Morrison insurance Solutions

Environmental Impairment – are you covered?

Liability insurance cover

Traditional liability policies were never originally designed to cover environmental risks and are based on the tort system. The tort system relies upon a policyholder being sued by a wronged third party to establish liability. In recent years Parliament has introduced an elaborate system of statutory liability. Statutory liability does not have the burden of proving fault to establish liability.

The result of this shift from tort to statutory systems has highlighted deficiencies in the cover a policyholder can expect from standard liability policies.

The statutory environment

There are many statutory environmental regimes but there are some common themes:

• They are strict liability (thus avoiding the need to prove fault)
• They are regulator enforced (thus avoiding all the restrictions in the tort system associated with who can sue and for what)
• They are more usually triggered by environmental harm than by personal injury or property damage
• They require the polluter to clean up rather than simply compensate a third party for their loss
• They are backed up by criminal sanctions

To add an additional layer of complexity, legislation is being added to all the time. For example, the European Environmental Liability Directive extends liability to include the wider environment (including biodiversity damage). This relates not only to damage that has occurred but also to the threat of imminent damage occurring. And liability is potentially unlimited.

Our advice

The issue of environmental liabilities has the potential to affect many businesses. We recommend that businesses check the depth of their liability policies.

New insurance products are being developed to fill the gaps, many providing annually renewable cover in respect of a business’s statutory liabilities arising out of environmental harm. In addition we recommend businesses ensure they are covered for the following:

• The full range of investigation and remediation that can be ordered under the new Environmental Damage regime
• For liability for environmental harm, even where the harm has not arisen as a result of pollution or contamination (for instance, where the harm results from a fire or a flood)
• For liabilities resulting from gradual pollution as well as liabilities resulting from pollution caused by a sudden incident
• Where the insured takes action in respect of environmental harm before a formal claim is made and before legal liability is officially established
• The long term risk of site ownership or tenancy
• Legal liabilities (on and off site)
• The risks of Third Party claims or extensive class actions
• Long term cover – running from between two to 15 years

In some instances we also recommend cover for liability:

• Arising out of historical contamination at specific sites (whether currently owned or previously sold),
• For environmental harm arising from products associated with installation, repair and servicing work at third party premises

What to do next

Environmental impairment and liability insurance is a complex area but with the right advice it is possible to get properly covered.

We are experts in liability insurance and understand all the issues so if you’d like more information, or would like us to review your cover please call our experts now.

Call 01789 761670


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