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ENVIRONMENTAL LIABILITY: ARE YOU COVERED?

POSTED ON April 25th

The waste industry in numbers

The following statistics are provided by the Governmental Statistical Services (UK statistics on waste – December 2016 update)[1], and are the most recent available, with reference periods ranging from 2010 up to 2015.

  • There is an EU target for the UK to recycle at least 50 per cent of household waste by 2020; in 2015 the UK recycling rate was 44.3 per cent
  • In 2014 the UK generation of commercial and industrial (C&I) waste was 27.7 million tonnes, which fell from 32.8 million tonnes in 2012
  • The UK generated 202.8 million tonnes of total waste in 2014. Over half of this (59.4 per cent) came from construction, demolition and excavation, with households responsible for a further 13.7 per cent
  • Of the 209 million tonnes of waste that entered final treatment in the UK in 2014, 44.5 per cent was recovered (including recycling and energy recovery). The proportion that went to landfill was 23.1 per cent, with the remainder going to backfilling, land treatment and release into water bodies and incineration
  • There have been over 400 pieces of EU legislation over the last 20 years with regards to environmental risks

Environmental liability insurance

The Association of British Insurers (ABI) defines environmental liability insurance as,

“Environmental liability insurance (ELI) covers the cost of restoring damage caused by environmental accidents, such as pollution of land, water, air, and biodiversity damage.”

Businesses in the waste and recycling sector are inherently exposed to environmental liability risks. In addition to possible contamination at companies’ own facilities, environmental damage affecting other properties or persons can result in claims from third parties, local authorities and environmental regulators. This includes damage to air, land, water, protected species and natural habitats. Often it is the legal costs of defending alleged losses which produce the significant costs and exposure to businesses.

Waste and recycling businesses are susceptible to unlawful abandonment of material on site by other parties for which they may be found liable.

Whilst general liability and property insurances provide some cover against pollution risks, it is fair to say that the potential liability of most companies operating a recycling plant or transfer station are beyond the realms of even the widest general public liability and property policies, and the cover available in respect of pollution is narrowing as the gap between environmental law and liabilities widen.

Environmental liability policies have developed over time, and the cost has reduced significantly in recent years as more companies have entered the market. Covers can be tailored to meet individual business requirements with limits readily available up to £20m and policy terms available for up to 10 years.

Covers may include:

  • clean-up costs imposed by regulators, including those incurred by the regulator itself
  • remediation of own premises, third party premises, land, water and natural resources (including loss of use and diminution in value)
  • liability arising under the Environmental Liability Directive
  • prevention costs
  • historical contamination
  • transportation risks
  • business interruption
  • legal costs
  • site investigation, emergency response costs, restoration costs and compensation
  • contractors’ liability
  • contractual liabilities in sale and purchase agreements
  • lenders’ requirements
  • change of law

How Miles Smith can help you

This can be a complex insurance to arrange, and it is vital that the business receives the best advice on how best to mitigate any potential exposure. It is also important to dovetail with any other policies that may offer some limited cover in respect of pollution insurance, such as property and casualty insurances. If the covers are placed in conjunction with the business’s total risk management portfolio, then savings could be made elsewhere.

[1] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/593040/UK_statsonwaste_statsnotice_Dec2016_FINALv2_2.pdf

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