Six myths about Environmental Insurance

RSA highlights common misconceptions about environmental cover

World leaders have struck a new climate change deal – the Glasgow Climate Pact – after the two-week COP26 summit in Glasgow in October and November. It is the first ever climate deal to explicitly state that the the use of coal (which has been deemed the worst fossil fuel for emitting greenhouse gases) will be limited, or “phased down”.

With a heavy focus on environmental issues and increasing regulations, businesses need to be more mindful than ever. What you may not be aware of is that not all pollution events are fully covered by standard insurance products. We’ve teamed up with RSA to highlight some of the key misconceptions about Environmental Insurance.

Myth 1: “All Public Liability Insurance includes environmental cover.”

Unfortunately, this is a myth. In reality, pollution cover under in Public Liability Insurance doesn’t provide adequate protection for all pollution incidents.

Covers not provided under a standard Public Liability policy include:

Gradual pollution

Not all pollution events are ‘sudden and accidental’ or ‘catastrophic’. Pollution events are just as likely to happen as a result of gradual pollution.

Statutory Liability

Works that is carried out at the request of an environmental regulator or debts incurred for work undertaken by regulator on your behalf wouldn’t be covered under a standard policy.

Own site clean-up

Own site clean-up from a pollution event is not covered under Public Liability Insurance. Meanwhile, it is estimated that 70% of claims paid under environmental policies are for own site clean-up.

Environmental damage

Much of the UK’s flora and fauna is not ‘owned’ by a private entity. Government authorities are charged with protecting the ‘non-owned’ environment. Therefore, environmental damage to ‘non-owned’ flora and fauna would not trigger a Public Liability policy.

Historic pollution

Under UK law, a land occupier or owner can be held liable for pollution on their site that they didn’t cause, even if it happened years ago. However, historic pollution is not covered by a Public Liability policy.

Myth 2: “We are not a polluter.”

It’s a common misconception that Environmental Liability is only for heavy engineering, chemical and manufacturing activities. You may not see your business as a potential polluter; however, environmental damage can be caused from the most unlikely pollutants. Water can become a pollutant when it is discharged into a river at high temperatures or laden with silt. Milk and alcohol spills can degrade the quality of surface water, causing fish to die.

The Environment Agency says around 57% of serious incidents that have been recorded were from so called ‘low risk’ trades. These sectors include light engineering, warehouses, retail outlets and commercial offices.

Myth 3: “The polluter pays.”

Many businesses rely on the fact that under UK law the polluter is the one that pays for historic pollution. However, this is not always the best approach, as problems can arise when:

• the polluter can’t be found or has gone bankrupt, at which point the owner or occupier of the property can become liable for clean-up; or
• you own land that was previously occupied by a recently privatised industry, for example by gas companies, the water industry or a local authority. Recent case law suggests that the successors to these companies or legal entities won’t be held liable for any pollution they caused

Myth 4: “Insurers only provide Environmental Insurance to low risk businesses.”

This one is false. Environmental Insurance can be taken out by businesses undertaking a wide range of activities, including commercial properties, product assembly, storage and distribution, manufacturing and chemical storage.

Myth 5: “You need a survey first.”

The streamlining of the underwriting process means that surveys are not always required; often policies are placed on existing information held by a business and/or once the application form has been completed.

Myth 6: “Environmental Insurance is too expensive.”

By working with our friends at RSA, we’re able to provide environmental cover at competitive prices. As well as policies that cover clean-up costs and third-party damages, your business can benefit from emergency response and legal and technical support to manage short and long-term exposure.

As your broker, we can source bespoke cover that meets your business’ requirements. To talk through your Environmental insurance needs, get in touch with our friendly team today.