Liability Requirements

Section 725 Section 725.247  Liability Requirements a)         Coverage for Sudden Accidental Occurrences.  An owner or operator of a hazardous waste treatment, storage, or disposal facility, or a group of such facilities, must demonstrate financial responsibility for bodily injury and property damage to third parties caused by sudden accidental occurrences arising from operations of the facility or group of facilities.  The owner or operator must have and maintain liability coverage for sudden accidental occurrences in the amount of at least $1 million per occurrence with an annual aggregate of at least $2 million, exclusive of legal defense costs.  This liability coverage may be demonstrated, as specified in subsections (a)(1) through (a)(6): 1)         An owner or operator may demonstrate the required liability coverage by having liability insurance, as specified in this subsection (a)(1). A)        Each insurance policy must be amended by attachment of the Hazardous Waste Facility Liability Endorsement or evidenced by a Certificate of Liability Insurance.  The wording of the endorsement and of the certificate of insurance must be as specified in 35 Ill. Adm. Code 724.251.  The owner or operator must submit a signed duplicate original of the endorsement or the certificate of insurance to the Agency.  If requested by the Agency, the owner or operator must provide a signed duplicate original of the insurance policy. B)        Each insurance policy must be issued by an insurer that is licensed by the Illinois Department of Financial and Professional Regulation, Division of Insurance. 2)         An owner or operator may meet the requirements of this Section by passing a financial test or using the guarantee for liability coverage, as specified in subsections (f) and (g). 3)         An owner or operator may meet the requirements of this Section by obtaining a letter of credit for liability coverage, as specified in subsection (h). 4)         An owner or operator may meet the requirements of this Section by obtaining a surety bond for liability coverage, as specified in subsection (i). 5)         An owner or operator may meet the requirements of this Section by obtaining a trust fund for liability coverage, as specified in subsection (j). 6)         An owner or operator may demonstrate the required liability coverage through the use of combinations of insurance, financial test, guarantee, letter of credit, surety bond, and trust fund, except that the owner or operator may not combine a financial test covering part of the liability coverage requirement with a guarantee unless the financial statement of the owner or operator is not consolidated with the financial statement of the guarantor.  The amounts of coverage demonstrated must total at least the minimum amounts required by this Section. If the owner or operator demonstrates the required coverage through the use of a combination of financial assurances pursuant to this subsection (a)(6), the owner or operator must specify at least one such assurance as "primary" coverage, and must specify other such assurance as "excess" coverage. 7)         An owner or operator must notify the Agency within 30 days whenever one of the following occurs: A)        A claim results in a reduction in the amount of financial assurance for liability coverage provided by a financial instrument authorized in subsections (a)(1) through (a)(6); B)        A Certification of Valid Claim for bodily injury or property damages caused by sudden or non-sudden accidental occurrence arising from the operation of a hazardous waste treatment, storage, or disposal facility is entered between the owner or operator and third-party claimant for liability coverage pursuant to subsections (a)(1) through (a)(6); or C)        A final court order establishing a judgment for bodily injury or property damage caused by a sudden or non-sudden accidental occurrence arising from the operation of a hazardous waste treatment, storage, or disposal facility is issued against the owner or operator or an instrument that is providing financial assurance for liability coverage pursuant to subsections (a)(1) through (a)(6). b)         Coverage for Nonsudden Accidental Occurrences.  An owner or operator of a surface impoundment, landfill, or land treatment facility that is used to manage hazardous waste, or a group of such facilities, must demonstrate financial responsibility for bodily injury and property damage to third parties caused by nonsudden accidental occurrences arising from operations of the facility or group of facilities.  The owner or operator must have and maintain liability coverage for nonsudden accidental occurrences in the amount of at least $3 million per occurrence with an annual aggregate of at least $6 million, exclusive of legal defense costs.  An owner or operator meeting the requirements of this Section may combine the required per-occurrence coverage levels for sudden and nonsudden accidental occurrences into a single per-occurrence level, and combine the required annual aggregate coverage levels for sudden and nonsudden accidental occurrences into a single annual aggregate level.  An owner or operator that combines coverage levels for sudden and nonsudden accidental occurrences must maintain liability coverage in the amount of at least $4 million per occurrence and $8 million annual aggregate.  This liability coverage may be demonstrated, as specified in subsections (b)(1) through (b)(6): 1)         An owner or operator may demonstrate the required liability coverage by having liability insurance, as specified in this subsection (b)(1). A)        Each insurance policy must be amended by attachment of the Hazardous Waste Facility Liability Endorsement or evidenced by a Certificate of Liability Insurance.  The wording of the endorsement must be as specified in 35 Ill. Adm. Code 724.251.  The wording of the certificate of insurance must be as specified in 35 Ill. Adm. Code 724.251.  The owner or operator must submit a signed duplicate original of the endorsement or the certificate of insurance to the Agency.  If requested by the Agency, the owner or operator must provide a signed duplicate original of the insurance policy. B)        Each insurance policy must be issued by an insurer that is licensed by the Illinois Department of Financial and Professional Regulation, Division of Insurance. 2)         An owner or operator may meet the requirements of this Section by passing a financial test or using the guarantee for liability coverage, as specified in subsections (f) and (g). 3)         An owner or operator may meet the requirements of this Section by obtaining a letter of credit for liability coverage, as specified in subsection (h). 4)         An owner or operator may meet the requirements of this Section by obtaining a surety bond for liability coverage, as specified in subsection (i). 5)         An owner or operator may meet the requirements of this Section by obtaining a trust fund for liability coverage, as specified in subsection (j). 6)         An owner or operator may demonstrate the required liability coverage through the use of combinations of insurance, financial test, guarantee, letter of credit, surety bond, and trust fund, except that the owner or operator may not combine a financial test covering part of the liability coverage requirement with a guarantee unless the financial statement of the owner or operator is not consolidated with the financial statement of the guarantor.  The amounts of coverage demonstrated must total at least the minimum amounts required by this Section.  If the owner or operator demonstrates the required coverage through the use of a combination of financial assurances pursuant to this subsection (b)(6), the owner or operator must specify at least one such assurance as "primary" coverage, and must specify other such assurance as "excess" coverage. 7)         An owner or operator must notify the Agency within 30 days whenever one of the following occurs: A)        A claim results in a reduction in the amount of financial assurance for liability coverage provided by a financial instrument authorized in subsections (b)(1) through (b)(6); B)        A Certification of Valid Claim for bodily injury or property damages caused by sudden or non-sudden accidental occurrence arising from the operation of a hazardous waste treatment, storage, or disposal facility is entered between the owner or operator and third-party claimant for liability coverage pursuant to subsections (b)(1) through (b)(6); or C)        A final court order establishing a judgment for bodily injury or property damage caused by a sudden or non-sudden accidental occurrence arising from the operation of a hazardous waste treatment, storage, or disposal facility is issued against the owner or operator or an instrument that is providing financial assurance for liability coverage pursuant to subsections (b)(1) through (b)(6). c)         Request for Adjusted Level of Required Liability Coverage.  If an owner or operator demonstrates to the Agency that the levels of financial responsibility required by subsection (a) or (b) are not consistent with the degree and duration of risk associated with treatment, storage, or disposal at the facility or group of facilities, the owner or operator may obtain an adjusted level of required liability coverage from the Agency.  The request for an adjusted level of required liability coverage must be submitted in writing to the Agency.  If granted, the Agency's action must take the form of an adjusted level of required liability coverage, such level to be based on the Agency assessment of the degree and duration of risk associated with the ownership or operation of the facility or group of facilities.  The Agency may require an owner or operator that requests an adjusted level of required liability coverage to provide such technical and engineering information as is necessary to determine a level of financial responsibility other than that required by subsection (a) or (b).  The Agency must process any request for an adjusted level of required liability coverage as if it were a permit modification request pursuant to 35 Ill. Adm. Code 703.271(e)(3) and 705.128.  Notwithstanding any other provision, the Agency must hold a public hearing whenever it finds, on the basis of requests, a significant degree of public interest in a tentative decision to grant an adjusted level of required liability insurance.  The Agency may also hold a public hearing at its discretion whenever such a hearing might clarify one or more issues involved in the tentative decision. d)         Adjustments by the Agency.  If the Agency determines that the levels of financial responsibility required by subsection (a) or (b) are not consistent with the degree and duration of risk associated with treatment, storage, or disposal at the facility or group of facilities, the Agency must adjust the level of financial responsibility required pursuant to subsection (a) or (b) as may be necessary to adequately protect human health and the environment.  This adjusted level must be based on the Agency's assessment of the degree and duration of risk associated with the ownership or operation of the facility or group of facilities.  In addition, if the Agency determines that there is a significant risk to human health and the environment from non-sudden accidental occurrences resulting from the operations of a facility that is not a surface impoundment, landfill or land treatment facility, the Agency may require that an owner or operator of the facility comply with subsection (b).  An owner or operator must furnish to the Agency, within a time specified by the Agency in the request, which must not be less than 30 days, any information that the Agency requests to determine whether cause exists for such adjustments of level or type of coverage.  The Agency must process any request for an adjusted level of required liability coverage as if it were a permit modification request pursuant to 35 Ill. Adm. Code 703.271(e)(3) and 705.128.  Notwithstanding any other provision, the Agency must hold a public hearing whenever it finds, on the basis of requests, a significant degree of public interest in a tentative decision to grant an adjusted level of required liability insurance.  The Agency may also hold a public hearing at its discretion whenever such a hearing might clarify one or more issues involved in the tentative decision. e)         Period of Coverage.  Within 60 days after receiving certifications from the owner or operator and a qualified Professional Engineer that final closure has been completed in accordance with the approved closure plan, the Agency must notify the owner or operator in writing that the owner or operator is no longer required by this Section to maintain liability coverage for that facility, unless the Agency determines that closure has not been in accordance with the approved closure plan. f)         Financial Test for Liability Coverage 1)         An owner or operator may satisfy the requirements of this Section by demonstrating that the owner or operator passes a financial test, as specified in this subsection (f)(1).  To pass this test the owner or operator must meet the criteria of subsection (f)(1)(A) or (f)(1)(B): A)        The owner or operator must have each of the following: i)          Net working capital and tangible net worth each at least six times the amount of liability coverage to be demonstrated by this test; ii)         Tangible net worth of at least $10 million; and iii)        Assets in the United States amounting to either:  at least 90 percent of total assets; or at least six times the amount of liability coverage to be demonstrated by this test. B)        The owner or operator must have each of the following: i)          A current rating for the owner or operator's most recent bond issuance of AAA, AA, A, or BBB, as issued by Standard and Poor's, or Aaa, Aa, A, or Baa, as issued by Moody's; ii)         Tangible net worth of at least $10 million; iii)        Tangible net worth at least six times the amount of liability coverage to be demonstrated by this test; and iv)        Assets in the United States amounting to either of the following:  at least 90 percent of total assets or at least six times the amount of liability coverage to be demonstrated by this test. 2)         The phrase "amount of liability coverage", as used in subsection (f)(1), refers to the annual aggregate amounts for which coverage is required pursuant to subsections (a) and (b). 3)         To demonstrate that the owner or operator meets this test, the owner or operator must submit each of the following three items to the Agency: A)        A letter signed by the owner's or operator's chief financial officer and worded as specified in 35 Ill. Adm. Code 724.251.  If an owner or operator is using the financial test to demonstrate both assurance for closure or post-closure care, as specified by 35 Ill. Adm. Code 724.243(f) and 724.245(f), or by Sections 725.243(e) and 725.245(e), and liability coverage, it must submit the letter specified in 35 Ill. Adm. Code 724.251 to cover both forms of financial responsibility; a separate letter, as specified in 35 Ill. Adm. Code 724.251 is not required. B)        A copy of the independent certified public accountant's report on examination of the owner's or operator's financial statements for the latest completed fiscal year. C)        A special report from the owner's or operator's independent certified public accountant to the owner or operator stating as follows: i)          That the accountant has compared the data that the letter from the chief financial officer specifies as having been derived from the independently audited, year-end financial statements for the latest fiscal year with the amounts in such financial statements; and ii)         In connection with that procedure, that no matters came to the accountant's attention that caused the accountant to believe that the specified data should be adjusted. 5)         After the initial submission of items specified in subsection (f)(3), the owner or operator must send updated information to the Agency within 90 days after the close of each succeeding fiscal year.  This information must consist of all three items specified in subsection (f)(3). 6)         If the owner or operator no longer meets the requirements of subsection (f)(1), the owner or operator must obtain insurance, a letter of credit, a surety bond, a trust fund, or a guarantee for the entire amount of required liability coverage, as specified in this Section.  Evidence of insurance must be submitted to the Agency within 90 days after the end of the fiscal year for which the year-end financial data show that the owner or operator no longer meets the test requirements. 7)         The Agency may disallow use of this test on the basis of qualifications in the opinion expressed by the independent certified public accountant in the accountant's report on examination of the owner's or operator's financial statements (see subsection (f)(3)(B)).  An adverse opinion or a disclaimer of opinion is cause for disallowance.  The Agency must evaluate other qualifications on an individual basis.  The owner or operator must provide evidence of insurance for the entire amount of required liability coverage, as specified in this Section, within 30 days after notification of disallowance. g)         Guarantee for Liability Coverage 1)         Subject to subsection (g)(2), an owner or operator may meet the requirements of this Section by obtaining a written guarantee, referred to as a "guarantee".  The guarantor must be the direct or higher-tier parent corporation of the owner or operator, a firm whose parent corporation is also the parent corporation of the owner or operator, or a firm with a "substantial business relationship" with the owner or operator.  The guarantor must meet the requirements for owners and operators in subsections (f)(1) through (f)(6).  The wording of the guarantee must be as specified in 35 Ill. Adm. Code 724.251.  A certified copy of the guarantee must accompany the items sent to the Agency as specified in subsection (f)(3).  One of these items must be the letter from the guarantor's chief financial officer.  If the guarantor's parent corporation is also the parent corporation of the owner or operator, this letter must describe the value received in consideration of the guarantee.  If the guarantor is a firm with a "substantial business relationship" with the owner or operator, this letter must describe this "substantial business relationship" and the value received in consideration of the guarantee.  The terms of the guarantee must provide as follows: A)        If the owner or operator fails to satisfy a judgment based on a determination of liability for bodily injury or property damage to third parties caused by sudden or nonsudden accidental occurrences (or both as the case may be), arising from the operation of facilities covered by this guarantee, or fails to pay an amount agreed to in settlement of claims arising from or alleged to arise from such injury or damage, the guarantor will do so up to the limits of coverage. B)        The guarantee remains in force unless the guarantor sends notice of cancellation by certified mail to the owner or operator and to the Agency.  The guarantee must not be terminated unless and until the Agency approves alternate liability coverage complying with Section 725.247 or 35 Ill. Adm. Code 724.247. 2)         The guarantor must execute the guarantee in Illinois.  The guarantee must be accompanied by a letter signed by the guarantor that states as follows: A)        The guarantee was signed in Illinois by an authorized agent of the guarantor; B)        The guarantee is governed by Illinois law; and C)        The name and address of the guarantor's registered agent for service of process. 3)         The guarantor must have a registered agent pursuant to Section 5.05 of the Business Corporation Act of 1983 [805 ILCS 5/5.05] or Section 105.05 of the General Not-for-Profit Corporation Act of 1986 [805 ILCS 105/105.05]. h)         Letter of Credit for Liability Coverage 1)         An owner or operator may satisfy the requirements of this Section by obtaining an irrevocable standby letter of credit that conforms to the requirements of this subsection, and submitting a copy of the letter of credit to the Agency. 2)         The financial institution issuing the letter of credit must be an entity that has the authority to issue letters of credit and whose letter of credit operations are regulated and examined by the Illinois Commissioner of Banks and Trust Companies. 3)         The wording of the letter of credit must be as specified in 35 Ill. Adm. Code 724.251. 4)         An owner or operator that uses a letter of credit to satisfy the requirements of this Section may also establish a trust fund.  Under the terms of such a letter of credit, all amounts paid pursuant to a draft by the trustee of the standby trust will be deposited by the issuing institution into the standby trust in accordance with instructions from the trustee.  The trustee of the standby trust fund must be an entity that has the authority to act as a trustee and whose trust operations are regulated and examined by the Illinois Commissioner of Banks and Trust Companies, or that complies with the Corporate Fiduciary Act [205 ILCS 620]. 5)         The wording of the standby trust fund must be identical to the wording specified in 35 Ill. Adm. Code 724.251(n). i)          Surety Bond for Liability Coverage 1)         An owner or operator may satisfy the requirements of this Section by obtaining a surety bond that conforms to the requirements of this subsection (i) and submitting a copy of the bond to the Agency. 2)         The surety company issuing the bond must be licensed by the Illinois Department of Financial and Professional Regulation, Division of Insurance. 3)         The wording of the surety bond must be as specified in 35 Ill. Adm. Code 724.251. j)          Trust Fund for Liability Coverage 1)         An owner or operator may satisfy the requirements of this Section by establishing a trust fund that conforms to the requirements of this subsection and submitting a signed, duplicate original of the trust agreement to the Agency. 2)         The trustee must be an entity that has the authority to act as a trustee and whose trust operations are regulated and examined by the Illinois Commissioner of Banks and Trust Companies, or that complies with the Corporate Fiduciary Act [205 ILCS 620]. 3)         The trust fund for liability coverage must be funded for the full amount of the liability coverage to be provided by the trust fund before it may be relied upon to satisfy the requirements of this Section. If at any time after the trust fund is created the amount of funds in the trust fund is reduced below the full amount of liability coverage to be provided, the owner or operator, by the anniversary of the date of establishment of the fund, must either add sufficient funds to the trust fund to cause its value to equal the full amount of liability coverage to be provided, or obtain other financial assurance, as specified in this Section, to cover the difference. For purposes of this subsection, "the full amount of the liability coverage to be provided" means the amount of coverage for sudden and nonsudden accidental occurrences required to be provided by the owner or operator by this Section, less the amount of financial assurance for liability coverage that is being provided by other financial assurance mechanisms being used to demonstrate financial assurance by the owner or operator. 4)         The wording of the trust fund must be as specified in 35 Ill. Adm. Code 724.251.