Environmental/Pollution Insurance - What you need to know
As a property owner, building contractor or manufacturer you or your tenants produce or handle or of waste regularly. There may also be spills or other accidents that cause pollution to nearby premises. While accidental pollution events are likely to be covered under your Public Liability insurance, other types of gradual or sudden pollution events may not be insured. Have you considered Environmental Liability/Pollution Insurance?
Environmental Liability insurance covers your business against alleged or actual acts of environmental harm caused in relation to your business. While Environmental Liability Insurance has traditionally been directed at large industrial manufacturers, oil refineries or even nuclear facilities, many states environmental protection agencies (EPA) are now focussed on medium and small businesses. In NSW, the EPA has stated in their 2020 Annual Report that they are focussed on ‘escalating compliance and enforcement actions’. There were at least 7 changes to laws covering the transport, construction and property management sectors last year alone.
Although most fines and enforcement action is by on-the-spot penalties, examples of recent court judgements include, a builder found guilty of pollution and fined $295,000 plus legal costs, also a council fined $446,500 plus legal costs for sewage entering a creak. Both also gave enforceable undertakings to change business practices that added to the operational costs of the companies. It’s worth noting that the maximum penalties in NSW are now, up to 7 years in jail, $5 Million in fines for a company and $1 Million per person. These are similar to penalties other states and territories have in place. This is a strict liability law, so there are really no excuses, if pollution occurs.
The NSW EPA oversees 9 laws with environmental requirements (form transport, waste management and hazardous chemicals to water and air quality). There were 7 changes to the related regulations in the past year alone. More information can be found at the NSW EPA website or from your local EPA office.
Given the broad range of potential environmental harm or damage that can be caused, it’s clear that just about every business has some type of environmental exposure. So what does Environmental/Pollution Insurance cover, why is it needed, who can benefit from it and how can it help your business?
What does Environmental/Pollution Insurance cover?
In general, Environmental/Pollution Insurance protects both the directors and managers personally, as well as your business, against allegations or actual environmental harm (pollution). The policy will pay for clean-up costs, which can easily be up to $1 Million, plus legal costs and expenses such as technical reports. Your policy should also cover bodily injury and property damage. Some policies can also pay for your loss of profits.
There are specialist liability wordings tailored for Property Owners, Business Operations, Construction Contractors, Environmental Professionals and Transport Companies.
One of the key products is Pollution Legal Liability (PLL), which covers contamination at your premises, whether from your operations or from accidental spread of existing pollution conditions. Contractors’ Pollution Liability (CPL) is another that covers contractors who work on third party sites or transport waste, where contaminants are found or an event occurs that causes environmental damage. For example, asbestos was buried years ago on site without the current owner’s knowledge, however the asbestos was spread throughout the site when levelling.
It’s often easier to budget for an annual insurance premium, than have to pay for site clean-up/remediation cost, fines and legal costs.
Who can benefit from Environmental/Pollution Insurance?
Whilst your business practices might not have changed, your responsibilities as an owner of manager, as well as the duty of the company to protect the environment has. This means that just about any business can potentially cause environmental harm and therefore benefit from Environmental/Pollution Insurance.
It’s not just the big manufacturers and oil refineries, it’s also small and medium businesses, that use or store chemicals, produces harmful waste or just moves building waste that can benefit from this type of insurance.
How can your business benefit from Environmental/Pollution Insurance?
It’s important to understand that the usual Public & Products Liability business insurance only provides limited cover for sudden and accidental pollution events. It won’t cover your business or the directors and managers for allegations or actual environmental harm from gradual leaks or contamination that happens over time. If you are not aware of this difference, it can leave you and your business exposed to significant legal costs, fines, the costs of a clean-up and even remediation of the land. This is in addition to the loss of income and reputational damage that can cause lasting financial damage.
Pollution and environment harm are specialised areas, with the potential to cause substantial and lasting damage. Therefore, insurers have developed these specialist products. If you want to manage this potentially large financial exposure, Environmental/Pollution Insurance will help.
Talk with a professional insurance adviser
Given that insurance can be complex and no two businesses are alike, it’s vital that you speak to a professional insurance adviser that help you manage key risks. They can help you decide whether this type of insurance is appropriate for you and your business and if so, customise it to suit your needs. Talk to an insurance professional today and find your local adviser.
This communication including any weblinks or attachments is for information purposes only, it is not a summary of a particular insurance product’s terms or conditions or a Policy Disclosure Statement (PDS). It is also not personal advice and your individual objectives, financial situation or needs have not been taken into account. This communication is not intended to constitute personal advice.
We strongly recommend that you consider the suitability of this information, in respect of your own personal objectives, financial situation and needs and if you are interested in discussing or finding out more about this communication, you should contact your insurance adviser. We also strongly recommend that you obtain and carefully consider any relevant PDS or policy wording before deciding whether to purchase any insurance product.
The type of insurance product in this communication is designed for both small and large businesses, who want both the directors and managers, as well as the business to be covered against financial loss, including personal financial loss, from environmental harm related to owning, operating, and managing a business.