Property Types

Machine Shops

Machine shops are exposed to many environmental risks through their operations. Accidental wastewater, chemical, or waste discharges can contaminate soil or groundwater or migrate to storm drains, drywells, surface waters, or neighboring properties. Additionally, stormwater coming into contact with process or storage areas for raw materials or wastes could carry pollutants and cause environmental damage. Toxic fumes, particulates, and other air emissions from machine operations could impact air quality. Also, various wastes and wastewater are generated as part of machine shop operations and can present liability related to transportation and disposal.

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Environmental Exposures May Include

Chemical Storage
Airborne Particulates
Chlorinated Compounds
Flammables
Oil-Water Separators
Hazardous Waste Mismanagement
Wastewater
Stormwater Run-off
Cargo Securement

Chemical Storage

Machine shops use and store various chemicals, including oils, coolants, and cleaning solvents. These may be stored in containers, aboveground, or underground storage tanks. Spills or leaks of these chemicals from storage or during handling can migrate to soil or groundwater, collect in stormwater, and migrate to storm drains, surface waters, or neighboring properties. Releases can result in cleanup liability, third-party bodily injury, property damage, or natural resource damage.

Airborne Particulates

Metal filings, dust, and paint chips may be generated from grinding, shaving, and sanding operations. Metal-containing fumes and oily mist and smoke can be generated from machining operations. If not properly controlled, these could create hazardous air quality for employees and third parties. In addition, particulates and pollutants could be carried outside, potentially impacting soils or groundwater or collecting in stormwater.

Chlorinated Compounds

Machine shops may use or previously have used chlorinated compounds as metal working fluids or solvents. Chlorinated volatile organic compounds are mobile, migrating through uncoated concrete and traveling readily in soil and groundwater. These compounds are highly volatile and persistent in the environment. Releases of these compounds can lead to expensive cleanups and third-party claims.

Flammables

Flammable and combustible liquids, including oils, gasoline, cleaners, solvents, paints, and thinner, may be stored and used in operations at machine shops and create a fire hazard. A fire can spread throughout a facility and emit toxic fumes and smoke from the burning materials or due to a mix of materials resulting from the fire. Firefighting solutions such as water and foam could create contaminated run-off that spreads to nearby storm drains or properties, resulting in environmental cleanup and tort liability.

Oil-Water Separators

Oil-water separators designed to separate oils from coolants may be present at these facilities and could be either in-ground or aboveground. They can develop leaks over time that allow oil or coolant to seep from the system into the surrounding environment.

Hazardous Waste Mismanagement

Waste metal working fluids, waste oils, solvents, chips, grit, and other waste materials may be generated by machine shop operations and can be considered hazardous. Improper storage and handling of wastes can lead to releases that may cause contamination. Additionally, waste generators are responsible for determining if their wastes are hazardous and require special disposal or recycling procedures. Waste generators retain “cradle to grave” liability for their disposed of wastes, and improper characterization and disposal can result in regulatory violations and environmental liability.

Wastewater

Wastewater from machine shops can contain metals, oils, grease, degreasers, suspended solids, and other pollutants. Wastewater treatment systems may be present at facilities, or wastewater may be taken to a non-owned disposal site or wastewater treatment facility. Releases of insufficiently treated wastewater or spills during storage, transport, or transfer from wastewater storage areas could create environmental risks. Improper waste disposal could lead to environmental liability or legal consequences for violating regulatory requirements.

Stormwater Run-off

Stormwater run-off could contact chemicals, metals, wastes, or other outside storage. Trucks delivering raw materials or picking up products or wastes can leak automotive fluids on the property and collect in stormwater run-off. Suppose adequate precautions are not taken to prevent pollutants from entering stormwater. In that case, pollutants can impact soil or groundwater at a facility or neighboring properties, migrate to storm drains, and be discharged to surface waters.

Cargo Securement

Transporting waste materials from the facility by the owner or third-party carriers to disposal sites or recycling centers can lead to environmental liability while on the road and during loading and unloading operations. Spills, leaks from accidents, or improper cargo securement can lead to third-party claims and cleanup liability.

Contractors Pollution Liability Can Provide Coverage For

On-site cleanup of new and pre-existing pollution conditions

Off-site cleanup of new and pre-existing pollution conditions

Third-party claims for cleanup costs

Third-party claims for bodily injury and property damage

Both sudden and gradual pollution conditions

Defense of third-party claims

First-party and third-party transportation pollution liability

Business Interruption expenses resulting from pollution conditions

Mold, bacteria, legionella, and more

Natural resource damage

Emergency response expenses

Illicit abandonment

Non-owned disposal sites

Loading and unloading

Civil fines and punitive damages, where allowed by state law

Aboveground and underground storage tanks

Claims Scenarios & Examples

A machine shop manufactured metal parts for the automotive industry. Cutting fluids from its milling machines were collected in a subgrade sump and recycled through a filtration system for reuse. The sump leaked cutting fluids that contained metals and oils into the soil under the building. When the soil was tested during a potential buyer’s due diligence, the soil was found to be impacted by petroleum hydrocarbons and metals. The machine shop owner was liable for the cleanup of the soil contamination, and the property sale stalled.
A machine shop was located in a multi-tenant industrial facility. Their air pollution control equipment was updated, and a third-party contractor installed new scrubbers. Over the next week, the neighboring facility employees complained of dizziness and nausea. It was determined that the scrubber for the machine shop had malfunctioned, and dust and fumes from the machine shop were entering the adjacent facility. The machine shop was sued for $500,000 in damages.
A machine shop was storing its waste in an outside shed. A forklift turned over on a ramp while carrying a drum of waste solvent to the shed, and solvent spilled onto the ground outside. The solvent entered a storm drain and was discharged to a nearby creek, resulting in emergency response and cleanup costs.
A fire occurred at a machine shop that stored magnesium. Magnesium combined with firefighting water to form magnesium oxide, releasing hydrogen gas, which made the fire self-sustaining. The smoke from the fire caused respiratory issues for several residents near the fire, forcing the evacuation of the surrounding community. Firefighting water run-off migrated into an adjacent stream. Cleanup was required.
A tank was being used to store waste coolants at a machine shop. The tank failed, resulting in a release of approximately 500 gallons of fluid. The tank did not have secondary containment, and the spill migrated outside onto the soil. The machine shop had to perform cleanup, including excavation of impacted soils and groundwater monitoring.
A machine shop had operated at the site for over 30 years. During the 1970s and 1980s, chlorinated solvents were used for degreasing on-site. The machine shop owner was required to perform an environmental investigation to secure a bank loan, and chlorinated volatile organic contamination was found in the soil and groundwater beneath the building. Further investigation also indicated that the past releases impacted indoor air quality. An expensive cleanup ensued.
Tramp oil removed from metalworking fluid was collected and sent off-site for recycling at a third-party facility. The third-party facility mishandled the waste it received, and the owner went bankrupt. The third-party disposal facility was found to be contaminated and impacted off-site drinking water wells. The disposal site was named as a Superfund site. EPA named the machine shop owner as a Potentially Responsible Party in the cleanup of the Superfund site based on manifests documenting that they had sent wastes there.
Wastewater generated from tumbling parts at a machine shop could not be discharged to the sanitary sewer, so it was shipped off-site for treatment at a third-party disposal facility. During transport, a truck overturned, spilling the wastewater into a nearby creek. The city sued the transporter and the machine shop to recoup their costs for responding to and cleaning up the spill.

Final Consideration

Your business can be faced with the cost to defend itself against allegations or legal action from pollution related events, regardless if you are fault or not. Having the proper insurance coverage in place will help fund the expenses incurred to investigate or defend against a claim or suit and provide you with environmental claims handling expertise.

This environmental risk overview offers a general understanding of potential risks and may not reflect all risks associated with your business. Environmental Risk Professionals has compiled this overview for informational purposes only. This overview does not constitute legal opinion or advice, nor does it establish a consultant-client relationship. This overview is not intended to guide project parties in interpreting specific contracts or resolving disputes; such decisions may require consultation with counsel and depend on various factors. © 2025 Environmental Risk Professionals, LLC

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