Latest Trends in Environmental Liability B. DARRELL CHILD INTERMOUNTAIN AWWA EXECUTIVE VICE PRESIDENT SEPTEMBER 15, 2016

Transcription

1 Latest Trends in Environmental Liability B. DARRELL CHILD INTERMOUNTAIN AWWA EXECUTIVE VICE PRESIDENT SEPTEMBER 15, 2016

2 Environmental Risk What Organizations Face Environmental Risk?

3 Environmental Risk May arise from our direct ownership or use of facilities or operations May arise from contractors or other operators that complete work on our behalf May arise vicariously by others that complete work for third parties May arise if others violate environmental standards on our premises

4 Environmental Risk If it happens to us or by us, we own the problem.

5 Environmental Risk What environmental risks do we face? Injury or illness from contaminated water or work sites Direct cost of cleanup Regulatory costs or fines Damages to other parties

6 Environmental Risks of Water Organizations Loading, Equipment & Hauling Pump Stations Use of Chemicals Fuel Tankers Odor Toxic release after a natural disaster

7 Examples Contamination of a aquifer Cross connection into a culinary water supply Challenge to water quality under the Safe Drinking Water Act Line disruption by a contractor Use of chemicals or disinfectants in water purification

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9 Example

10 Environmental Risk Will our current insurance cover environmental events?

11 Environmental Overview 1. History of liability coverage 2. Specialized environmental policies 3. Risk Management

12 History of Environmental Liability Insurance Most general liability policies written prior to 1970 would cover environmental events, including contamination of drinking water. The Environmental Protection Agency was established in 1970 to mandate responsibility for environmental risks. The insurance industry issued their first limitations for environmental events with a qualified pollution exclusion.

13 Qualified Pollution Exclusion It is agreed that the insurance does not apply to bodily injury or property damage arising out of the discharge, dispersal, release of toxic chemicals, liquids or gases, waste material or other irritants, contaminants or pollutants.but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.

14 Absolute Pollution Exclusion Excluded all pollution events at a site or premises which was covered under the general liability policy. Potentially could allow coverage for off site work completed by a contractor or materials in transit. Did not resolve issues related to normal operations such as treatment of water, backup of sewers or ancillary work.

15 Total Pollution Exclusion Many carriers added total pollution exclusions, which eliminated all possible environmental or pollution claims from coverage.

16 Pollution Exclusion Language Most policies exclude: Irritants, Contaminants or pollutants Discharged or released in any form Into land, water or the atmosphere

17 Modified Pollution Exclusions Today many General Liability insurers use a pollution exclusion that eliminates coverage, at sites or premises which may or may not grant exceptions for: Back up of sewers & drains Culinary water Hostile fire Use of chemicals in treatment or spraying While in transit

18 Drinking Water The qualified pollution exclusion applies to drinking water or any water that is distributed for human consumption.

19 Modified Pollution Exclusions General liability pollution exclusion exemptions may be granted for culinary water: Treatment of water Contamination of water

20 Pollution Exclusion Language Is odor a pollutant? Some policies treat odor as a pollutant, and therefore excluded. Others do not treat odor as a pollutant, which means that a claim for undue odor may have coverage.

21 Odor = Pollution

22 When we Hire Contractors Generally evidence of insurance is required, however when there are environmental concerns a higher level of review is necessary.

23 When We Hire Contractors Requirements: Specific requirement that the contractors liability policy has modifications to address any potential environmental hazard. May require specific environmental coverage. Review actual policy language, since this will not be evident on a certificate of insurance.

24 Environmental Risk Planning Environmental risks are evaluated for the organization. An assessment is made of potential coverage from existing policies. Environmental coverage is designed to complement the existing coverage program.

25 Risk Management Considerations Evaluation of risks that could potentially be beyond the scope of the organizations resources, including the ability to raise revenue through taxation. Balancing risk to the lowest possible long term cost.

26 Environmental Coverage Specialized environmental insurance is available for risks that fall outside of normal coverage parameters.

27 Contemporary Environmental Coverage Environmental Liability insurance is generally written by specialty insurance carrier, with specific policy language that is crafted to each circumstance.

28 Pollution Legal Liability or Environmental Impairment Liability Insurance Coverage responds to loss arising from pollution conditions at a specific site or location. Known contamination at the time of the application for coverage is not covered. May include transportation coverage or other ancillary activity.

29 Pollution Legal Liability or Environmental Impairment Liability Insurance Coverage is generally written on a claims made basis, which means that the coverage trigger is when a claim is made. The policy may or may not grant retroactive coverage to prior policy periods. The policies are generally written on an extended terms basis, generally in the range of 3 to 5 years. They may also extend based on lending requirements.

30 Pollution Legal Liability or Environmental Impairment Liability Insurance Coverage options may be tailored to specific needs: First & third party clean up Third party bodily injury liability Third party property damage & natural resource damage Legal defense cost Costs of business interruption Diminution in the value of property Transportation off site Emergency response costs Underground storage tanks

31 Retention of Risk Most environmental liability policies prescribe that the policy holder generally pays for the first layer of risk. Self insured retentions are generally set in a range of $25,000 or higher. The higher the retention the lower the overall premium cost.

32 Pollution Legal Liability or Environmental Impairment Liability Insurance Policies include a schedule of covered locations. Unlike a general liability policy that grants coverage to all locations and operations of an entity, unless specifically excluded.

33 Fuel Tankers Automobile Liability Pollutants not used for normal operation of the vehicle, are excluded under standard Automobile Liability policies.

34 Environmental Liability Insurance Response Covers an accident or leak at a site, which may result in legal liability. Protects financial interest, especially when outside loans or financing is evident. May allow reuse of brownfields or other sites that may be ideal for development. Provides coverage if environmental impairment results from a natural disaster.

35 Questions?

36 Contact Information DARRELL CHILD

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