By Sarah Veysey, Crain News Service
CHICAGO (May 15, 2013) — Organizations that do not purchase dedicated environmental insurance policies frequently are not fully covered, or covered at all, in the event of a loss.
That makes them vulnerable to liabilities that could be hard to manage, according to research carried out by the International Underwriting Association (IUA).
The report, "Environmental Loss Scenarios," was produced by the London-based IUA's nonmarine environmental committee, which is made up of underwriters from across the IUA's 40 London market company members, in association with London-based law firm Berwin Leighton Paisner L.L.P.
The report covers differing potential loss scenarios based upon real-life events, including dust problems on a construction site, the failure of a hotel's oil tank, a spillage of pesticide during transportation, and pollution of a car park caused by poorly maintained drains.
"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 accident," said Chris Jones, director of market services at the IUA, in a statement. "Environmental liability is clearly not only the preserve of heavy industry."
Insurance coverage gap
There is, according to the report, a large gap between the coverage offered by traditional liability insurance products and the range of environmental liabilities that companies may now face, particularly under the European Union's Environmental Liability Directive, which is based on the "polluter pays" principle.
"It is important to remember that environmental liabilities are often difficult to manage," Mr. Jones said in the statement. "They can take a long time to resolve and involve much technical input which, without an insurer's help, may prove a considerable burden."
This report appeared in Business Insurance magazine, a Chicago-based sister publication of Tire Business.