PROPERTY DAMAGE CAUSED BY CORROSION
https://sites.google.com/site/metropolitanforensics/property-damage-caused-by-corrosion
It is common knowledge that
corrosion can make bridges fail, foundations collapse, tanks and pipelines
leak, and electric systems short-circuit. According to the National Association of
Corrosion Engineers, corrosion damage costs U.S. industry and economy an
estimated $300 billion annually. Since corrosion is a slow and predictable
(although unavoidable) process, releases caused by corrosion damage are, in
general, not considered sudden and accidental.
Many liability insurance
policies contain qualified pollution exclusion clauses, under which there is an
exception to the exclusion of coverage for liability arising from the discharge
of pollutants where the discharge was "sudden and accidental." Other policies expressly exclude coverage for
loss due to specified risks such as corrosion, wear and tear, water damage,
etc. When business interruption insurance is attached as an endorsement or
rider to a property insurance policy, most courts have concluded that the
exclusion of risks as to the property insurance did not apply to the business
interruption coverage.
Conflict
of Laws
The word sudden is directed
at rupture or human error, an explosion, a spill, something which occurs
abruptly. The term is used to specifically exclude the situation which happens
due to the corrosion over an extended period of time of the pipes or tanks
below ground which could cause a leaking situation over several years. There is
conflict of laws regarding the meaning and application of the "sudden and
accidental" exception to the pollution exclusion clause.
Applying New York law, the
term "sudden" as used in such exception has a temporal aspect as
referring to the discharge of a pollutant abruptly, precipitantly, or brought
about in a short time. It does not refer
to actions which occur gradually over a period of time.
On the other hand, applying
New Jersey law, one court held that the "sudden and accidental"
language of the pollution exclusion clause does not bar coverage for gradual
pollution, construing the term "sudden" as meaning unexpected or
unintended, without a temporal aspect. There are several intermediate
interpretations as well.
Courts are divided on who
bears the burden of proving that any discharge was “sudden and accidental.”
Some courts hold that the policyholder has the burden of proving exceptions to
an exclusion. In contrast, a number of jurisdictions place the burden of
disproving that the discharge was “sudden and accidental” on the insurance
company.
Corrosion
Fundamentals
Corrosion is the deterioration
of a material (such as metal) due to interaction with its environment. Perhaps
the best known example of corrosion is steel; as soon as iron ore has been
smelted and refined to produce steel, nature begins to reverse the process. The
steel reacts with the environment to form oxidation/reduction byproducts such
as oxides, sulfates, sulfides, and carbonates.
The metal underground
storage tanks (UST) have a finite life as they are subject to corrosion attack
once they are placed in a corrosive environment. The average life of a UST
(i.e., the time it takes to develop a corrosion leak) is less than 18 years.
This average time to corrosion can be shorter or longer depending on the
specific environment where the tank has been placed.
Corrosion can have many
forms, both wet and dry:
General corrosion is the most common type of corrosion. It is defined as the uniform
loss of metal from the entire exposed surface of the metal.
Pitting is a form of localized corrosion in which a small portion of the
metallic structure is corroded at a rate much faster than the bulk of the
structure. Although this type of corrosion is faster than the general
corrosion, corrosion pitting forms gradually and is a predictable and known
event associated with the underground storage tanks placed in contact with an
electrolyte; therefore, it cannot be considered a sudden and accidental
occurrence.
Galvanic Corrosion. This type of corrosion is caused when dissimilar metals are
connected in an electrolytic solution under the proper conditions, one metal
will experience accelerated corrosion.
Crevice Corrosion. Crevice corrosion is another form of localized corrosion. It
occurs in crevices on metal structures/equipment.
Under-deposit Corrosion. This is a special type of crevice corrosion where the crevice or
space is caused by a deposit on the metal surface. Scale, corrosion products or
a variety of other debris can cause deposits under which accelerated corrosion
occurs
There are several
conditions that must be met before these reactions can occur.
1. The metal must be reactive. It must be inherently unstable in the
metallic form, thereby tending to corrode.
2. The metal must be in contact with an electrolyte. An electrolyte
is a solution, usually aqueous (i.e., water), which can conduct electric
current and support ionized species.
3. The electrolyte must contain dissolved species. This can be either
dissolved gases, such as oxygen or chlorine, or dissolved ions, such as the
hydrogen ion, which acts as an oxidizing agent.
4. The kinetics of the situation (the rate at which the corrosion
reactions can occur) must be rapid enough to be of practical significance.
The first requirement, that
the metal must have sufficient reactivity, is exhibited by metals such as iron,
copper and steel. They readily corrode under the proper conditions. It is
important to note that without the presence of dissolved gases (such as oxygen)
or minerals (such as chlorides) in an electrolyte (such as water) even highly
reactive metals do not corrode.
What
is Amenable to Corrosion?
All commonly used metals
are vulnerable to corrosion. The following are some corrosion areas that have
caused significant property damages.
Concrete. The corrosion of reinforcing
steel in structures of every kind, including buildings, piers, bridges, roads,
etc., is a major problem. When cracking
of the concrete occurs, it can quickly weaken the structure, leading to costly
repairs, or even total replacement. One
of the biggest causes of corrosion of steel in concrete is the use of deicing
salts on our highways and streets. In the United States, many million tons of
salt or deicer is applied on a yearly basis to highways. In addition to
contaminating the local groundwater, deicers also can cause additional property
damages. Metropolitan witnessed the clogging of drainage systems due to the
precipitation of calcium deposits found in the de-icing chemicals that had
resulted in property damage.
Pipelines
and Tanks. Most pipelines in the United States, are already well
beyond their initial design life (averaging 30 years or so), and virtually
every one traverses an area that is prone to corrosion. To manage corrosion
risk, the oil and gas industries have been making large investments for many
years in cathodic protection and other corrosion control systems.
Copper
Piping Corrosion. Corrosion can also be found in hot water re-circulating
systems in high-rise buildings, especially the ones that use groundwater. The
insurance carriers must be aware that many underground waters are aggressive to
copper piping. Metropolitan has witnessed such corrosion in geothermal system
piping where groundwater drawn from a hard-water area (i.e., lots of calcium is
present, as this is a common mineral present in most of the Northeast) is
re-circulating.
EXAMPLES OF CORROSION
CLAIMS
Copper Pipe Corrosion Claim
Pinhole
leaks are unfortunately a common occurrence.
A pinhole leak is
the breakthrough of the pipe wall when the pipe is undergoing “pitting
corrosion” or simply “pitting”. When
enough pitting occurs in the interior of the pipe, it will break through and
water will begin to travel to the exterior of the pipe. Pitting
corrosion (pinholes) are directly related to water chemistry. High or low pH balance and water
softness/hardness (high/low mineral content of the water) will directly affect
certain types of copper piping, and can cause accelerated corrosion. Hot water and heating supply
lines are statistically more frequently damaged by pinhole leaks. The high
temperature of the water can accelerate corrosion. Certain types of pitting
will not occur in low water temperatures.
A typical example was seen
in a 4-story school building in Massachusetts that had a copper piping and hot
water re-circulating system and drew its potable water supply from a
groundwater well system. Pinhole leaks began to appear in the hot water pipes
after about one year of use, causing property damage. A fact-finding investigation by Metropolitan
showed that the groundwater supply was very aggressive (calcium was in excess
of 250 ppm), while the velocity in the copper piping was extremely high, at
about six feet per second. Metropolitan
opined that the combination of these two factors was the cause of the
corrosion. Claim closed.
Tank Corrosion Claim
Two underground storage
tanks (one fuel oil and one gasoline storage tank) were removed from the
property of the insured. They were rusted and had several small holes (the
largest was about one-half inch in diameter). Metropolitan performed a
fact-finding investigation that consisted of record review, tank inspection,
soil testing, and plume delineation. Metropolitan found that the pollutants
escaped through leaks caused by corrosion, and that this corrosion occurred
gradually over an extended period of time. Accordingly, the insurer concluded
that any coverage otherwise provided by the policy was excluded under the
policy's pollution exclusion.
Based on the fact-finding effort of Metropolitan and upon review
of the results by the insured’s expert, the insured withdrew the claim for
property damages.
Metropolitan Engineering, Consulting & Forensics (MECF)
Providing
Competent, Expert and Objective Investigative Engineering and Consulting
Services
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Tenafly, NJ 07670-0520
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