At the same time, national and international laws have been developed so that individuals and companies can be prosecuted for causing damage to the environment. Yet many are unaware of the impact even the smallest accident could have, not just to the environment but financially to the polluter themselves. Since the 1970s and 1980s, environmental insurance policies have been developed to cover liabilities arising from claims from third parties.
Environmental Liability Insurance
Also known as Environmental Impairment Liability (EIL), this type of insurance covers claims for personal injury, damage to property, clean-up expenses, legal expenses or fines that have been incurred as a result of pollution. Often property and liability insurance policies have exclusions related to pollution, which means that additional insurance for pollution-related damage is still needed. Since the extent of the pollution exclusions vary from policy to policy, numerous different types of environment insurance policies have been developed by insurance companies to cover them.
Pollution Liability
Understanding pollution liability is key to choosing the type of insurance your business might need. The problem is that many business associate pollution problems with high-risk industries. While major accidents in those fields may be relatively rare, there are still thousands of pollution incidents reported every year. According to a report from the Environment Agency, in England alone, in each year from 2012 to 2014, over 600 of those events reported were categorised as serious.
So who should consider taking out EIL cover? It may seem initially surprising that businesses that have taken out EIL cover include portfolio owners or managers and investment trusts, as well as educational establishments, property owners and developers.
Why do they need to ensure against the risk of causing damage to the environment?
It’s not just the production of hazardous substances and waste that can cause damage. Seemingly innocuous waste such as milk, run-off water containing food waste, oil or fuel can be serious enough to cause damage. Indeed, common causes of environmental damage reported include sewage, fuels, oils and even organic materials. And since contamination incidents can also occur gradually, they can go unnoticed for an extended period of time.
Since 2009, the EU Environmental Liability Directive (ELD) has aimed to incentivise businesses to take more ownership of the risks they may pose to the environment. This includes taking steps to prevent damage to the environment occurring by putting in place and following correct procedures.
Businesses are now liable financially for the cost of any damage their pollutants have caused. Under the European directive, the business must investigate the cause of the contamination and pay for remedial action. Should contamination be as a result of individuals in that company being negligent in their duties, it can be considered an offence which – if it comes to court – could result in up to two years’ imprisonment, and/or an unlimited fine. It doesn’t matter, either, whether it is pollution caused by contractors. A company can still be liable for contamination events caused by work done by contractors they’ve hired.
Contractors Pollution
Take, for example, a recent incident where a local water company hired a contractor to make some improvements to a water treatment plant. Both the water company and its contractor failed to properly survey an area of drainage prior to emptying a tank of diluted toxic chemicals, which led to the water in a nearby brook becoming contaminated, killing virtually all fish and other creatures in a 1.7 km stretch. Both companies were ordered to pay fines, and in addition the water company had to pay for restocking the affected area with fish once the pollutant had gone. The court stated that the pollution incident could have been prevented had the utility company and its contractor inspected the area first and taken the necessary precautions.
An incident like this brings home the message that damage to the environment, especially when it occurs due to negligence, is taken very seriously. In theory, any type of business could inadvertently become the cause of environmental pollution and, as such, should have a thorough understanding of the regulations, whether they’re in farming, construction, waste management or manufacturing, or if they’re private businesses, voluntary organisations and public sector establishments like hospitals and schools. Even the smallest environmental accident could result in a costly outcome and could bring about serious legal and financial consequences for smaller businesses.
Environmental impairment liability cover can protect against all types of liabilities, including business interruption, remediation costs, transportation, damage to a third party’s property or injury to a third party. It can also cover legal costs. Different types of EIL can focus on fixed site liabilities or for where contractors are involved and on liabilities that have been introduced by the ELD. That’s why it’s important to have a specialist insurer assess any environmental risks your business might pose and what kind of environmental impairment liability cover you are most likely to need.
The Right Insurance Product for You
The good news is that when you work with Argyll, our insurance advisory business (in effect an experienced broker with the expertise that enables them to put together just the package of protection your business needs) Ensura, will be able to offer a range of policies, that will ensure that your business is covered against potential incidents and that thus offers the coverage and the solution you need. Such cover will mean you have the knowledge that are insured against loss, or that such loss is limited. Their speciality is to ensure that the underwriting process is carried out in a responsible manner, this making sure that both parties fully understand the risks involved and that therefore there are no nasty surprises for either party in the event of a claim.
Together with our team of law professionals, who will keep your business on the right side of the extensive and every changing raft of environmental regulation and legislation, the insurance services we offer are the very definition of a complete package.
At Argyll we know that our professional approach has helped a wide range of corporate , commercial bodies and other institutions obtain the protection they need for their day to day operations and activities.
Please do check out our range of case studies and other insights into the world of Environmental Insurance and be sure to contact us if you want more information.