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Businesses that work with potential pollutants that could find their way into their surroundings need to be aware of the risk and consider being appropriately protected against environmental liability. The pollutants are not always obvious so it's important to understand the range of environmental risks a business could be liable for without even realising it. Environmental damage can apply to property, ecosystems or wildlife, including land, air or water.
The types of businesses that have a moderate to high risk of causing environmental impacts and should consider environmental liability insurance an essential cover include:
- construction
- manufacturing
- agriculture
- food production
- viticulture and brewing
- recycling operations
- mining
- energy
and many more that deal with and dispose of pollutant or contaminating substances.
Environmental incidents may result from a number of causes:
- failure of water and waste disposal systems
- toxic waste leakage
- air pollution from dust or chemical emissions
- road transport accidents involving spills
- damage from disasters.
The Environmental Protection Agency (EPA) has the power to impose fines and penalties against any business found to have damaged the environment, either knowingly or involuntarily, while the associated disruption to business operations may be more extensive than the damage itself.
How can environmental liability insurance protect business exposures?
Environmental liability policies offer protections to businesses if they have been found liable for a breach of environmental law and were unaware of the issue. There has been a widespread case of friable asbestos found in landscaping supplies across numerous suburbs in New South Wales: how would your business survive if it was found that you unknowingly contributed to an issue like this?
Having an environmental liability policy is a major step in being able to offset future costs in the event that any environmental issues arise, regardless of whether it's your fault or a third party-driven problem.
Some of the costs related to an environmental issue might include:
- emergency response, such as fire control and mitigation actions
- clean-up and removal of contaminants and pollutants, business and third party properties or waterways
- public relations around crisis containment
- compliance with EPA directives and payment of penalties and fines.
Fire containment activity poses a key environmental risk
Fire containment materials such as foam and firefighting chemicals have a proven impact on the environment. If a fire has occurred and been contained at your business or operating facility you could be at risk of contaminating the surrounding environment — and even if this happened at some time in the past you may have inherited the problem and can still be held liable.
For example, in regional areas contaminated soil, groundwater or waterways from the use of per- and poly-fluoroalkyl substances (PFAS or 'forever chemicals') can result in loss of farmed produce. PFAS are typically found in firefighting material such as foams. The chemical foam or soluble liquid have been proved to be carcinogenic.
Containing fires usually involves vast amounts of water and firefighting chemicals. What is often overlooked is the runoff of such volume of water, often contaminated, entering neighbouring properties or waterways. Firefighters are not held liable for potential pollution. Liability rests with the property owner who is responsible for the clean-up.
Environmental liability insurance options
Environmental liability policies can be purchased as first and third party cover or just third party cover. The policy typically covers cases such as:
- gradual pollution and any sudden and accidental pollution event
- historical site specific pollution events and operational exposures
- clean-up costs associated with a pollution event
- public relations and crisis containment expenses.
First party liability insurance covers provide for the client's own costs associated with the pollution event, such as clean-up costs and any fines and penalties levied by a governmental agency or body.
Third party covers provide for the associated costs and losses by third parties with respect to either bodily injury or property damage.
How Gallagher can help with environmental liability protection
Our insurance experts have the expertise and experience to advise you on obtaining the insurance cover you need and can help make sure your business has adequate cover for environmental liability.
