Environmental Liability Insurance Risk Exposures Explained

What about insurance cover against environmental or pollution related incidents? The potential for a major pollution related incident is more likely than one may think, especially for high risk industrial businesses and property owners where the resultant cleanup and legal costs could be astronomical.

• Historical Pollution (long-term or delayed effects of pollution related incidents)
• Air Pollution (including dust and odour)
• Soil Pollution (including sudden or gradual)
• Water Pollution (including surface water runoff and wastewater discharge)

Typical Environmental Liability insurance products include:

• Contractors Pollution Liability

This policy responds to:

• Errors and omissions in environmental technical/geotechnical reporting;
• Third-party bodily injury, property and environmental damage events arising from such errors and omissions;
• Pollution release during operations; and
• Such liabilities arising from a contractor’s activity and introduction of new/aggravation of new pollution conditions (this can also be taken out on behalf of contractors).

• Pollution Legal Liability

• This is a selection driven policy that can be site specific or across numerous locations.
• Business Interruption cover may also be built into this policy.
• It provides options for miscellaneous contracting operations and transportation of goods.

A proactive strategy for Property Owners to take is to include an Environmental Liability policy as part of the outgoings under their lease agreements. Building and Public Liability insurance are typically included and passed onto the tenants this way, so why not also include Environmental Liability? This can be done in house by property management agencies and will look after the best interests of the owners and their tenants, as the Environmental Liability insurance will respond as a first port of call should a pollution incident occur.

• Q. Is Environmental Liability insurance applicable to my Industry type?

A: The insurers that offer an Environmental Liability product policy generally have a broad appetite; the most common industries provided with this policy type include (but are not limited to):

Manufacturing – chemical, automotive, beverage, transportation, logistics and aviation.

Construction – Residential/commercial constructions, demolition and excavation

Services & Real Estate – Waste treatment, landfills, airports, marinas and petrol stations

Tourism & Hospitality – Hotels & resorts, boat yards/marinas and national parks

Energy – Refineries, gas works, terminals and tank farms, wind farms and hydro power facilities

Healthcare & Life Sciences – Hospitals, aged care facilities, clinics, laboratories & diagnostic facilities

• Q. A fire in my warehouse caused toxic smoke and run-off from stored chemicals into a neighbouring creek. The investigation and clean up costs are extremely high, and worse still is the tenant has gone into liquidation. Will my Public Liability insurance respond to this?

A: The resultant action from this event would fall under Statutory Liability, which is generally a standard exclusion under all General/Public Liability policies. Where such an incident is a possibility, we recommend an Environmental Liability policy which includes cover for the statutory clean-up costs that can be required under Environmental Law or incurred by a government entity.

• Q. Can we de-risk the purchase of a new development site by taking out an Environmental Liability insurance policy to cover off pollution exposures?

A: The history of a development site can certainly pose a risk to any planned new development, especially if that site was previously used as industrial land or as a gas service station, for example. In the right situations, purchasing an Environmental Insurance policy will de risk this scenario and give the buyer a safety net that may otherwise have made the deal too risky.

An Environmental Liability policy not only responds to bodily injury and property damage coverage for pre-existing and new conditions, but it will also respond if a site surveyor fails in their due diligence of the site and did not identify contamination that was in fact present. Instead of letting a prime location site opportunity slip by, mitigate and overcome the risk by purchasing the applicable Environmental Liability policy at the beginning.