By: ILDIKO RICHARDSON, Head, Inﬁniti Insurance’s RisQ division
Pollution Laws have changed considerably over the last 30 years since the introduction of the ‘Total Pollution Exclusion’ in the late 1980’s following the asbestosis scare.
Further pollution disasters in the US caused the market to rethink their standpoint on environmental disasters as there was significant exposure to insurers. The market however had to provide for some element of cover and this came in the form of the Multimark wording.
Both the insurance and reinsurance markets were relatively content with this level of cover as it avoided the traditionally penal exclusions and partially met the client’s and broker’s needs.
Fast forward to the advent of our democracy when the legal landscape had changed considerably, with our brand new Constitution bringing about the National Environmental Management Act (NEMA). “This Act articulates the so-called “polluter pays” principle, which has been globally accepted in progressive jurisdictions and codified into the NEMA principles. These principles were enacted to “… guide the interpretation, administration and implementation of this Act …” and prescribe that (i) there should be lifecycle responsibility for anything which impacts the environment; and that (ii) the costs of remedying environmental pollution and of preventing, controlling and minimising environmental damage must be paid for by those responsible for harming the environment.”
INSURANCE NOT KEEPING UP
This would surely make the markets take note and be the catalyst for change yet there was no change to the exclusion wording, no change to the definitions, no change to underwriting practices, no additional considerations given to the consumer who now has a very real exposure in terms of these regulatory changes.
When one considers that 1 litre of oil can contaminate up to 1 million litres of drinking water, one begins to realise the enormity of the situation and the far reaching consequences of our everyday actions. The insurance markets thus remained in an isolated bubble and to some extent they still do today.
Fast forward to today, and we now have very few insurers offering first-party clean-up costs, as well as consequential third-party covers for pollution events. Brokers have a misconception that the Subjective Pollution Exclusion still covers their clients for sudden and accidental pollutions. It does, but only after it affects a third-party for injury or damage. What happens when the pollution event is contained on the insured’s own property?
The law clearly states that you are legally obligated to clean it up, and standard policy wordings state: “Policy does not cover liability arising out of the deliberate, conscious, intentional or reckless disregard by the insured’s technical or administrative management of the need to take all reasonable steps to prevent claims”. Not ensuring that a spill on the insureds own property is dealt with to the letter of the Law, may be seen to contravene this condition of the Insureds Policy.
This shows a glaring disparity in cover for any client with this exposure. If one supposes that only industries such as Petro Chemical companies, Pesticide manufacturers and large storage facilities are exposed, think again! Your local hardware store, shopping centre housing a pool supply store and general goods store, golf course and plant nursery can, and do, have a pollution exposure. The list is endless.”
Most office parks, shopping centres and businesses now have generators to cater for the rolling black-outs. Recently an insured had to pay out R560 000 to clean up 700 litres of diesel spilt when topping up the onsite generators. Does your client have the money in their budget to ensure they can afford to not contravene the law because of such an unexpected event?
We cannot allow the continuous degradation of our environment and so as an Industry we have to provide a suitable and adequate insurance product offering. It is up to brokers to source such a product for their clients. Such products are now available in the market.
We need to deal with the changes in legislation and NOT hide from them. We need to underwrite them and ensure that valid claims are paid when they come along.
RisQ has product offerings tailored to meet the client’s and broker’s expectations and needs and to enable them to bridge the divide.