Update your environmental insurance advice

Even if you haven't recommended pollution cover to a client in the past, it makes sense to re-examine your client's pollution exposures on a regular basis. In spite of sweeping regulatory and legal changes, pollution insurance has become a lot more affordable, bringing this important protection within the reach of most businesses.

Our coverage options have never been wider. It is easier than ever before to tailor a pollution cover to your client's individual needs.

Our environmental impairment liability (EIL) program goes far beyond the CGL coverage in several important areas:

• Gradual and sudden pollution coverage — EIL provides cover for sudden pollution events such as fire, explosion or sudden spill from a tank or container, as well as gradual seepage, including historical pollution.



• Government-ordered clean-up expenses — EIL provides cover for bodily injury (BI), property damage (PD) and clean-up expenses arising from a pollution event. By contrast, the CGL policy expressly excludes any government-ordered cleanup and monitoring expenses. Most spills are remediated under the supervision of the Ministry of the Environment (MOE) officers, so this cover is very important.



• Waste materials — the CGL policy provides no cover for pollution from waste materials. Pollution of any kind from even the most innocuous wastes is subject to an absolute exclusion. This exposure is especially important for customers in the waste management industry and for other clients with an elevated exposure arising from waste materials.

We don't want clients to carry more insurance cover than they need, so for those with a low risk of gradual (historical) pollution losses, we suggest our Pollution Event Insurance (PEI) policy form.

• PEI provides excellent cover for third-party BI, PD and cleanup expenses for sudden events only on a time basis (120 or 240 hour form.) $10-million limit available.



• The PEI form is much broader than the pollution cover in a standard CGL policy, even IBC2313, the Insurance Bureau of Canada's (IBC's) broadest environmental rider.



• PEI includes cover for losses arising from waste material on the client's premises. There is no similar cover in the IBC2313 form.



• PEI provides cover for government-ordered cleanup expenses, as well as BI and PD. There is no similar cover in the IBC2313 form.



• PEI provides protection for transportation risks, including loading and unloading exposures if excluded by the auto fleet policy.



• PEI cover is an affordable alternative to full EIL cover.



• A reduced inspection requirement applies. However, we usually recommend a full EIL inspection — after all, your client might want or need broader cover in the future.



• PEI may not be suitable for clients whose principal exposure is gradual pollution (seepage) rather than a sudden above-ground escape or spill.

We now can offer $5-million limits for cover on a sudden pollution basis, or up to $1 million for cover to include gradual pollution exposures.

• Designed for large and small fleet operators.



• Provides over-the-road hazards, attached machinery, loading and unloading, and premises liability.



• Especially suitable for fleets hauling fuels, flammable or corrosive liquids, waste or other dangerous materials.



• Fills the gap created by SEF 30 or similar statutory limitations in the statutory auto policy. In most provinces, the auto policy provides liability cover for pollution events. In some provinces, the SEF 30 is used to exclude losses arising from machinery or attached equipment, including pollution events. In particular, the
• Insurance Corporation of British Columbia (ICBC) imposes the SEF 30 exclusion without exception.


We can usually write auto DIC cover without inspection, if no premises liability cover is required.

• Disposal, recycling & transportation of wastes



• Emergency response services such as vacuum trucks



• Incineration, encapsulation and other waste disposal techniques



• Medical and other specialty wastes



• Products risks which are particularly sensitive to environmental exposures



• Asbestos removal contractors

• Cover may be written to include all the contractor's activities on a blanket basis, not just scheduled locations.



• Cover may be written on a single-job basis, for owner's interest, contractor's interest or full wrap-up form.



• We can also write tough risks such as underground tank installers or site remediation and decontamination projects, either on an annual or individual-job basis.



• Work on or near waste management sites such as waste dumps or storage depots presents unusual hazards for contractors and other service providers.



• The standard CGL policy provides reduced cover for work on or around such sites. A specialty policy may be necessary for such work.



• Our cover can include completed operations, if not provided by the CGL policy.



• We also write asbestos removal contractors in our Canadian Liability Insurers program.

Typically these hazards reside in a pristine setting, surrounded by water, wilderness habitat, park or farmland. Even minor spills may present a serious threat to nearby communities that are reliant on traditional industries or lifestyles. Our program recognizes the special exposures and environmentally sensitive nature of these risks.

For clients who can demonstrate excellent environmental safety practices, our new program provides broad cover with reduced engineering requirements.

Our policy is extended to include sub-limit of $50,000 for "midnight dumping" expenses — to pay for the cost of removal of illegally dumped wastes. In most provinces, environmental regulations may impose a strict duty on the property owner to dispose of these wastes, often at a significant cost.

• Engineers practising in the environmental field who are unable to obtain appropriate cover from their regular markets



• Testing laboratories, including analysis of soil, liquids and chemicals



• Biologists



• Geologists



• Chemists



• Other consultants in the environmental field.

The program is underwritten in-house and supported by first-class, licensed insurers. Minimum premium of $2,500 applies.

• To qualify for environmental insurance (and to reduce the premium)



• To inform insurers for other property and casualty covers



• Business financing



• Occupational health and safety



• Spill control and emergency procedures



• A component in a due diligence defense to future environmental charges.

• A pre-binding survey at your expense is usually a necessary part of placing an EIL risk.



• We'll reduce the first year's premium by up to 10 percent to help defray the survey costs.



• We'll absorb the cost of any renewal survey as well. For most risks, the survey will therefore be a one-time requirement, although there may be cases where mid-term acquisitions require additional or follow-up inspections.



• Plan ahead — order the survey early to ensure that cover can be bound on time. Ideally, the survey should be ordered 50-60 days before the proposed attachment date.



• We can accept inspections from our approved engineers, but if you have a recent report from any other consultant, include a copy with your application. We'll do our best to ensure that survey fees are not duplicated unnecessarily.



• Our engineers can often reduce the cost of their services if they are provided with copies of previous reports before they visit the site.



• Your submission should include copies of any recent environmental audits or other relevant reports. We can provide a more reliable premium indication and may even be able to waive our requirement for a survey by an approved engineer. Any material risks identified by prior reports must be disclosed to underwriters.



• The survey provides valuable additional information that helps you offer your client the right insurance advice.

Most insurers use the IBC standard CGL environmental exclusion. Usually, this exclusion doesn't apply to the products and completed operations exposures. But some carriers use non-standard forms that exclude all pollution exposures, including the products and/or completed operations hazard.

We suggest that you examine this coverage feature carefully, especially for client's with an elevated products and/or completed operations hazard pollution exposure, such as the manufacture of storage equipment or control valves for industrial liquids or other pollution-sensitive products or services.

For such clients, the standard CGL provides generous products and completed operations cover. Of course, the environmental exclusion still applies to premises liability and other hazards.

For risks with a higher than average products and/or completed operations exposure, we urge you to:

• Verify that the CGL carrier has used the standard exclusion. Some carriers use non-standard forms that reduce or exclude all pollution exposures, including the products and/or completed operations hazard.



• Be sure that your underwriter agrees with your coverage interpretation, preferably in writing. Some claims examiners have little experience in pollution losses, so it is preferable to address this issue when placing the risk, rather than after the first loss has been reported. If the claim examiner elects to deny the loss or obtain a legal opinion on coverage issues, the defence of the third party claim may fall to your client. Environmental losses are usually complex and can be very costly to defend.



• The "wastes" exclusion in your CGL may also apply to the products and/or completed operations hazard.



• Most CGL policies only cover BI and PD losses. Government ordered clean-up costs may be expressly excluded, even in the products and/or completed operations hazards.



• The IBC announced further changes to the CGL environmental exclusions in July 2000. This revision may further reduce pollution coverage as respects the products and/or completed operations hazard. Be prepared for the implementation of these wordings over the next 12-18 months.



• If suitable cover isn't available from your CGL carrier, consider our specialty EIL cover, which we can extend to include the products and/or completed operations hazard. We can provide limits up to $10 million for most risks.

Federal and provincial regulators may be down, but they are not out. They can still rally resources to investigate serious incidents, especially those which have a high chance of successful prosecution or which may be politically sensitive.

Most ministries still have enough clout to introduce new regulations where justified. Ontario's environment minister recently admitted to neighbours of a Sarnia, Ontario waste disposal site that a loophole in existing regulations permitted the site operators to "lace" non-hazardous fill waste material with more hazardous wastes imported from New York and Michigan. The minister will introduce new regulations to discourage hazardous waste imports from the U.S.

The provinces have also introduced legislation that reduces reliance on regulatory intervention and makes it easier for communities to sue polluting neighbours in the courts. Ontario's Environmental Bill of Rights gives community groups a special kind of class action with which to pursue polluters. The legislation was designed to eliminate the historical obstacles faced by plaintiffs in environmental litigation and to improve and speed up access to court-ordered remedies.

Finally, new environmental issues are appearing all the time, requiring new regulatory responses. The current debate about genetically modified foods is a good example of such an emerging concern.

It is poor risk management advice to assume that environmental risks have reduced along with regulatory budgets. Environmental issues should continue to be an important element in a well-run corporate risk management plan. The alligator may appear to be asleep, but don't get too close to those teeth!

This is the first federal legislation in Canada that makes insurance for environmental exposures mandatory.

Canada is a signatory to and has adopted the principles outlined in the Basel Convention of March 1989. Under this United Nations treaty, signatories agreed to introduce controls on the international movement of hazardous wastes for disposal or recycling. The new rules apply to wastes generated in Canada and being exported, wastes generated outside Canada and being imported, and wastes being transported through Canada.

For waste and recyclable materials travelling by road, it appears that Environment Canada will accept evidence of auto or non-owned auto cover. For wastes travelling by rail or other means, EIL cover is required. Usually, we can provide cover for individual shipments or extend our policy to include all the client's pollution exposures.

Our clients are now exposed to new costs of maintaining and monitoring emissions standards, additional waste disposal expenses and new types of criminal prosecution. In addition, they are exposed to new types of strict or absolute liability in the event of an environmental accident.

The very limited pollution liability cover in the CGL policy just hasn't kept up with these rapidly changing exposures. Our EIL policy offers excellent protection in this fast-moving area of commercial liability.

The laws of premises or product liability have not changed appreciably in the last 20 years so the advice that you give your client for those risks has not changed much in that time.

By contrast, environmental law is still evolving at a rapid pace. To keep pace with these changes, your advice has to stay up to date. It makes good sense to re-examine your clients' environmental exposures.

Even if you haven't recommended pollution liability insurance to a client in the past, ask yourself whether your renewal recommendations should re-evaluate this coverage in the context of an increasingly demanding legal backdrop.

Although AWSA has sanctioned an exclusive program through a national broker for this cover, we can offer alternative cover that meets or exceeds AWSA requirements.

The key purpose of sentencing is to prevent other offences. Fines are profitable for the treasury and unpleasant for the offender, but they don't have any direct impact on further offences. Since 1988, some courts have used remedial orders to prevent offenses — for example, ordering storage tanks to be upgraded. These orders, however, aim to remedy a problem that has already occurred, not the problems that may occur tomorrow.

Some judges have tried to improve a defendant's environmental management — for example, by ordering a defendant to conduct an audit, write a manual or improve staff training. Judge Ormston, in the Bata case, ordered the company's board of directors to discuss environmental issues at all their meetings. However, these orders merely skim the surface of good environmental management, and they expire after one or two years.

The Prospec Chemical order goes much further than anything Judge Ormston did in the Bata case. To comply with ISO 14000, Prospec must develop and implement, to the satisfaction of an independent auditor, detailed procedures to measure, document and control all of its environmental impacts. Audits must be performed, staff trained, manuals written, emergency plans prepared.

Once in place, the ISO 14000 management system will continue to affect Prospec long after the court order expires.

For Prospec, compliance with ISO 140001 is no longer "voluntary." However, it is notable that the court turned to a voluntary standard to determine what Prospec should do.

This decision was controversial. It was not government regulators or the general public who determined the content of ISO 14000 — that was done by industry and stakeholder groups around the world. And it will not be up to the Alberta Department of the Environment to determine whether Prospec has complied — that will be determined by the ISO 14000 auditor.

(Based on an article by Diane Saxe in the Saxe Faxletter)

(Reproduced from an article by Diane Saxe in the Saxe Faxletter)

Recycling operations present an elevated liability hazard, even if the activities at the site appear to be harmless, such as storage and sorting of non-hazardous waste materials.

A fire from seemingly harmless waste materials such as plastic recyclables may discharge very hazardous combustion by-products. The August 1997 fire at a recycling depot in downtown Hamilton released hazardous levels of dioxin, a highly toxic carcinogen.

The CGL policy provides no cover for pollutants discharged as a result of a fire or explosion at a waste site. Even if the CGL environmental exclusion has a hostile fire provision, all pollution from a waste site is specifically excluded.

Other interests are also affected by this elevated liability risk. The recyclers landlord, tenant, and even customers now have a vital interest in the recycler's financial responsibility. Most provinces have now enacted environmental legislation that permits the province and other plaintiffs to sue these and other interests if the recycler is unable to meet its obligations. These powerful strict liability provisions apply even where there is no negligence on the part of the other interests. Even prior owners of the property may be held severally liable for the failure of a subsequent operator of the property.

A separate specialty policy is your best bet for any risk with an increased environmental exposure. In many cases, suitable environmental cover may be much more important than CGL cover. We suggest that environmental cover for such risks should be viewed as a high priority, rather than an optional or additional cover.

The charges arose out of a delivery of waste fuel that turned out to contain resins. The fuel was placed in the customer's storage tank with other materials, and then solidified. When the customer demanded that its tank be cleaned out, the manager was drawn into an expensive cleanup. To keep the costs down, and to hide the foul-up from his superiors, he had some of the solidified waste sent to the local landfill.

This report illustrates that even the best companies are vulnerable to the results of poor judgment by their employees. Risk management can reduce but never entirely eliminate risk.

(Reproduced from an article by Diane Saxe in the Saxe Faxletter)

The information in this website is intended to be general in nature and should not be construed as specific recommendations, nor as a substitute for the advice of a professional insurance broker who is familiar with a client's particular exposures or circumstances.

The coverage summary should not to be construed as an insurance policy or the interpretation of an insurance policy.

Liability claims for this class of business may often follow months or years after the event itself. Failure to report an incident promptly may jeopardize the insurers investigation and defence of a subsequent legal action. To avoid the risk that individual losses may be denied as a result of late reporting, we would encourage you to report all such incidents promptly.

Please note that if your policy is written on a claims-made form, the policy contains certain restrictions that limit the reporting of losses after the policy has expired.