Curbing the Costs of Contamination
The arena of environmental insurance claims can present many challenging and dynamic scenarios where environmental damage and financial liabilities quickly propagate in the immediate aftermath of a crisis. Environmental claims range from fuel spills to polluted flood waters, encompass issues with the disposal of a demolition waste and major fire incidents involving the spread of noxious smoke or asbestos contamination.
Environmental incidents may be covered in whole or in part, under first party material damage wordings, traditional Public Liability wordings or specialist environmental impairment liability (EIL) covers. Adjusters should be aware of a number of key issues when instructed on a pollution related incident as often causation is in doubt, identifying whether liability arises under civil or statute law requires urgent clarification, policy cover issues can be complex and evidence for potential recoveries needs to be secured. Significant pressures can also be exerted on the policyholder in relation to potential reputational damage and/or prosecutions under environmental criminal law that can include unlimited fines or imprisonment for Directors and Officers.
To mitigate costs, early and appropriate emergency response (such as the containment of spreading oil) must commence swiftly and given the premium rates charged by emergency responders for such work, it is important to close the emergency phase at the earliest. Liabilities from pollution events may not readily be apparent, such as in fuel spill cases where oil has soaked into soils on adjacent lands and migrates downwards reaching groundwater aquifers from which a potable water is abstracted. This could result in several millions pounds of costs, with all local resident's home plumbing becoming contaminated and a permanent loss of access to potable water from that source.
Our Environmental Risks division has extensive experience in a range environmental incidents and supports clients and colleagues globally both remotely or by travelling to provide on-site support as needed. We also collaborate with selected partners including specialist environmental consultants and emergency responders to offer a comprehensive and cost effective environmental risks service. We believe it is imperative to undertake a prompt investigation of liability and policy cover matters, assess what risks exist and act accordingly applying our technical expertise to ensure that realistic clean up targets are agreed. Regulators are engaged as need be and evidence on recoveries is secured.
We had been involved in a case involving the flooding of a large office block’s basement with water that was assumed to be contaminated. Initially, it had been estimated that removing the water using road tankers would take approximately 8 weeks and cost at least £750,000, not including BI and worsening of property damage caused by delayed drying. By introducing the correct expertise, we engaged with the Governmental Regulator and proved that the level of contamination in the flood water was negligible. Upon receipt of the Regulator’s permission, subject to sampling and ongoing monitoring, we pumped the water using specialist equipment out to the river from where it originated. This approach cost less than £30,000 and was completed in under 2 weeks resulting in savings in excess of £1million.
Similarly, in another case we applied our environmental claims handling expertise and reduced project costs by at least £650,000. The incident involved 8,000 tonnes of material which had been brought onto land that was unlawfully occupied by members of a travelling community, supposedly as flood defence from an adjacent river. The land owner was required by the Regulator to remove this material which reportedly also included hazardous material, namely asbestos. Waste disposal contractors who were trusted by the policyholder had quoted approximately £900,000 for waste removal.
Upon instruction, we arranged for robust sampling and mapping of waste that confirmed the majority of the material was not in fact hazardous waste as the policyholder's contractors had initially suggested. Waste brokers were therefore engaged to tender out the removal and costs were reduced to approximately £250,000. This highlights the added value of applying our thorough environmental risks expertise to each claim, undertaking a detailed investigation and taking action swiftly to mitigate delays, risks and costs.
David Waller can be contacted at email@example.com