Leather Manufacturing Insurance

Why Environmental Risks Top All Others for Leather Manufacturers

Leather tanning is the process of converting raw hides or skins into leather. The leather manufacturing industry comprises several different types of establishments that engage in these activities:

  • Tanning, currying and finishing hides and skins
  • Contracting with others to process hides and skins
  • Dyeing or dressing furs

Most leather is made from cattle, sheep and pigs. Other more exotic animals, including kangaroos, ostrich, crocodiles and snakes, are also used to make leather.

Leather manufacturing facilities (tanneries) face numerous, very serious risks. While tanneries have the same exposures to property damage and bodily injury claims as other manufacturers, there is a more serious concern. Tanneries and leather manufacturing establishments can pose a severe threat to the environment, as they emit polluted wastewater, solid wastes and gases.

The tanning process uses large amounts of dangerous, toxic chemicals including the following:

  • Mineral salts
  • Coal-tar derivatives
  • Various oils, dyes and finishes, including some that are cyanide-based
  • Arsenic
  • Chromium and vegetable tannins
  • Alum, man-made chemicals, formaldehyde, glutaraldehyde

There are approximately 111 tanning facilities in the U.S., but not every one of these facilities performs the same or entire tanning process. There are more tanneries in the Northeast and Midwest than other parts of the U.S., but overall the number of tanneries has decreased significantly in the last 40 years. This is due to the introduction of synthetic leathers and the increased importation of leather products and increased environmental regulations.

Tannery waste often consists of large amounts of pollutants, including salt, lime sludge, sulfides, chromium waste and acids. People who live or work near tanneries have a greater risk of contracting certain cancers due to exposure to these toxic chemicals. Tannery workers are exposed to a wide range of carcinogenic chemicals leading to an increased risk for lung cancer, testicular cancer, pancreatic cancer and other cancers.

Environmental Liability Insurance for Leather Manufacturers

During the last several decades, the federal government has enacted legislation aimed at curbing dangerous emissions and pollutants from manufacturing facilities, including tanneries.

  • The Environmental Protection Agency (EPA) in 1985 established standards to better control liquid waste emissions from tanneries.
  • The Clean Air Act of 1990 created additional federal standards to help curb the emission of volatile compounds into the air.
  • The Comprehensive Environmental Response Compensation and Liability Act of 1980 (also known as the Superfund Act) imposed liability for cleanup of polluted sites on the polluters themselves.

In response to these regulations, many tanneries tried to find safer methods of processing and finishing hides. Many others simply moved their operations to other countries.

Those that stayed assumed that their general liability insurance policies would cover costs related to pollution cleanup. But insurance companies balked and, for the most part, specifically excluded environmental claims from their general liability policies.

Environmental liability insurance policies were introduced specifically to cover the exposures that are excluded by general liability policies. Despite the fact that tanneries have had to clean up their acts, dangerous chemicals still play a significant role in the tanning process. One mistake can be devastating for surrounding communities, employees and the financial viability of the tannery. Without environmental liability insurance, tanneries have little to no recourse if they are responsible for an environmental disaster.

Environmental liability insurance covers property loss and liability costs that arise from toxic spills and pollution incidents. It typically includes coverage for cleanup activities required by law as well as third-party bodily injury and property damage costs. In addition, it covers the tannery’s legal defense and any other court costs, settlements or judgments associated with pollution or contamination incidents. Coverage may be provided for incidents that are sudden and accidental and for those that arise out of gradual contamination.

An environmental liability policy may also include coverage for business interruption due to pollution or contamination losses.

Environmental liability insurance is typically written on a “claims-made” basis. This means that the policy that is in force at the time the claim is made is the policy that pays the claim regardless of when the contamination occurred. If a spill happened two years ago but no claim was made until today, your current environmental liability policy pays the claim, even if you had a different policy (or no policy) in effect when the actual spill happened.

Be sure to discuss all of the specifics about claims-made insurance policies with your independent insurance agent.

Manufacturing Insurance for Tanneries

In addition to focusing on mitigating your environmental exposures, leather tanneries should also consider a variety of manufacturing insurance policies to protect their business interests.

  • Commercial property insurance protects your building and other property in the event of a covered loss, such as fire, vandalism, smoke or theft. It provides coverage for physical damage to equipment and machinery, warehouses and office space, office equipment, computers, and more.
  • Business interruption coverage, or business income coverage, protects your earnings and helps to pay expenses if your business is unable to operate because of damage caused by some type of covered disruption.
  • Equipment breakdown insurance, often referred to as boiler and machinery coverage, supplements your business property insurance. It covers certain costs associated with accidental breakdown of machinery or equipment and the resulting property damage or loss.
  • Commercial general liability (CGL) insurance is necessary for occasions in which your business is negligent and causes bodily injury or property damage to a third party. Your CGL policy provides coverage for attorney fees, court costs, settlements and judgments up to the limits of your policy.
  • Product liability insurance covers your financial responsibility for losses or injuries to a user, buyer or bystander caused by a defect or malfunction of your product. Claims for product-related damage are usually related to manufacturing or production flaws, design defects or defective warnings or instructions. If you are sued for some type of product negligence, you may be required to pay for medical costs, compensatory damages, economic damages, attorney fees, court costs and more.
  • Commercial auto insurance covers your vehicle fleet and drivers in the event of an accident or other vehicle damage. Commercial auto insurance provides coverage for property damage and bodily injury liability claims, vehicle damage and medical bills as well as any costs related to lawsuits due to auto accidents involving your vehicle fleet.
  • Commercial umbrella insurance, or excess liability coverage, provides an extra layer of liability protection to any of several other policies you might have. It is activated when the limits of your other applicable liability policies have been exhausted, protecting you when a covered claim exceeds the amount of coverage available from any other applicable policy.

Protect Your Employees With Workers’ Compensation Insurance

Tanneries use large quantities of dangerous chemicals to transform animal hides into leather for use in all kinds of goods. These chemicals are extremely dangerous for workers who handle them or are exposed to them, and have been shown to increase workers’ risks for certain cancers.

Workers face additional dangers in your facility, including the following:

  • Injuries due to use of heavy equipment 
  • Slippery floors or hazards that lead to slips, trips and falls
  • Crushed fingers, hands or limbs
  • Chemical burns to skin and eyes

Excessive employee injuries and illnesses can be financially devastating for your business. Workers’ compensation insurance provides insurance coverage when accidents happen at the workplace. It ensures that the injured worker gets medical care and income protection while unable to work.

Workers’ compensation insurance provides benefits to injured workers regardless of who is at fault for their injury. And it provides death benefits for a worker’s dependents if there is a fatality.

Tanneries may find it difficult to find affordable workers’ compensation insurance because your business is considered high-risk for employees. Tannery operators should work with an independent insurance agent who has experience helping high-risk employers find workers’ compensation coverage.

How to Find Solutions for All of Your Tannery Insurance Needs

Tanneries present insurance companies with several challenges, and great care must be taken to ensure that you find business insurance that is tailored to your very unique exposures. From basic manufacturing insurance to more complex environmental liability and workers’ compensation insurance, you need the advice of an experienced, independent insurance agent. Independent agents can work with multiple highly-rated insurance companies who specialize in complex manufacturing risks.

Contact an agent in the Trusted Choice® network for advice, consultation and free quotes for comprehensive manufacturing insurance.

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