An Environmental Impairment Liability (EIL) policy is designed to cover unforeseen environmental damage discovered in the policy period for all business activities of the Insured.
Environmental losses are, by their very nature, complex. All too often early, ill-conceived, decisions can prove costly; leading to poor customer and client outcomes.
These two recent cases demonstrate the devastating implications for organisations which could have saved time and money (and reputational damage) with an EIL policy in place.
Case study 1: Electro plating factory hydrochloric acid spill
3000 litres of hydrochloric acid was spilt when a tank at an electro plating factory collapsed. Acid migrated across the site, over neighbouring land and into a canal, causing impact to aquatic life. The Health and Safety Executive (HSE) and the Environment Agency (EA) were involved due to the risk to staff and contamination to controlled water.
There was no cover for on site clean-up under the material damage policy as the damage was not due to the operation of an insured peril. There was cover for damage to Third Party property under the Public Liability policy, but this did not extend to cover remediation of controlled water. The business required emergency assistance and advice in relation to dealing with the HSE, the EA and the media.
The company involved had to pay all costs, which reduced their profit margin. They also had to arrange the work and deal with the regulators at their own cost. Had they had an EIL policy in place, this would (subject to compliance with terms and conditions etc.) probably have covered remediation of their own site, the third party site and the controlled water clean-up, plus immediate assistance with emergency clean-up costs and possibly cover for legal/public relations advice.
Case study 2: University campus kerosene spill
This incident involved a spill of kerosene at a University campus due to an overfilled tank. The delivery operative was relying on a gauge attached to the tank which subsequently proved to be in need of recalibration; the tank was in a bund, but the bund wall was cracked. Oil migrated through the bund, down a slope, across grass land and entered drains that discharged into a watercourse. If the bund wall had been sound, the oil could have been pumped from the bund and no further damage would have occurred.
The material damage policy did not include the tank or bund within the definition of buildings. The damage was all on land belonging to the University, so the Public Liability policy was not triggered. There was no cover for impact to controlled water.
The University had to meet all of the clean-up costs from their own resources and manage the situation themselves. An EIL policy would (subject to compliance with terms and conditions etc.) probably have covered all of the costs incurred beyond the policy excess.
Our Environmental Claims Service
Whilst comparatively small in number, we recognise that environmental losses can be devastating to our clients’ customers and disproportionately costly. This, along with the complex nature of these claims, is why we have developed a bespoke service dedicated to managing this process in a way which reduces timescales and controls indemnity spend.
Providing both first and third party environmental claims services, we have partnered with like-minded specialist consulting firms operating in the environmental market to offer complete transparency and confidence to our clients
We have designed our own process map to assist our field staff with key decision making, but in summary:
- All Environmental claims are dealt with by experienced staff, with the dual emphasis on the early attendance of specialist contractors to instigate immediate practical mitigation.
- All cases are subject to continued peer review.
- Our specialist consulting firms are subject to rigorous, but achievable, operational methods which include:
– Emergency attendance on the same day of instruction.
– A reporting framework so that informed decisions can be taken in the minimum of time.
– Financial governance allowing for expenditure to be incurred immediately ‘at-risk’, thereby avoiding any delay whilst policy and legal liabilities are assessed
– An agreed process whereby any case with projected costs above a pre-determined level, tenders will be obtained on a restricted time basis.
We have had considerable success adopting the above strategy for the management of environmental services with a high degree of customer satisfaction. In particular, the tender process promotes an improved critical analysis of what measures are required. To date, a comparison of ‘first tender’ submissions and ‘second review’ has delivered savings of circa 30%.
More information on our Environmental claims service can be found here, or to find out more about Steve, who leads our dedicated national Environmental Loss Adjusting and Claims Service, you can click here or contact him via firstname.lastname@example.org.