Insurance companies exclude liability for home fuel oil tanks, so homeowners are left on the hook for remediation.

By Brenda Flanagan

Correspondent

This is part two of a three-part series delving into the issue of oil and gasoline contamination from leaking underground storage tanks and the impact on homeowners and the environment. Watch part one and part three.



It’s caked in clay, but looks solid enough as the backhoe gently hoists Joan Fitzgerald’s 500-gallon fuel oil tank out of the ground and into the air and deposits it on her front lawn in Clifton. But back in the excavated hole, dark residue stains the dirt and the odor of petroleum is heavy above the pit.

“I can smell it,” she said.

Environmental consultant Steve Rich chops at the clay. Underneath holes appear in the 66-year-old steel. Daylight shines through some that are as big as dimes.

“I think, unfortunately, quite a bit of oil might have come out,” Rich said.

“I don’t know if I can talk to you right now. I’m upset. I’ve been upset all week, and now this just puts the icing on the cake,” Fitzgerald said.

Her tank is only one of an estimated 100,000 fuel oil storage tanks buried underground across New Jersey. They range in size from a couple hundred gallons to monsters that hold thousands of gallons.

Building inspector Earl Karlen says he sees things like this quite a bit. “Maybe 50 percent of the old tanks — they do have holes, they do leak. It had been in the ground a long time, that’s why.”

Serious cases, where plumes of contamination ride groundwater channels far beyond the tank pits, require extreme excavation.

“It was pretty bad, as you can see,” said Ken Lombardo, of Lombardo Environmental. “The house had to be put on piles and beams to remediate the soil.”

He figures cleanup will run $200,000. Insurance might cover half. The DEP is notified whenever a critical level of contamination is detected. They get a technical report when it’s remediated. Homeowners then get a letter certifying that the cleanup is complete. They can’t sell the property without it, he says, because banks won’t offer mortgages on homes with underground oil tanks.

The grant money New Jersey set aside to help compensate homeowners for fuel oil tank removal can’t keep up with demand. There’s a waiting list with 1,700 names and the wait is four years long.

“Some are waiting it out,” Rich said. “Some are walking away from their homes. They walk away from their homes. They just don’t have the equity in the property to ultimately clean or pay for remediation and get it cleaned up.”

“They’re really like the Wild West. You know, you just have these tanks out there that invariably at some point in time that are going to leak,” said environmental attorney Stu Lieberman.

Lieberman points to New Jersey’s 2005 Fuel Oil Tank Exclusion Policy. It lets insurers opt out of paying for damages from tank removal unless homeowners can prove that oil leaked before 2005.

“It’s a sin,” he said. “It’s really a crime that the Division of Banking and Insurance allowed the insurance companies in New Jersey to stop covering these things.”

“The upshot is that there are many homeowners that don’t have coverage, and don’t know that they don’t have coverage,” Executive Vice President of the Fuel Merchants Association of New Jersey Eric DeGesero said.

New Jersey’s Fuel Merchants Association questions whether the lack of DEP oversight on oil tank removals is driving up costs — especially if an insurer’s picking up part of the bill to fix those oil leaks that occurred more than a decade ago.

“The costs just seem to be a lot more in the insurance world than they might otherwise need to be,” DeGesero said.

“The cost that they sometimes incur for these remediations, it’s really a market driven process. That’s why the costs become so extensive in some cases,” said Kenneth Kloo, NJ DEP site remediation project director.

The DEP says that regulations permit industrial cleanups to leave behind small amounts of contaminants in the soil. That isn’t the case for home sites, where banks and buyers demand much more stringent remediation standards.

“There’s no ability to obtain a permit to leave any contamination behind,” Kloo said.

To help save cleanup costs, the DEP’s now considering a controversial fix: to relax some cleanup regulations for homeowner tanks of less than 2,000 gallons. Meanwhile, Senator Jennifer Beck is sponsoring legislation that would require insurance companies to start offering fuel oil tank liability policies to homeowners, again.

“If they don’t want it they have to sign and certify a letter back to the insurer that they don’t want it,” she said. “Otherwise the homeowners’ insurance company must provide it automatically.”

“Homeowners insurance was intended to be there for the structure and for your belongings inside. It wasn’t there to be a hazardous waste plan,” Christopher Stark from the Insurance Council of NJ said.

The insurance lobby says those policy changes and oil tank exclusions were very clear, and that insurers do not want to walk it all back a decade later.

“At the heart of this it’s an environmental issue,” said Stark. “It’s an issue of maintenance, it’s an issue of warranty and it’s an issue of making sure that you’ve replaced these tanks.”

Back in Clifton, Fitzgerald just heard that cleanup will cost $75,000 to remove 125 tons of contaminated dirt. However, she does say that she unwittingly made a mistake by converting to natural gas heat before she removed the oil tank — and that voided her insurance policy.

She says she doesn’t think State Farm’s going to help her pay for it? “I just don’t think they will,” she said.

State Farm told NJTV News that they’re actively working with Fitzgerald on her claim. Across New Jersey underground storage tanks and contaminated soil from old gas stations and dry cleaners lurk underground. You might be living next to one and not even know it.

This story is part of Dirty Little Secrets, a series investigating New Jersey’s toxic legacy. Participating news partners include New Jersey Public Radio/WNYC, WHYY, NJTV, NJ Spotlight, Jersey Shore Hurricane News, WBGO, New Brunswick Today and the Rutgers Department of Journalism and Media Studies. The collaboration is facilitated by The Center for Investigative Reporting, with help from the Center for Cooperative Media at Montclair State.



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