Environmental Impairment Liability (EIL) Insurance
Environmental Impairment Liability insurance is an insurance policy to protect stakeholders holding property assets or operating businesses from pollution or environmental incidents.
With ultimate responsibility for cleaning up contamination resting with the polluter, maintaining environmental liability policy reduces your exposure.
Tougher legislation mixed with media attention and heightened community awareness means Environmental risk is ever increasing. As these claims can also be long-tail in nature, the financial losses to you through being either the cause of, or the victim can be devastating.
Boardroom agendas need to take into account exposures arising from this legislation, with balance sheet exposure, reputation and corporate governance failure major potential issues.
Stakeholders and businesses who should consider Environmental EIL Insurance
The types of businesses and directors that may be interested with this type of insurance are those with interests in commercial properties or the operating businesses on these properties. Pollution exposures are not just a consideration for the more ‘traditional’ industries such as chemicals, petroleum or manufacturing.
If your assets or business have any relationships with, or are involved with, or have exposures from below, this is an insurance you may wish to consider:
- Waste, Chemicals, Fuel
- Bulk storage of materials
- Waste water
- Industrial processes
- Transportation of materials
- Construction works
- Contaminated land from historical operations
- Fire
Any sites that have historical use like this, should consider the cover as well.
With pollution conditions becoming more onerous, and stricter environmental laws placing major financial exposures onto businesses and directors, reviewing this coverage is important.
Environmental insurance is a more recent and is continuing to develop. Benefits include coverage for liabilities arising from Underground Storage tanks, First party business interruption, Transportation and Disposal sites.
What is covered by EIL Insurance?
Environmental policies can provide coverage for:
- Costs of site investigation and assessment
- Costs of pollution clean-up, both sudden and gradual
- 3rd party claims for bodily injury and property damage
- Legal defence expenses
- Emergency response
- Public Relations and Mitigation costs
- Business interruption
- Civil fines and penalties, including enforceable undertakings - Environmental Protection Authority (EPA) orders including EPA own costs.
- Natural resource damage
There are gaps in traditional liability policies that means they do not provide environmental liability cover.
Significantly your existing traditional General Liability policy does not cover Gradual Pollution, Historic Pollution, Statutory clean-up costs, on-site First Party Clean up, Environmental Damage and Loss mitigation and consultancy costs. In addition, a General Liability policy must have personal injury or property damage initially and does not cover strict liability by itself, and resultant penalties.
What are the different types of Environmental Liability policies
There are essentially three main types of Environmental Liability policies
- Fixed Site Pollution Liability
- Contractors Pollution Liability
- Transactional Environmental Policies
Fixed-site Pollution Liability
Fixed-site Pollution Legal Liability (PLL) policies protect insured's from liabilities and costs resulting from pollution conditions at, on, under or migrating from specified locations.
This type of policy is appropriate for insured's who operate at premises that they own, lease or licence (also known as “covered locations”).
PLL insurance can cover single sites or portfolios and be arranged on an annual or multi-year term.
The coverage can be structured to respond to new pollution whether caused by an owner or tenant, and in some cases, can also be structured to respond to historical contamination caused by prior use of the site.
These policies are designed to respond to pollution at or from the site, not to who caused it.
PLL policies are issued on a claims-made and reported basis.
Contractors Pollution Liability
Contractors Pollution Liability (CPL) policies protect insured's from liabilities and costs arising from pollution conditions which result from specified contracting activities (also known as “covered operations”).
This type of policy is appropriate for insured's who work on Third parties’ sites.
CPL insurance can be used to cover a contractor’s exposures on an annual basis or multi-year term, complimenting and filling in the pollution gaps in their public liability or CAR policy. Alternatively it can cover single projects for the duration of the project.
CPL policies are available on a claims-made or occurrence basis. If a contractor is arranging cover, then a CPL policy covering the contractor and any subcontractors working on the project is suitable. On the other hand, if a contractor’s client is arranging cover, a CPL policy with an Owner Controlled Insurance Program (OCIP) endorsement is appropriate.
Transactional Environmental Policies
In undertaking M&A Transactions, both buyers and sellers may wish to provide a financial cap to certain exposures such as Environmental to the other party, in order to create greater certainty for the transaction.
With this in mind, it may be possible to obtain a programme that includes these benefits
- Coverage for up to 10 years for a one-off program with full retroactive coverage
- Personal coverage for directors and officers
- Coverage for losses arising from future changes in environmental legislation
- Assignment clauses can be provided enabling insured’s to assign the policy to a future purchaser
Claims process
Typically within 24 hours of notification of a pollution liability incident there can be identification and instigation of emergency action.
We can mobilise experts on your behalf, have a plan developed by insurers for the days, weeks and months ahead, conduct formal discussions with regulatory authorities, with continual crisis management support.
With all insurance policies the trigger to the commencement and indemnification under the policy are important. We will discuss coverage, benefits and costs of various policies with you prior to commencement.
Summary
For more information relating to this coverage, please contact our experienced team at Business Insurance Specialists who can assist you in discussing and obtaining competitive terms for this cover.