The International Underwriting Association (IUA) has warned companies not to rely on traditional public liability policies to insure against environmental risks.
The IUA along with the Association of British Insurers (ABI) and UK brokers’ Association BIBA has issued a new study which warns that reliance on standard PL products may leave firms dangerously exposed to new laws designed to make polluters pay for the damage they cause.
A guide ‘Environmental Risks: insured or not?’ states that the gap between traditional insurance cover and the range of environmental liability exposure has become “uncomfortably wide and will get wider”.
Roger Nash, Liability Underwriting Manager at Faraday Underwriting said: “In recent years, liability for environmental harm has become much more common. The old system of regulation has been bolstered by an elaborate system of statutory liability that is a great deal more effective in making polluters pay.
“This new statutory system is growing all the time and already underpins the majority of UK cases. Environmental liability is now like no other and if one asks whether traditional insurance policies cover these new exposures the answer is a definite no.”
In addition to the industry guide the IUA, BIBA and ABI have also issued an accompanying leaflet comparing the coverage available under different traditional insurance policies. This publication includes a table that lists 23 types of environmental liability or loss. It then states whether each of these are generally likely to be covered by public liability policies, public liability policies with endorsements arising from recent case law, environmental impairment liability policies and property policies.
Mr Nash added: “Traditional liability policies are, of course, indispensable for dealing with a diverse range of more common liability risks. But the level of environmental cover they offer is likely to be extremely basic.
“There is now a very good range of specialist environmental insurance products available in the UK market that can fill in the gaps.”
Steve Foulsham, BIBA Technical Services Manager, said: “BIBA has been concerned since the incorporation of the Environmental Liability Directive, that brokers have the ammunition to enable them to have discussions on this subject with their clients.
“BIBA believes that many businesses do not fully appreciate the exposures created by the Directive, and by working with the IUA, we are now able to provide guidance. Members can now appreciate the reasons why reliance upon general liability policies to address these exposures is simply not sufficient.”