Environmental Claims - Does your business have water-tight cover?
Have you considered if your business would be fully covered for an environmental claim? Guest blogger Toby Arnold of Aspen Insurance discusses the benefits of having a water-tight environmental insurance policy in place for pollution incidents.
Different businesses are subject to unique environmental exposures and risks. The majority of companies pose some level of risk to the environment, but some are more likely to pose an increased risk of environmental exposures from their air emissions, oil or chemical spills and waste management or water discharge from cleaning or cooling operations.
Pollution can arise from a wide variety of sources. For example, property owners can be liable for damage caused by tenants or from old historical activities on their sites. Most businesses do not realise that pollution cover under general insurance is often limited to damage to third parties only, and caused by a sudden and unforeseen pollution incident.
Most pollution is released very slowly and may go undetected for several years - but when it reaches a third party or water body, there can be significant consequences. Commercial insurance policies often exclude losses from gradual pollution releases and as a result your business could be liable for any injuries, damage and loss of use.
Regardless of whether pollution on your own site is gradual or sudden in nature, if you are required to clean it up under environmental law it is unlikely that a commercial insurance policy would respond. There’s also your own business interruption costs incurred whilst it’s being cleaned up.
Environmental regulators are becoming more active and with constant changes to environmental law, the potential exposures faced by businesses are also increasing. For example, if a pollution incident were to cause damage to protected species or habitats then as these are not ‘owned’ by a third party there would be no cover under a general insurance policy.
It’s not just a case of writing a cheque and walking away either - you will be responsible for restoring the environment to its original condition, which can take years. Environmental insurance pays for the specialists to take care of this for you, no matter how long it takes.
Company Directors, Managers and Supervisors can also be exposed. Individuals can be prosecuted for environmental offences with maximum penalties including prison. Environmental insurance covers investigations, defence costs and settlements.
An environmental claim can often be very complex, involving numerous interested parties often with competing interests. So, access to an expert claims service is key to minimising a particular loss.
It is therefore important that if a company Director or Risk Manager decides not to buy environmental insurance, they fully understand what it is they are not purchasing. That way it is an informed decision should they have to explain it to their board, shareholders, employees and other stakeholders after an environmental incident.
Environmental insurance can also provide access to expert environmental consultants and contractors. Aspen Insurance has set up a dedicated environmental incident helpline to assist with a timely response and provide steps to limit and mitigate the extent of any damage, as well as providing assistance to an insured when dealing with the demands of a regulator.