Pollution liability caused by leaking oil tanks has become a major problem in New Jersey. Costs to clean up environmental damage, particularly damage to water supplies or acquifers, can run into millions of dollars.

Currently, homeowners policies provide pollution coverage for liability caused by above ground or underground oil tanks up to the homeowner's policy liability limits.  Most policies do not provide coverage for pollution damage to a homeowner's premises unless the pollution is caused by a covered peril.

In  2005, the Department  permitted the Insurance Services Office  to implement a $10,000 first party remediation coverage which would also provide a  $50,000 liability limit for the  escape of liquid fuel and lead liability limitation with a 1% reduction in the current loss cost and options to purchase higher limits.  

Several companies impose surcharges for the presence of oil tanks on the premises. Other companies have been given Department approval to exclude pollution liability caused by oil tanks with an option to buy-back the pollution liability coverage for an additional premium. The “buy-back” of oil tanks coverage may not be available for insureds with old oil tanks (over 20 years) and the “buy-back” may only be offered once to new applicants.

Since all oil tanks will ultimately leak, the Department urges all homeowners with oil tanks to have their tanks tested and inspected and to replace old oil tanks to protect New Jersey's environment and to prevent a homeowners pollution liability loss.