Current through Register Vol. 48, No. 9, September 27, 2024
(a)
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 section 261.4(a)(24)(vi)(F), 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 one (1) million dollars per occurrence
with an annual aggregate of at least two (2) million dollars, exclusive of
legal defense costs. This liability coverage may be demonstrated as specified
in paragraphs (a)(1), (2), (3), (4), (5), or (6) of this section:
(1) An owner or operator may demonstrate the
required liability coverage by having liability insurance as specified in this
paragraph.
(i) 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 section
261.151(h). The wording of the certificate of insurance must be identical to
the wording specified in section 261.151(i). The owner or operator must submit
a signed duplicate original of the endorsement or the certificate of insurance
to the Department. If requested by a Department, the owner or operator must
provide a signed duplicate original of the insurance policy.
(ii) 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 (1) or more states.
(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 paragraphs (f) and (g) of this
section.
(3) An owner or operator
may meet the requirements of this section by obtaining a letter of credit for
liability coverage as specified in paragraph (h) of this section.
(4) An owner or operator may meet the
requirements of this section by obtaining a surety bond for liability coverage
as specified in paragraph (i) of this section.
(5) An owner or operator may meet the
requirements of this section by obtaining a trust fund for liability coverage
as specified in paragraph (j) of this section.
(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 under this paragraph, the owner or operator shall specify
at least one (1) such assurance as "primary" coverage and shall specify other
assurance as "excess" coverage.
(7)
An owner or operator shall notify the Department in writing within thirty (30)
days whenever:
(i) A claim results in a
reduction in the amount of financial assurance for liability coverage provided
by a financial instrument authorized in paragraphs (a)(1) through (a)(6) of
this section; or
(ii) A
Certification of Valid Claim for bodily injury or property damages caused by a
sudden or non-sudden 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 paragraphs (a)(1) through (a)(6) of this section; or
(iii) 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 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 paragraphs (a)(1) through (a)(6) of this
section.
(b)
Coverage for nonsudden accidental occurrences. An owner or operator of a
hazardous secondary material reclamation facility or intermediate facility with
land-based units, as defined in section 260.10, which are used to manage
hazardous secondary materials excluded under section 261.4(a)(24) 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 three (3) million dollars per occurrence
with an annual aggregate of at least $6 million, 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 must
maintain liability coverage in the amount of at least four (4) million dollars
per occurrence and eight (8) million dollars annual aggregate. This liability
coverage may be demonstrated as specified in paragraph (b)(1), (2), (3), (4),
(5), or (6) of this section:
(1) An owner or
operator may demonstrate the required liability coverage by having liability
insurance as specified in this paragraph.
(i)
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 section 261.151(h). The wording of the certificate of
insurance must be identical to the wording specified in section 261.151(i). The
owner or operator must submit a signed duplicate original of the endorsement or
the certificate of insurance to the Department. If requested by the Department,
the owner or operator must provide a signed duplicate original of the insurance
policy.
(ii) 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 (1) or more states.
(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 paragraphs (f) and (g) of this
section.
(3) An owner or operator
may meet the requirements of this section by obtaining a letter of credit for
liability coverage as specified in paragraph (h) of this section.
(4) An owner or operator may meet the
requirements of this section by obtaining a surety bond for liability coverage
as specified in paragraph (i) of this section.
(5) An owner or operator may meet the
requirements of this section by obtaining a trust fund for liability coverage
as specified in paragraph (j) of this section.
(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 under this paragraph, the owner or operator shall specify
at least one (1) such assurance as "primary" coverage and shall specify other
assurance as "excess" coverage.
(7)
An owner or operator shall notify the Department in writing within thirty (30)
days whenever:
(i) A claim results in a
reduction in the amount of financial assurance for liability coverage provided
by a financial instrument authorized in paragraphs (b)(1) through (b)(6) of
this section; or
(ii) A
Certification of Valid Claim for bodily injury or property damages caused by a
sudden or non-sudden 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 paragraphs (b)(1) through (b)(6) of this section; or
(iii) 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 secondary
material treatment and/or storage facility is issued against the owner or
operator or an instrument that is providing financial assurance for liability
coverage under paragraphs (b)(1) through (b)(6) of this section.
(c) Request for
variance. If an owner or operator can demonstrate to the satisfaction of the
Department that the levels of financial responsibility required by paragraph
(a) or (b) of this section are not consistent with the degree and duration of
risk associated with treatment and/or storage 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 paragraph (a) or (b) of
this section.
(d) Adjustments by
the Department. If the Department determines that the levels of financial
responsibility required by paragraph (a) or (b) of this section are not
consistent with the degree and duration of risk associated with treatment
and/or storage at the facility or group of facilities, the Department may
adjust the level of financial responsibility required under paragraph (a) or
(b) of this section 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 that 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,
it may require that an owner or operator of the facility comply with paragraph
(b) of this section. An owner or operator must furnish to the Department,
within a reasonable time, any information which the Department requests to
determine whether cause exists for such adjustments of level or type of
coverage.
(e) Period of coverage.
Within sixty (60) 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 section 261.143(h), the Department will notify the owner or operator in
writing that they are no longer required under section 261.4(a)(24)(vi)(F) to
maintain liability coverage for that facility or a unit at the facility, unless
the Department has reason to believe that that 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.
(f) Financial test
for liability coverage.
(1) An owner or
operator may satisfy the requirements of this section by demonstrating that
they pass a financial test as specified in this paragraph. To pass this test
the owner or operator must meet the criteria of paragraph (f)(1) (i) or (ii) of
this section:
(i) The owner or operator must
have:
(A) Net working capital and tangible
net worth each at least six (6) times the amount of liability coverage to be
demonstrated by this test; and
(B)
Tangible net worth of at least ten (10) million dollars; and
(C) Assets in the United States amounting to
either:
(1) At least ninety (90) percent of
their total assets; or
(2) At least
six (6) times the amount of liability coverage to be demonstrated by this
test.
(ii)
The owner or operator must have:
(A) A current
rating for their 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; and
(B) Tangible net worth of at least ten (10)
million dollars; and
(C) Tangible
net worth at least six (6) 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 (90) percent of their
total assets; or
(2) at least six
(6) times the amount of liability coverage to be demonstrated by this
test.
(2) The phrase "amount of liability coverage"
as used in paragraph (f)(1) of this section refers to the annual aggregate
amounts for which coverage is required under paragraphs (a) and (b) of this
section and the annual aggregate amounts for which coverage is required under
paragraphs (a) and (b) of sections 264.147 and 265.147.
(3) To demonstrate that they meet this test,
the owner or operator must submit the following three (3) items to the
Department:
(i) A letter signed by the owner's
or operator's chief financial officer and worded as specified in section
261.151(f). If an owner or operator is using the financial test to demonstrate
both assurance as specified by section 261.143(e), and liability coverage, the
letter specified in section 261.151(f) must be submitted to cover both forms of
financial responsibility; a separate letter as specified in section 261.151(e)
is not required.
(ii) 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.
(iii) If the chief financial
officer's letter providing evidence of financial assurance includes financial
data showing that the owner or operator satisfies paragraph (f)(1)(i) of this
section that are different from the data in the audited financial statements
referred to in paragraph (f)(3)(ii) of this section or any other audited
financial statement or data filed with the SEC, then a special report from the
owner's or operator's independent certified public accountant to the owner or
operator is required. The special report shall be based on an agreed upon
procedures engagement in accordance with professional auditing standards and
shall 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.
(4) The
owner or operator may obtain a one-time extension of the time allowed for
submission of the documents specified in paragraph (f)(3) of this section if
the fiscal year of the owner or operator ends during the ninety (90) days prior
to the effective date of these regulations 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 (90) 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 must send, by the effective date
of these regulations, a letter to the Department and to each state agency or
Regional Administrator, as appropriate, where the owner's or operator's
facilities to be covered by the financial test are located. This letter from
the chief financial officer must:
(i) Request
the extension;
(ii) Certify that
there are grounds to believe that the owner or operator meets the criteria of
the financial test;
(iii) Specify
for each facility to be covered by the test the EPA Identification Number,
name, address, the amount of liability coverage and, when applicable, current
closure and post-closure cost estimates to be covered by the test;
(iv) Specify the date ending the owner's or
operator's last complete fiscal year before the effective date of these
regulations;
(v) Specify the date,
no later than ninety (90) days after the end of such fiscal year, when the
documents specified in paragraph (f)(3) of this section will be submitted;
and
(vi) 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.
(5) After the initial submission of items
specified in paragraph (f)(3) of this section, the owner or operator must send
updated information to the Department within ninety (90) days after the close
of each succeeding fiscal year. This information must consist of all three
items specified in paragraph (f)(3) of this section.
(6) If the owner or operator no longer meets
the requirements of paragraph (f)(1) of this section, 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 must be obtained.
Evidence of liability coverage must be submitted to the Department within
ninety (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 Department
may disallow use of this test on the basis of qualifications in the opinion
expressed by the independent certified public accountant in his report on
examination of the owner's or operator's financial statements (see paragraph
(f)(3)(ii) of this section). 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 must provide evidence of assurance
for the entire amount of required liability coverage as specified in this
section within thirty (30) days after notification of
disallowance.
(g)
Guarantee for liability coverage.
(1) Subject
to paragraph (g)(2) of this section, 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
must meet the requirements for owners or operators in paragraphs (f)(1) through
(f)(6) of this section. The wording of the guarantee must be identical to the
wording specified in section 261.151(g)(2). A certified copy of the guarantee
must accompany the items sent to the Department as specified in paragraph
(f)(3) of this section. 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.
(i) 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.
(ii) [Reserved]
(2)
(i) 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 Attorney General
or Insurance Commissioner 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 section
264.151(g)(2) is a legally valid and enforceable obligation in South
Carolina.
(ii) 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-U.S. 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 if
(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 section 261.151(h)(2) is a
legally valid and enforceable obligation in that state.
(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
paragraph and submitting a copy of the letter of credit to the
Department.
(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 a federal or state agency.
(3) The wording of the letter of credit must
be identical to the wording specified in section 261.151(j).
(4) 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 which
has the authority to act as a trustee and whose trust operations are regulated
and examined by a federal or state agency.
(5) The wording of the standby trust fund
must be identical to the wording specified in section 261.151(m).
(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 paragraph and submitting a copy of the bond to the
Department.
(2) 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 U.S. Department of the
Treasury.
(3) The wording of the
surety bond must be identical to the wording specified in section 261.151(k) of
this chapter.
(4) A surety bond may
be used to satisfy the requirements of this section only if the Attorney
General or Insurance Commissioner of:
(i) The
state in which the surety is incorporated; and
(ii) 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 section
261.151(k) is a legally valid and enforceable obligation in South
Carolina.
(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 paragraph and submitting
an originally signed duplicate of the trust agreement to the
Department.
(2) The trustee must be
an entity which has the authority to act as a trustee and whose trust
operations are regulated and examined by a federal or state agency.
(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 the liability coverage to be
provided, the owner or operator, by the anniversary date of the establishment
of the trust 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 paragraph, "the full amount of the liability
coverage to be provided" means the amount of coverage for sudden and/or
nonsudden 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
identical to the wording specified in section 261.151(l).
