Environmental Liability “Mind the Gap!” · ACII Cert CII (MP) ACILA Head of Environmental...
Transcript of Environmental Liability “Mind the Gap!” · ACII Cert CII (MP) ACILA Head of Environmental...
Environmental Liability
“Mind the Gap!”Presentation for Belfast Insurance Institute
17 September 2015
Graham HawkinsACII Cert CII (MP) ACILA
Head of Environmental Solutions
Stephen McCune
ACII ACILA
Loss Adjusting Services, Branch
Manager
Introduction
• Brief explanation of the European Environmental Liability
Directive (ELD)
• How this has been interpreted and applied by different
countries across Europe
• Coverage issues where there is cross-border
contamination
• Examples concerning ‘gaps’ in cover for environmental
exposures
• ELD – The Future
Environmental Liability Directive
• Directive 2004/35/CE of the European Parliament and the
Council - 21 April 2004
• Members need to enact local legislation for prevention and
remedying of significant environmental damage
ELD
Transposition into national legislation was required by 30 April 2007
This deadline was met by only 4 Member States (Italy, Latvia,
Lithuania and Hungary)
2008 – 2009: European Court of Justice raised proceedings against
Austria, Finland, France, Greece, Luxemburg, Slovenia and the UK
1 July 2010: transposition completed in all Member States
In UK - Environmental Damage (Prevention and Remediation)
Regulations 2009 (wef 1 March 2009) (England & Wales)
In NI - Environmental Liability (Prevention and Remediation)
Regulations (Northern Ireland) 2009 (guidance from www.doeni.gov.uk)
• Damage which has significant adverse effects on reaching or
maintaining favourable conservation status of species and
natural habitats protected under EC legislation
• Damage that significantly adversely affects the ecological,
chemical and/or quantitative status and/or ecological
potential of waters falling within the scope of the water
framework directive
• Land contamination that creates a significant risk of human
health being adversely affected as a result of direct or indirect
introduction in, on or under land of substances, preparations,
organisms and micro-organisms
ELD – not a level playing field!
-Options (that each Country can choose):
•Include additional species and habitats
•Extension of the definition of “operator”
•Provide a “permit defence” and/or “state of the art defence”
•Optional exemption of spread of sewage sludge - Annex III ?
•Add other activities to Annex III?
•Joint & several liability vs proportional liability?
•Mandatory financial security? – for some not all
This resulted in a patchwork of legal systems across Europe
ELD
• First Europe wide “polluter pays” regulation
• Establishes liability for environmental damage to protected
species and natural habitats, water and land (note:
“environmental damage to” ≠ “pollution of”)
•Establishes 2 liability systems:
•Strict liability for Annex III activities
•Fault-based liability for non-Annex III activities
Strict LiabilityFault-based
Liability
Waste Licence / permit
Discharges to water
Air pollution
Dangerous substances
Water abstractions (WFD)
Transport of waste
Mining waste
Carbon capture and storage
Occupational activities
not in Annex III
Land
damage
Water
damage
Damage to protected species
and natural habitats
ELD
• Operator whose activity causes an imminent threat of environmental
damage must:
•Take all practicable steps to prevent the damage without delay
•If measures fail to eliminate imminent threat, notify competent
authority as soon as possible
• Operator whose activity has caused environmental damage must take
remedial measures to restore the habitat to “baseline” condition
• Remediation measures
• Primary Remediation
• Complimentary Remediation
• Compensatory Remediation
But what is the baseline?
ELD – How is the “baseline” calculated?
ELD – Primary, Complimentary and Compensatory Remediation
• Primary Remediation (PR)
• Direct remediation or clean up of the affected area
• Complimentary Remediation
• In paralell with PR to promote recovery of the area – e.g. planting extra plants
near to affected area so that overall area has the “same” environmental benefit
• Compensatory Remediation
• Requirement to carry out remediation elsewhere or at end of the PR phase if
unable to return area to “baseline”
ELD – the costs• Emergency costs
• Investigation and forensics costs
• Criminal fines or Civil sanctions
• Legal fees
• Clean-up costs
• Primary, complimentary or compensatory
remediation costs
• Compensation to victims for injuries or distress
• Compensation to victims for property damage
• Compensation for disruption caused to
neighbouring activities
• Own business interruption costs
• Public relations costs
ELD• A French study in April 2010 investigated the differences in costs for
environmental remediation/restoration before and after the ELD came into force:
- Spill of 21,000l bleach into a river near a paper processing factory in France (5 April1997)
- Costs in 1997: € 42,700
- Costs in 2010: € 140,000 to € 400,000
- Spill of herbicides, insecticides and fungicides into a river after a fire (6 August 1996)
- Costs in 1996: € 10,000
- Costs in 2010: up to € 4,000,000
• More info: http://www.developpement-durable.gouv.fr/IMG/pdf/ED19c.pdf
ELD – Cross border issues
pollution
incident here
Contamination
discovered
here
National
border
ELD - The future
• 2014: report by the EC on the implementation (or not!) of the
ELD
• 2015: possible legal changes to the ELD
The damage severity threshold?
Pan-European mandatory security?
Optional defences?
Includes offshore activities?
• In the meantime the EC is working on training material for the
different stakeholders to raise awareness
ELD – Insurance
“Pollution” cover under existing Material Damage or
General/Public Liability policies will protect my
client/insured – won’t it!?!
Well let’s see???
Material Damage Policy – The “Gaps”
• Buildings damage – but only within the definition
• NOT the surrounding ground or at depth if this does not
pose a risk or damages the buildings
• Pollution must arise from the action of an insured peril
(fire, escape of oil etc)
• Gradual wear and tear exclusions
• No Business Interruption cover if no damage to the
buildings
Public Liability Policy – The ‘Gaps’
• Offers limited protection
• Many liabilities fall outside the insuring clauses
• Only cover tort/civil law liabilities – not statutory
• Bartoline Limited v RSA and Heath Lambert Ltd (2006)
• Bartoline ‘extensions’
Public Liability - The ‘Gaps’
Gradual pollution
Own site pollution
Prevention of harm
Statutory liabilities
ELD – Environmental Liability Insurance
• Covers costs for work required by the Regulator
• Covers both own land and off site remediation
• Covers gradual and sudden causes
• Covers action to prevent the risk of environmental
damage
• Generally covers Primary, Complimentary and
Compensatory remediation costs (ELD)
• Can extend to cover insured’s business interruption
losses where related to remediation works
• Can provide Public Relations costs
Environmental Liability Insurance –
common exclusions
• Environmental contamination known about prior the
retroactive date
• Maintenance of equipment is not preventative costs
• Known expense – ie -remediation of a brown field site
forms part of a developer’s known costs
• No policy covers any Court Fines, costs or
criminal penalties
Scenario 1
Scenario 1
• Insured Landowner own a silage store
• Walls of store collapse – enters nearby river
• Claims for damage and clean up of:
Own land
Contaminated water of nearby river
Costs to prevent spread of pollution to neighbouring land
• Not covered under Property or PL policy
• Control of Pollution (Silage, Slurry and Agricultural Fuel
Oil) Regulations (Northern Ireland) 2003
Scenario 2
Scenario 2
• External oil tank replaced but not feed lines
• Leak from feed line allowed escape of oil to depth and
polluted aquifer
• Leak due to rusting of feed line – This was deemed a
gradual cause so no cover under PL (even if they may
have had a ‘Bartoline’ extension)
• No damage to own buildings as pollution went to depth
‘Gradual’ pollution
• “…This policy excludes all liability in respect of Pollution or
Contamination other than that caused by a sudden,
identifiable, unintended and unexpected incident which
takes place in its entirety at a specific time and place during
the Period of Insurance…”
• The incident is the area of focus
• Gradual pollution is not excluded where the incident is
sudden, identifiable, etc…
• Beware! Wordings do vary
Scenario 3
ELD – Experience so far........
• Very few ELD cases (and almost none where compensatory and
complementary remediation was applied)
• Competent authorities across Europe tend to use pre-existing
legislation rather than the ELD
• Operators are unfamiliar with the requirements and risks related to
the ELD and thus what they are and are not insured for
Q&A
Graham HawkinsACII Cert CII (MP) ACILA
Head of Environmental Solutions
+44(0)7920 871042