if their property is damaged. Third-party liability financial assurance might be needed if there is a fire at a facility or if an underground storage tank leaks and contaminates the soil or well water. Facilities going through post-closure monitoring or a corrective action cleanup aren’t required to have third-party liability coverage. Only active facilities are required to have this type of financial assurance.
Financial Assurance for Post-closure
Post-closure Financial Assurance covers the costs of maintaining a closed facility and any required monitoring. If a facility closed and left waste behind (for example, in a landfill), it will need post-closure financial assurance. Only companies required to have a post-closure plan or permit need this type of financial assurance. It is not very common. A company that closes a facility and doesn’t leave any waste or contamination behind shouldn’t need post-closure financial assurance. Those who need to provide post-closure financial assurance will need to cover all the estimated costs for all future work covered by the post-closure permit, even if the facility has not closed yet.
Financial Assurance for Corrective Action
Financial Assurance for Corrective Action covers the costs of performing cleanup work and any other work a corrective action order might require you to do. If your facility is not in corrective action, you do not need this type of financial assurance. If a facility is required to have financial assurance for corrective action, the company must cover all the work required by the order, including items like site security, testing, and construction costs.
The Department of Ecology is currently working on developing more Web-based forms to help you prepare financial assurance documents. Until they are available, email us, and we can send a Microsoft Word document to fill in. We also can assist with all forms.
Whether for a business owner who needs financial assurance, an insurance agent who represents companies that provide financial assurance, or just an interested private citizen, we are happy to explain financial assurance. To know more about financial assurance email Kimberly Goetz, Ecology’s Financial Assurance Officer, or call her at (360) 407-6754.
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