Financial responsibility (FR) is a state and federal requirement for underground storage tank (UST) owners and operators to have the fiscal means to handle any corrective action costs and third-party liability claims associated with sudden and non-sudden accidental releases from UST systems. Having FR not only puts the owner or operator in compliance with state and federal regulations, it also provides their business with protection in the event of an accidental release from their UST system.
Federal and state governments and their agencies that own USTs are not required to demonstrate FR if their debts and liabilities are the debts and liabilities of a state or the United States
There are two required coverage amounts: "per occurrence" coverage and "aggregate" coverage. All petroleum marketing firms (e.g. gas stations) must have $1 million available to clean up and pay for any third-party damages resulting from each release. This is the "per occurrence" amount. For non-petroleum marketing firms, the required "per occurrence" amount is based on an average monthly throughput. An average monthly throughput of 10,000 gallons or less requires coverage of $500,000; more than 10,000 gallons requires $1 million of coverage.
The second amount, the annual "aggregate," is a limit or cap on the dollar amount of coverage per year. The number of UST systems owned determines aggregate coverage. The annual aggregate coverage required is $1 million for owners of one to 100 USTs. Owners of more than 100 USTs are required to have $2 million of aggregate coverage.
|Group of UST Owners and Operators
||Per Occurrence Coverage
|GROUP 1: Petroleum marketers with 1,000 or more tanks or nonmarketers with net worth of $20 million or more (for nonmarketers, the occurrence “per occurrence” amount is the same as Group 4-B below)
||$1 million if you have 100 or fewer tanks or $2 million if you have more than 100 tanks|
|GROUP 2: Petroleum marketers with 100-999 tanks|
|GROUP 3: Petroleum marketers with 13-99 tanks|
|GROUP 4-A: Petroleum marketers with 1-12 tanks|
|GROUP 4-B: Nonmarketers with net worth of less than $20 million||$500,000 if throughput is 10,000 gallons monthly or less or
$1 million if throughput is more than 10,000 gallons monthly|
|GROUP 4-C: Local governments
(including Indian tribes not part of Group 5)|
|GROUP 5: Indian tribes owning USTs on Indian lands
(USTs must be in compliance with UST technical requirements)|
Scope of Coverage
The full scope of required FR coverage includes different types of both obligations and releases. The owner or operator needs coverage for both on-site and off-site corrective action as well as third-party compensation.
|Full Scope of Finanical Responsibility Coverage
|Type of Obligation|
|Type of Release||Corrective Action (on-site & off-site)
||Third-Party Compensation (on-site & off-site)
|Bodily Injury||Property Damaage|
Financial mechanisms available to owners and operators include commercial liability insurance/risk retention group, self-insurance, guarantee, letter of credit, surety bond, trusts and certificates of deposit. Local government entities may also use a government fund, bond rating test, government guarantee or government financial test. Owners and operators may use a combination of mechanisms to meet FR obligations. The chart below shows that the most common financial mechanism is UST pollution liability insurance.
Your insurance agent can obtain UST pollution liability insurance for you. Note that property insurance policies typically exclude underground storage tanks. Please call your insurance agent or contact ADEQ for more information.
For a list of known insurance providers maintained by the US Environmental Protection Agency, please click here.
Owners/operators must submit documentation demonstrating FR compliance to ADEQ on a yearly basis. Either the owner or the operator may provide FR coverage – but both are responsible if FR requirements are not in compliance. No matter which mechanism is used, this documentation must include a schedule of covered tanks, and a Certification of Financial Responsibility.
If your mechanism of choice for FR compliance is UST pollution liability insurance, note that ACORDS, Declarations and Binders are NOT acceptable proof of FR compliance documentation. An Endorsement or Certificate of Insurance (whichever is applicable) must be submitted and worded as specified in the regulations. Sample Certificates of Insurance from different insurance companies can be viewed at the following links:
Disclaimer: The above sample documents are provided for general information purposes only. These documents are provided as a convenience to ADEQ site visitors and the inclusion of these particular samples does not imply approval or endorsement of the particular insurance carrier.
Failure to submit and/or maintain documentation of FR compliance may result in an enforcement action. Enforcement may include the ADEQ Director issuing a stop use order and affixing a tag to stop operation of the UST, civil penalties of up to $25,000 per day and/or injunctive relief. Consult the Arizona Revised Statues for further information.
For Further Information