Insurance cover for environmental losses is often incomplete or even non-existent without a dedicated environmental policy in place. That is the conclusion of a new research paper, published by the IUA, examining potential environmental claims scenarios.
The report highlights the gaps in cover that exist when relying on standard public liability and property policies, or even public liability policies with regulatory clean up and contamination costs extensions.
It highlights a range of potential loss scenarios that could affect different business sectors and result in incidents that are both costly and time consuming to handle.
“What is most striking about the scenarios is that it is easy to imagine a very wide range of businesses being involved in an environmental incident, ” commented Chris Jones, IUA Director of Market Services (pictured).
“Environmental liability is clearly not only the preserve of heavy industry.”
The research paper, Environmental Loss Scenarios, was prepared by the IUA’s Non-Marine Environmental Committee which is made up of underwriters from across the association’s 40 member companies.
Among the scenarios it covers are dust problems on a construction site, failure of a hotel’s oil tank, a spill of pesticide during transportation and pollution of a car park from poorly maintained drains. All the scenarios are based on real life examples.
The key message of the report is that the gap between the range of environmental liabilities to which organisations are now exposed and the liability cover provided by traditional insurance policies has become uncomfortably wide and will get wider.
“It is important to remember that environmental liabilities are often difficult to manage, ” added Mr Jones. They can take a long time to resolve and involve much technical input which, without an insurer’s help, may prove a considerable burden.
“The importance of having adequate environmental insurance in place has significantly heightened with the introduction of the EU Environmental Liability Directive which is based on the ‘polluter pays’ principle. This places strong emphasis on risk assessment, management and prevention
“Many EU member states have also required operators to put in place financial security to meet potential liabilities under the directive. So far the UK has not imposed such a measure but may yet choose to do so.”
Copies of Environmental Loss Scenarios, which is published in association with Berwin Leighton Paisner, are available from Chris Jones. The publication is also available on the IUA website together with an earlier report from August 2010 Environmental Risks: insured or not?