INTRODUCTION

The purpose of this document is to establish the third party claims administration policy for the State of Vermont's Petroleum Cleanup Fund (PCF). Included in this document is a description of third party coverage the PCF provides and the parties who are eligible to receive this coverage. This document is established pursuant to 3 V.S.A. § 835 of the Administrative Procedures Act, and replaces the preceding Policies and Procedures Manual for Third Party Claims dated October 9, 1991.

The PCF is authorized under Title 10, Chapter 59 § 1941. The PCF is financed by both a distributor licensing fee and an annual tank assessment fee. The state is authorized to use money from the fund to compensate third parties for bodily injury and property damage resulting from petroleum releases from underground storage tanks. The fund may also pay for investigation and remediation of contaminated sites. Please refer to the document titled, "Procedures for Reimbursement from the Petroleum Cleanup Fund" (see Appendix B), for more information on this issue. This manual is written for third party claims of bodily injury and property damage only. When issues arise that are not specifically addressed by the statute or this manual, the Vermont Fair Claims Practices Regulations may be reviewed during the administration of third-party claims.

CLAIMS PHILOSOPHY

The philosophy underlying the administration of third party claims against the Petroleum Cleanup Fund are as follows:

1. To pay legitimate claims promptly, subject to the availability of funds and fund priorities;

2. To ensure claimants are given a high standard of care and concern consistent with fair and equitable treatment;

3. To give prompt attention to all claims matters in an attempt to reduce unnecessary litigation;

4. To identify and reject fraudulent claims;

5. To keep communications open between all parties; and

6. To follow the claims policies incorporated in this document.

ELIGIBILITY

Under the authorizing legislation and subject to available funding, the PCF is authorized to pay all eligible third party claims that the UST owner/operator or permittee becomes legally obligated to pay (up to $1 million per site):

(1) Which are caused by a release of a petroleum product from a qualifying UST (See Appendix B for information on what USTs qualify for the PCF);

(2) Where uninsured costs are incurred after January 1, 1987 and where claims are made prior to July 1, 1999.

EXCLUSIONS

Under the policies established by this manual, some types of claims are excluded from reimbursement by the fund. These exclusions are listed below. Later sections of the manual discuss how these exclusions may be applied in evaluating a claim.

A. Injury and damages that are insured by the UST owner/operator or permittee which resulted in the claim.

B. Any obligation for which the UST owner/operator or permittee may be held liable under Workers Compensation, unemployment compensation, disability benefits, or similar law.

C. Any liability assumed by the UST owner/operator or permittee under any contract or agreement that the owner/operator or permittee would not have without such contract or agreement.

D. Any Third Party Damages of any employees or any independent contractor of the UST owner/operator or permittee arising out of, or in the scope of, his or her employment by the owner/operator or permittee.

E. Any Third Party Damages arising out of the release of petroleum products from any oil, gas, or similar well, above ground tank or from a UST that is not eligible for coverage under the PCF.

F. Any punitive damages, exemplary damages, multiple compensatory damages, administrative or criminal fines, or penalties imposed upon the UST owner/operator or permittee.

G. Any costs, charges or expenses of the UST owner/operator or permittee for normal or routine operations or maintenance at any site.

H. Third Party Damages claimed by an owner or permittee or by a partner, family member, shareholder, or joint venturer of any UST owner/operator or permittee or by a business enterprise or individual or its agents, employees, assignees or subrogees that wholly or partly owns, leases, operates or manages the eligible site. Also excluded is any former UST owner/operator or permittee who may have been the owner/operator or permittee at the time when the release occurred, and any individual or corporation that leases the property where the release originated after the contamination is found.

I. Any costs, charges, or expenses for the reconditioning or replacement of any petroleum products or any storage tank or pipes or pumps attached thereto at any site.

J. Any Third Party Damages arising out of a violation of, or alleged violation of, Federal or state anti-competition, antitrust, racketeering and corrupt organization, or similar law.

K. Any costs, charges, or expenses for legal services used to prepare, negotiate or litigate a third party claim.

PCF PRIORITIES

All disbursements from the PCF are subject to the availability of funds. The state is not authorized to pay any claims that would result in a deficit to the PCF. In addition, the PCF is obligated to maintain a minimum balance of $1 million in order to support the state's underground storage tank loan program. Therefore, claims will be paid according to the following priorities:

1. Relocation costs;

2. Cleanup costs (covered by other provisions of the fund);

3. Bodily injury claims;

4. Personal property restoration;

5. Business losses;

PCF POLICIES

The following policies provide the basis for reimbursements from the PCF for property damage and bodily injury. All provisions for payment from the PCF are subject to available funding.

Policy on Reimbursement for Relocation Costs

This section covers costs to relocate from a dwelling that has been determined to be uninhabitable by the Department of Environmental Conservation (DEC) or the Department of Health (DOH). In cases when an emergency evacuation is deemed necessary, the DEC should be immediately notified of the evacuation to ensure the relocation costs are covered under this policy. Notification can be made to the Hazardous Materials Hotline at 1-800-641-5005.

1. Short Term Evacuation (less than 30 days)

a. Lodging and Meals Per Diem

1. PCF will reimburse cost of "reasonable" lodging expenses.

2. PCF will reimburse up to $ 30 per day per adult, and up to $ 15 per day per youth (under 13 years old) to cover the increased cost of meals and miscellaneous expenses.

3. PCF will reimburse transportation costs associated with getting children to and from a local school, if needed.

2. Impacted Residence (dwelling)

a. Property taxes -- not a covered expense

b. Telephone and Television (cable/satellite fees) -- not a covered expense

c. Electricity -- Only the electrical costs to operate a remedial system are covered

d. Heating oil use -- not covered, unless home normally heated primarily with wood or coal.

3. Personal Belongings

a. PCF will reimburse the costs to move essential belongings to the temporary quarters, if necessary.

b. PCF will reimburse the costs to have pets boarded, if necessary.

4. Long Term Evacuation (more than 30 days)

a. Lodgings/Meals

1. PCF will reimburse the cost of "reasonable" housing (either long term motel room or apartment or house).

2. If apartment or house, PCF will reimburse the necessary security deposits and utility hook up fees. Security deposits will need to be repaid to the state at the end of the rental period.

3. PCF will not reimburse monthly utility charges for the rental property, but will cover the utility costs of the affected dwelling (see B below).

4. Meals allowance and miscellaneous expenses.

a. apartment, house, or motel with cooking facilities -- none

b. motel or efficiency or apartment with no cooking facilities:

i. up to $ 30 per day per adult for increased food costs

ii. up to $ 15 per day per youth for increased food costs.

5. PCF will reimburse the costs to have pets boarded, if necessary.

b. Residence (dwelling) determined by DEC or DOH to be uninhabitable

1. Property taxes -- paid by owner

2. Telephone -- only monthly service fee is covered

3. Electricity -- fully covered

4. Heating -- fully covered at minimum maintenance temperature

5. Loss of rental income -- fully covered after the first 30 day evacuation period

6. Property insurance --- paid by owner

7. Television --- paid by owner

c. Personal Belongings

1. PCF will reimburse reasonable moving costs.

d. Transportation

1. Will be covered on a case by case basis.

e. Personal Legal Expenses

1. Not covered

f. Use of Residence

1. Residents still have access and short internal use of their homes during the evacuation/remediation stage; however, they cannot receive reimbursement if they choose to relocate back into the affected dwelling.

 Policy on Reimbursement of Property Damage Costs

1. Repair and Replacement

a. PCF will reimburse all reasonable costs associated with cleaning and repairing damaged property, except for costs that are part of the emergency response or site remediation covered by the cleanup provisions of the fund.

b. PCF will reimburse all reasonable costs to provide for replacement when cleaning or repair are not possible, or the cost of cleaning and repair would be greater than the replacement cost. Damages will be assessed on an actual cash value basis.

c. Property value determinations by independent and qualified appraisers will be required for most property damage claims.

d. Loss of use damages are included in the definition of property damage, and will be reimbursed, subject to the other provisions of this manual.

2. Drinking Water Supply

a. PCF will reimburse all reasonable costs associated with the following, if determined by the DEC to be necessary:

1. Closure of a contaminated well

2. Hook-up to a readily available public water supply

3. Development of a new drinking water supply well or other drinking water source approved by DEC.

b. PCF will reimburse all reasonable costs to install an in-home point-of-entry treatment system only in cases where the installation was directed by the DEC or when petroleum contamination is measured in the water supply at concentrations above health advisory levels and the hook-up to a public supply or development of some other new supply (well) is not feasible. PCF will also reimburse all reasonable costs to operate and maintain the system as long as the water supply remains contaminated above health standards or until the DEC determines point-of-entry treatment is no longer needed.

c. PCF may reimburse the costs to purchase bottled water until a permanent alternate supply can be provided.

d. PCF will reimburse claimants for the reasonable cost of testing the water supply as directed by DEC. Reimbursement will cover only tests to identify petroleum or hydrocarbon constituents of petroleum, or for tests necessary to properly operate a water treatment system

e. PCF will not reimburse the costs of any water bills following hook-up to a public supply.

f. PCF may not reimburse the costs to install a new water supply if the contaminated well was installed in violation of any state or local ordinance prohibiting wells.

3. Diminution of Property Values

a. The Diminution of Property Value (DPV) is determined as the difference between the fair market value of the property uncontaminated and the fair market value of the property with contamination present. This is determined using the open market. The property owner must list the property with a real estate agent, and an offer must be made for the property in writing by a potential buyer. The state must agree that the offer is reasonable and represents the fair market value for the contaminated property. Once the sale of the property is completed, the PCF will pay the difference between the uncontaminated appraised market value and the selling price. The DEC will issue a letter of payment to the seller and payment may be expected in 30-60 days.

b. The fair market value of the property will be determined from the report of an independent appraiser selected by the Claimant or the State. PCF will reimburse the cost of this appraisal as long as the property is listed with a real estate agent. If the State or the Claimant disputes the initial appraiser's report, a second appraisal may be performed at the disputing party's expense. If disagreement remains, a third appraiser jointly selected by the State and Claimant will be selected , and whose fees shall be covered by the PCF. Any agreement between two of the three appraisers will constitute an acceptable DPV. If disagreement remains, then the three appraisals will be averaged to determine the acceptable DPV.

c. The DPV will be calculated as of the day that the property ownership has transferred or as of the day that the remediation is judged by the project manager to be stable or complete. If the remediation of the third party's property makes the property "clean" (contamination below established health standards), then no DPV will be made.

d. The DPV will be paid only to the current property owner on record at the time that the contamination was discovered, unless the property owner has assigned the right to recover to a subsequent owner of the property.

e. The DPV will only be paid on those properties on which contamination has been found, and an actual loss of property value has been incurred. No DPV will be paid for a perceived or anticipated loss of property value. No DPV will be paid for loss of property value alleged to have been caused by being in the neighborhood of contamination.

f. A notice of a potential claim for DPV must be filed with the DEC within one year of discovery of contamination.

Policy on Bodily Injury

1. The definition of bodily injury refers to bodily injury, sickness, disease and death.

2. Bodily injury cases are to be handled on a case-by-case basis. Compensation may include:

a. Emergency medical treatment

b. Medical testing

c. Doctors visits

d. Hospitalization

e. Prescriptions

3. Existing insurance company acceptable guidelines on fair and reasonable costs should be followed. The Workers Compensation Fee Schedule may be reviewed to establish fair and reasonable costs.

4. Medical expenses may be reimbursed or if claimant demonstrates an inability to pay, medical expenses can be paid directly by the fund.

5. Medical expenses which may be related to the petroleum releases will be reviewed on a case by case basis and may be covered expenses. All allowable and reasonable medical expenses including doctors fees, diagnostic testing, hospitalization, and emergency medical treatment shall be covered if related to petroleum exposure. Medical expenses may either be paid directly or be reimbursed. (See below, 1.6.3 Policy on Bodily Injury)

6. Excluded Items

a. Compensation may not include:

1. Compensation for fear of sickness or stress of anticipated illness

2. Any damages covered by medical insurance or workers compensation

PROCEDURES FOR SUBMITTING AND REVIEWING A CLAIM

1. SUBMITTAL OF A CLAIM

The following procedures should be followed in submitting of a third party claim against the PCF :

a. Claims must be submitted on the Notice of a Claim form (see Appendix C).

b. Notification of all claims must be made in writing, and should be filed withe the DEC within one year of discovery of contamination.

2. CLAIM REVIEW

The following steps constitute the review of any third party claim (Such review will be completed by either the WMD or a third party administrator contracted by the WMD):

a. Obtain all relevant file information on the release incident. Determine the site manager or Sites Management Section Chief and obtain any report, descriptions, sampling data, or other information related to the release.

b. Review the claim for eligibility with respect to the policies outlined in this manual. Many of the policy guidelines refer to determining eligibility on a case by case basis. Therefore, considerable judgement may be required by the claim adjustor. All decisions on eligibility should be carefully documented. Decisions should be in keeping with the claims philosophy outlined in this manual.

c. Review eligible claim items for proper cost documentation. Invoices, receipts, and canceled checks or credit card receipts must be included for all items. Notify claimant of any documentation that may be lacking.

d. Review costs for reasonableness. This may require outside consultation with medical experts or appraisers.

e. Review the claim against the PCF balance and priorities.

f. If a claim cannot be settled within 30 working days of receipt of the claim, then a letter should be sent to the claimant indicating the reasons that additional time is needed.

CLAIM ADJUSTMENT RECOMMENDATION

The next step in the adjustment process is to prepare a recommendation for payment of the third party claim. A letter shall be prepared by the WMD to be sent to the Claimant which includes the following:

a. The recommendation (whether to reject, accept or partially accept the claim).

b. The amount of payment recommended.

c. A full explanation of the recommendation with reasons for accepting or rejecting any items. All explanations should be based on the policies and procedures in this manual.

After the recommendation has been accepted, the claim will be submitted for payment within 10 working days. The actual time it takes to receive payment of the claim varies, but is typically within 30-60 days.

Appeals of the initial determination of payment of a third party claim must be made in writing to the Director of the Waste Management Division within 60 days of that decision. The Director shall make a final determination regarding the claim. An appeal of the Director's decision must be made to the superior court of the county where the source of the contamination is, pursuant to 10 V.S.A. § 1933. This appeal must be made in writing within 30 days of the Director's decision.

Approved by:

Appendix A

DEFINITIONS

The claim policies outlined in this manual are based on Vermont law and common practice among insurance carriers. Certain terms which are used to describe claims, bodily injury, property damage, and other concepts must be defined so that they can be applied to the administration of third party claims against the PCF. These definitions are given below.

1. Bodily Injury means bodily injury, including sickness, disease, or death sustained by any person. Bodily injury does not include mental anguish.

2. Claim means any statement of potential responsibility or demand for money or services made against the owner or permittee caused or claimed to be caused by a release of a petroleum product from an uninsured underground storage tank (UST).

3. Defense of Claims. The fund may make such investigation and settlement of any Claim as it deems advisable.

4. Property Damage means: (a) physical damage to tangible property including all resulting loss of use of that property; or (b) loss of use of tangible property which is not physically damaged.

5. Third Party Damages means Bodily Injury, Property Damage diminution of property value, and relocation expenses as a result of release of a petroleum product from a UST system that is covered under the PCF.

Appendix B

Procedures for Reimbursement from the Petroleum Cleanup Fund

Appendix C : Forms

Return to Sites Management Section Guidance Documents