Liability requirements

1. Coverage for sudden accidental occurrences. An owner or operator of a hazardous secondary material reclamation facility or an intermediate facility subject to financial assurance requirements under subparagraph f of paragraph 6 of subdivision y of subsection 1 of section 33.1-24-02-04, or a group of such facilities, shall 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 shall have and maintain liability coverage for sudden accidental occurrences in the amount of at least one million dollars per occurrence with an annual aggregate of at least two million dollars, exclusive of legal defense costs. This liability coverage may be demonstrated as specified in subdivision a, b, c, d, e, or f: a. An owner or operator may demonstrate the required liability coverage by having liability insurance as specified in this subdivision. (1) Each insurance policy must be amended by attachment of the hazardous secondary material facility liability endorsement, or evidenced by a certificate of liability insurance. The wording of the endorsement must be identical to the wording specified in subsection 8 of section 33.1-24-02-42. The wording of the certificate of insurance must be identical to the wording specified in subsection 9 of section 33.1-24-02-42. The owner or operator shall submit a signed duplicate original of the endorsement or the certificate of insurance to the department, and other state's agencies that regulate reclamation and intermediate facilities if the facilities are located in more than one state. If requested by the department, the owner or operator shall provide a signed duplicate original of the insurance policy. (2) Each insurance policy must be issued by an insurer that, at a minimum, is licensed to transact the business of insurance, or eligible to provide insurance as an excess or surplus lines insurer, in one or more states. b. 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 6 and 7. c. An owner or operator may meet the requirements of this section by obtaining a letter of credit for liability coverage as specified in subsection 8. d. An owner or operator may meet the requirements of this section by obtaining a surety bond for liability coverage as specified in subsection 9. e. An owner or operator may meet the requirements of this section by obtaining a trust fund for liability coverage as specified in subsection 10. f. 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 under this subdivision, the owner or operator shall specify at least one such assurance as "primary" coverage and shall specify other assurance as "excess" coverage. g. An owner or operator shall notify the department in writing within thirty days whenever: (1) A claim results in a reduction in the amount of financial assurance for liability coverage provided by a financial instrument authorized in subdivisions a through f; (2) A certification of valid claim for bodily injury or property damages caused by a sudden or nonsudden accidental occurrence arising from the operation of a hazardous secondary material reclamation facility or intermediate facility is entered between the owner or operator and third-party claimant for liability coverage under subdivision a through f; or (3) A final court order establishing a judgment for bodily injury or property damage caused by a sudden or nonsudden accidental occurrence arising from the operation of a hazardous secondary material reclamation facility or intermediate facility is issued against the owner or operator or an instrument that is providing financial assurance for liability coverage under subdivision a through f. 2. Coverage for nonsudden accidental occurrences. An owner or operator of a hazardous secondary material reclamation facility or intermediate facility with landbased units, as defined in section 33.1-24-01-04, which are used to manage hazardous secondary materials excluded under subdivision y of subsection 1 of section 33.1-24-02-04 or a group of such facilities, shall 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 shall have and maintain liability coverage for nonsudden accidental occurrences in the amount of at least three million dollars per occurrence with an annual aggregate of at least six million dollars, exclusive of legal defense costs. An owner or operator who must meet 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. Owners or operators who combine coverage levels for sudden and nonsudden accidental occurrences shall maintain liability coverage in the amount of at least four million dollars per occurrence and eight million dollars annual aggregate. This liability coverage may be demonstrated as specified in subdivision a, b, c, d, e, or f: a. An owner or operator may demonstrate the required liability coverage by having liability insurance as specified in this subsection. (1) Each insurance policy must be amended by attachment of the hazardous secondary material facility liability endorsement or evidenced by a certificate of liability insurance. The wording of the endorsement must be identical to the wording specified in subsection 8 of section 33.1-24-02-42. The wording of the certificate of insurance must be identical to the wording specified in subsection 9 of section 33.1-24-02-42. The owner or operator shall submit a signed duplicate original of the endorsement or the certificate of insurance to the department, and other state's agencies that regulate reclamation and intermediate facilities if the facilities are located in more than one state. If requested by a department, the owner or operator shall provide a signed duplicate original of the insurance policy. (2) Each insurance policy must be issued by an insurer which, at a minimum, is licensed to transact the business of insurance, or eligible to provide insurance as an excess or surplus lines insurer, in one or more states. b. 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 6 and 7. c. An owner or operator may meet the requirements of this section by obtaining a letter of credit for liability coverage as specified in subsection 8. d. An owner or operator may meet the requirements of this section by obtaining a surety bond for liability coverage as specified in subsection 9. e. An owner or operator may meet the requirements of this section by obtaining a trust fund for liability coverage as specified in subsection 10. f. 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 under this subdivision, the owner or operator shall specify at least one such assurance as "primary" coverage and shall specify other assurance as "excess" coverage. g. An owner or operator shall notify the department in writing within thirty days whenever: (1) A claim results in a reduction in the amount of financial assurance for liability coverage provided by a financial instrument authorized in subdivisions a through f; (2) A certification of valid claim for bodily injury or property damages caused by a sudden or nonsudden accidental occurrence arising from the operation of a hazardous secondary material treatment and/or storage facility is entered between the owner or operator and third-party claimant for liability coverage under subdivisions a through f; or (3) A final court order establishing a judgment for bodily injury or property damage caused by a sudden or nonsudden accidental occurrence arising from the operation of a hazardous secondary material treatment or storage facility, or both, is issued against the owner or operator or an instrument that is providing financial assurance for liability coverage under subdivisions a through f. 3. Request for variance. If an owner or operator can demonstrate to the satisfaction of the department that the levels of financial responsibility required by subsection 1 or 2 are not consistent with the degree and duration of risk associated with treatment or storage, or both, at the facility or group of facilities, the owner or operator may obtain a variance from the department. The request for a variance must be submitted in writing to the department. If granted, the variance will take the form of an adjusted level of required liability coverage, such level to be based on the department's assessment of the degree and duration of risk associated with the ownership or operation of the facility or group of facilities. The department may require an owner or operator who requests a variance to provide such technical and engineering information as is deemed necessary by the department to determine a level of financial responsibility other than that required by subsection 1 or 2. 4. Adjustments by the department. If the department determines the levels of financial responsibility required by subsection 1 or 2 are not consistent with the degree and duration of risk associated with treatment or storage, or both, at the facility or group of facilities, the department may adjust the level of financial responsibility required under subsection 1 or 2 as may be necessary to protect human health and the environment. This adjusted level will be based on the department'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 department determines there is a significant risk to human health and the environment from nonsudden accidental occurrences resulting from the operations of a facility that is not a surface impoundment, pile, or land treatment facility, the department may require an owner or operator of the facility to comply with subsection 2. An owner or operator shall furnish to the department, within a reasonable time, any information the department requests to determine whether cause exists for such adjustments of level or type of coverage. 5. Period of coverage. Within sixty days after receiving certifications from the owner or operator and a qualified professional engineer that all hazardous secondary materials have been removed from the facility or a unit at the facility and the facility or a unit has been decontaminated in accordance with the approved plan per subsection 8 of section 33.1-24-02-36, the department will notify the owner or operator in writing that the owner or operator is no longer required under subparagraph f of paragraph 6 of subdivision y of subsection 1 of section 33.1-24-02-04 to maintain liability coverage for that facility or a unit at the facility, unless the department has reason to believe all hazardous secondary materials have not been removed from the facility or unit at a facility or that the facility or unit has not been decontaminated in accordance with the approved plan. 6. Financial test for liability coverage. a. 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. To pass this test the owner or operator shall meet the criteria of paragraph 1 or 2: (1) The owner or operator shall have: (a) Net working capital and tangible net worth each at least six times the amount of liability coverage to be demonstrated by this test; (b) Tangible net worth of at least ten million dollars; and (c) Assets in the United States amounting to either: [1] At least ninety percent of the owner's or operator's total assets; or [2] At least six times the amount of liability coverage to be demonstrated by this test. (2) The owner or operator shall have: (a) A current rating for the owner's 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; (b) Tangible net worth of at least ten million dollars; (c) Tangible net worth at least six times the amount of liability coverage to be demonstrated by this test; and (d) Assets in the United States amounting to either: [1] At least ninety percent of the owner's or operator's total assets; or [2] At least six times the amount of liability coverage to be demonstrated by this test. b. The phrase "amount of liability coverage" as used in subdivision a refers to the annual aggregate amounts for which coverage is required under subsections 1 and 2 and the annual aggregate amounts for which coverage is required under subsections 1 and 2 of section 33.1-24-05-79 and subsection 5 of section 33.1-24-06-16. c. To demonstrate the owner or operator meets this test, the owner or operator shall submit the following three items to the department: (1) A letter signed by the owner's or operator's chief financial officer and worded as specified in subsection 6 of section 33.1-24-02-42. If an owner or operator is using the financial test to demonstrate both assurance as specified by subsection 5 of section 33.1-24-02-36, and liability coverage, the owner or operator shall submit the letter specified in subsection 6 of section 33.1-24-02-42 to cover both forms of financial responsibility; a separate letter as specified in subsection 5 of section 33.1-24-02-42 is not required. (2) 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. (3) If the chief financial officer's letter providing evidence of financial assurance includes financial data showing the owner or operator satisfies paragraph 1 of subdivision a which is different from the data in the audited financial statements referred to in paragraph 2 of subdivision c or any other audited financial statement or data filed with the securities and exchange commission, a special report from the owner's or operator's independent certified public accountant to the owner or operator is required. The special report must be based upon an agreed upon procedures engagement in accordance with professional auditing standards and must describe the procedures performed in comparing the data in the chief financial officer's letter derived from the independently audited, year-end financial statements for the latest fiscal year with the amounts in such financial statements, the findings of the comparison, and the reasons for any difference. d. The owner or operator may obtain a one-time extension of the time allowed for submission of the documents specified in subdivision c if the fiscal year of the owner or operator ends during the ninety days prior to the effective date of this section and if the year-end financial statements for that fiscal year will be audited by an independent certified public accountant. The extension will end no later than ninety days after the end of the owner's or operator's fiscal year. To obtain the extension, the owner's or operator's chief financial officer shall send, by the effective date of this section, a letter to the department. This letter from the chief financial officer must: (1) Request the extension; (2) Certify the owner or operator has grounds to believe that the owner or operator meets the criteria of the financial test; (3) Specify for each facility to be covered by the test the identification number, name, address, the amount of liability coverage and, when applicable, current closure and postclosure cost estimates to be covered by the test; (4) Specify the date ending the owner's or operator's last complete fiscal year before the effective date of this section; (5) Specify the date, no later than ninety days after the end of such fiscal year, when the owner or operator will submit the documents specified in subdivision c; and (6) Certify that the year-end financial statements of the owner or operator for such fiscal year will be audited by an independent certified public accountant. e. After the initial submission of items specified in subdivision c, the owner or operator shall send updated information to the department within ninety days after the close of each succeeding fiscal year. This information must consist of all three items specified in subdivision c. f. If the owner or operator no longer meets the requirements of subdivision a, the owner or operator shall 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 liability coverage must be submitted to the department within ninety days after the end of the fiscal year for which the year-end financial data shows the owner or operator no longer meets the test requirements. g. The department may disallow use of this test on the basis of qualifications in the opinion expressed by the independent certified public accountant in the independent certified public accountant's report on examination of the owner's or operator's financial statements (see paragraph 2 of subdivision c). An adverse opinion or a disclaimer of opinion will be cause for disallowance. The department will evaluate other qualifications on an individual basis. The owner or operator shall provide evidence of insurance for the entire amount of required liability coverage as specified in this section within thirty days after notification of disallowance. 7. Guarantee for liability coverage. a. Subject to subdivision b, an owner or operator may meet the requirements of this section by obtaining a written guarantee, hereinafter referred to as "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 shall meet the requirements for owners or operators in subdivisions a through f of subsection 6. The wording of the guarantee must be identical to the wording specified in subdivision b of subsection 7 of section 33.1-24-02-42. A certified copy of the guarantee must accompany the items sent to the department as specified in paragraph c of subsection 6. 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. (1) 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 corporate 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. (2) [Reserved]. b. The following applies: (1) In the case of corporations incorporated in the United States, a guarantee may be used to satisfy the requirements of this section only if the attorneys general or insurance commissioners of: (a) The state in which the guarantor is incorporated; and (b) Each state in which a facility covered by the guarantee is located have submitted a written statement to the department that a guarantee executed as described in this section and subdivision b of subsection 7 of section 33.1-24-02-42 is a legally valid and enforceable obligation in that state. (2) In the case of corporations incorporated outside the United States, a guarantee may be used to satisfy the requirements of this section only if: (a) The non-United States corporation has identified a registered agent for service of process in each state in which a facility covered by the guarantee is located and in the state in which it has its principal place of business; and (b) The attorney general or insurance commissioner of each state in which a facility covered by the guarantee is located and the state in which the guarantor corporation has its principal place of business, has submitted a written statement to the department that a guarantee executed as described in this section and subdivision b of subsection 8 of section 33.1-24-02-42 is a legally valid and enforceable obligation in that state. 8. Letter of credit for liability coverage. a. 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 department. b. 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 a federal or state agency. c. The wording of the letter of credit must be identical to the wording specified in subsection 10 of section 33.1-24-02-42. d. An owner or operator who uses a letter of credit to satisfy the requirements of this section may also establish a standby 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 a federal or state agency. e. The wording of the standby trust fund must be identical to the wording specified in subsection 13 of section 33.1-24-02-42. 9. Surety bond for liability coverage. a. An owner or operator may satisfy the requirements of this section by obtaining a surety bond that conforms to the requirements of this subsection and submitting a copy of the bond to the department. b. The surety company issuing the bond must be among those listed as acceptable sureties on federal bonds in the most recent circular 570 of the United States department of the treasury. c. The wording of the surety bond must be identical to the wording specified in subsection 11 of section 33.1-24-02-42. d. A surety bond may be used to satisfy the requirements of this section only if the attorneys general or insurance commissioners of: (1) The state in which the surety is incorporated; and (2) Each state in which a facility covered by the surety bond is located have submitted a written statement to the department that a surety bond executed as described in this section and subsection 11 of section 33.1-24-02-42 is a legally valid and enforceable obligation in that state. 10. Trust fund for liability coverage. a. 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 an originally signed duplicate of the trust agreement to the department. b. The trustee must be an entity that has the authority to act as a trustee and whose trust operations are regulated and examined by a federal or state agency. c. 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 the liability coverage to be provided, the owner or operator, by the anniversary date of the establishment of the fund, either shall 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 subdivision, "the full amount of the liability coverage to be provided" means the amount of coverage for sudden or nonsudden, or both, occurrences required to be provided by the owner or operator by this section, less the amount of financial assurance for liability coverage which is being provided by other financial assurance mechanisms being used to demonstrate financial assurance by the owner or operator. d. The wording of the trust fund must be identical to the wording specified in subsection 12 of section 33.1-24-02-42.