A compliance audit may uncover missing water quality records, problems with treatment equipment, or failures to meet permit requirements. For agents reviewing water treatment insurance, the challenge is determining whether the findings involve the insured’s work and whether they affect its insurance needs. A problem at a customer’s facility does not automatically mean the water treatment contractor is responsible.
What Do Water Treatment Compliance Audits Examine?
Environmental compliance audits review a facility’s operations and records against applicable regulations and permit requirements. The scope depends on the type of facility and the regulations governing its operations.
For example, Clean Water Act compliance monitoring for facilities with National Pollutant Discharge Elimination System (NPDES) permits includes reviews of discharge monitoring reports and on-site evaluations. Separate environmental audit protocols address municipal wastewater facilities and public water systems.
An audit may identify missing sampling records, incomplete reporting, or equipment maintenance problems. However, agents need to distinguish between the facility’s compliance obligations and the services provided by an outside treatment company, testing laboratory, or equipment contractor.
Which Audit Findings Should Trigger an Insurance Review?
Start by determining whether the finding involves work the insured was hired to perform.
Suppose an audit identifies missing water quality monitoring records. The facility may be responsible for collecting the readings, or its agreement may assign certain monitoring tasks to a water treatment contractor. The agent should review the service agreement and available records before connecting the finding to the insured.
A closer insurance review makes sense when the investigation identifies:
- Services the company performs that were not included in its insurance application
- Contractual responsibilities that extend beyond the company’s previously disclosed work
- Changes in operations resulting from the audit’s corrective action requirements
For example, a contractor previously responsible for chemical delivery may agree to take on testing and treatment adjustments. The new responsibilities should be disclosed to the insurer so the agent can review the applicable professional liability and other policy terms.
An audit finding alone does not establish negligence or determine whether insurance would cover a resulting claim.
What Should Agents Check Before Renewal?
Request the relevant audit findings and the company’s response. The goal is to establish what happened, which responsibilities belong to the insured, and whether any corrective actions change its work.
Review service agreements, subcontractor arrangements, maintenance records, and descriptions of employee duties. Compare the information with what the insurer received during underwriting.
Pay particular attention to any new testing, consulting, equipment maintenance, or treatment responsibilities. Agents should also determine whether findings involve the water quality and operational liabilities associated with the insured’s services.
If the findings involve an alleged discharge, contamination incident, or other loss, review applicable claim notification requirements rather than treating the issue solely as a renewal question.
For newly identified services, ask the underwriter to review the updated operations and any relevant policy exclusions or limitations.
WaterColor Management offers risk-management services that include reviewing water service and subcontract agreements to help clarify responsibilities.
Use Audit Findings To Ask Better Underwriting Questions
Compliance audits can give agents information about a water treatment company’s operations that wasn’t apparent during the original submission. Before renewal, establish which findings involve the insured, whether its responsibilities have changed, and what information the underwriter needs.
Contact WaterColor Management to discuss water treatment accounts with compliance findings that raise questions about operations, contractual responsibilities, or insurance coverage.
About WaterColor Management
WaterColor Management has insured the water industry for over 30 years. Our policies include unlimited defense cost coverage in the event of a lawsuit against you. Call us at (855) 929-0824 or email info@watercolormanagement.com for a quick quote for your Water Business Professional, Products/Completed operations, Pollution, and General Liability Insurance.