Compared to other key insurance policies that protect your company like Property and Automobile insurance, Pollution policies are relative newcomers to the insurance marketplace. Many insurance buyers do not yet fully understand the critical protection they provide or how one policy can differ significantly from another. These differences can affect your company’s ability to survive a pollution spill or escape.
Let me preface my next comments by saying; protection historically afforded incorporated entities (corporate veil) does not hold for liability arising from the escape of pollutants. Polluter pay legislation will not stop at Ltd. or Inc. but will take whatever corporate and personal monies, resources and capital to fully remediate a spill or escape up to and including personal wealth of directors and officers.
Are pollutants only noxious chemicals like petrochemicals, acids, and contaminated water?
Milk truck overturns releasing dairy product into a city drain system. The milk is considered a pollutant when it hits the ground.
Chlorinated water released into a watercourse has chlorine in levels not naturally occurring in nature resulting in damage to the ecosystem.
Pollutants or contaminants are substances that escape confinement resulting in them being where they should not be.
Purchasing a pollution policy does not automatically afford you and your organization the protection you hope to have. Like a fine suit, a pollution policy must be tailored to fit you.
For instance, some policies afford coverage if the escape is sudden rather than gradual, giving you a finite and short period to discover and report the escape. If you miss the deadline, you will have to find another way to fund remediation.
Defending your company in the face of a spill is paid for with ‘defense costs’, but what if you have fines and penalties levied against you. What if your company receives an order to pay punitive costs? These can be covered, but not if your broker does not know to ask.
Danny Lasante was transporting 35,000 litres of jet fuel, meant for helicopters fighting a nearby wildfire, when he crashed the truck in July 2013 and slid into Lemon Creek in the Slocan Valley in B.C.’s West Kootenay region on July 26, 2013.
He was later convicted on one count under the Environmental Management Act for causing the leak.
He was fined $20,000 in Nelson Provincial Court last week. He has two years to pay the fine, CBC.ca Posted Feb 27, 2020
Did you ever think your company’s liquidity would be a factor in surviving a covered loss? Some pollution policies will reimburse you after you pay the claim out of your own pocket. Are you liquid enough to pay a large remediation bill and wait to be reimbursed?
Many pollution policies will only respond with a third party ‘trigger’ meaning a claim needs to be brought by someone outside of your company who is impacted by a spill or escape. Without a third party bringing action for a spill at your premises, your pollution policy will not respond. So what? Banks will not finance land transactions without environmental assessments. No trigger, no claim, no remediation, no sale.
If your company handles potential pollutants in volume like machine oils, paints or other chemicals, protecting your organization from a spill or escape is critical. Why? Legislation has evolved to a ‘polluter pay’ model rather than allowing it to be swept under the carpet as we have seen historically.
If a pollutant can escape your premises, you are vulnerable to actions from other (3rd) parties including government bodies empowered by legislation; Alberta Environmental Protection and Enhancement Act.
Pollutants that cannot escape your premises pose different challenges, probably most problematic is the eventual sale of your business or property. As a liability against your organization, historical spills will need to be remediated prior to sale or the liability transferred to the buyer reducing the value of the sale. Spills and escapes left for periods of time before remediation will migrate meaning the scope and cost to remediate only increases with time.
Additionally, the default position of most pollution policies requires a 3rd party trigger which means coverage can only be invoked by someone other than you making a claim. If your escape of pollutants is on your site with no risk of migrating off, it is unlikely another (3rd) party will be able to make a claim, leaving you with a pollution policy that cannot respond. Ensuring that coverage has been enhanced with a 1st party trigger is critical when obtaining Premises Pollution coverage.
As the name suggests, Products Pollution coverage protects your organization from allegations of a pollution event related to your product. Products that carry, contain, move, or otherwise process pollutants such as: drums, bins, tanks, pipes, tubing or other machinery/equipment all have the propensity to fail. Even if your product does not fail, you have to deal with the allegation that it did until proven otherwise and this can mean costly defence costs, especially if your product goes into the US, a more litigious legal environment.
Even if the escape of pollutants related to your product is solely the fault of the end user, you may have to defend your organization in court. Here the concept of joint and several liability can have you pay for a loss that is zero percent your fault.
Joint and several liability is a legal term for a responsibility that is shared by two or more parties to a lawsuit. A wronged party may sue any or all of them, and collect the total damages awarded from any or all of them.
In law, joint and several liability makes all parties in a suit responsible for damages up to the entire amount awarded. If one party is unable to pay, the others named must pay more than their share even if the court attributes only 1% of fault to your organization which is not uncommon. In such cases, responsibility for the total amount awarded would be shared by all regardless of fault attributed.
A strong Quality Assurance & Quality Control program can defend your product in court.
Quality assurance are actions taken to design and manufacture a safe and effective product by building quality controls into the product life cycle.
Quality control are test procedures used to verify that a product is safe and effective after manufacturing is done.
Thor Insurance and Financial is a locally owned Northern Alberta insurance and benefits brokerage with roots going back to 1979. Our management team has over 100 years of commercial insurance experience, which we leverage to serve our commercial and industrial clients … Local Access, Global Reach.
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