The Environmental Liability Directive regarding the prevention and remedying of environmental damage provides a framework of environmental liability based on the ‘polluter pays’ principle. The EPA (Environmental Protection Agency) has published a document to help companies quantify and provide sufficiently for their environmental liabilities. The document firmly underpins the ‘polluter pays’ principle and establishes the requirement for adequate ‘Financial Provision’ which can include the arrangement of a suitable insurance policy.

The Level of ‘Financial Provision’ required of a company will vary depending on three things;

— The complexity attaching to the site 
— The sensitivity of the receiving environment 
— The effective management of environmental risk by the company

The EPA guiding document subdivides liabilities into known liabilities and unknown or unexpected liabilities such as a leak.

In some occurrences, future liabilities extend well beyond the day to day running of a company, therefore requiring a mix of ‘Financial Provisions’ ranging from cash or ESCROW accounts, to parent company guarantees, or risk transfer instruments such as insurance or bonds.

In relation to the arrangement of insurance in relation to a company’s obligations to ensure adequate ‘Financial Provision’, Wexford Insurance can arrange all types of insurance coverage policies.

While the environmental insurance markets are a little, even though a growing one, there are many different options available to companies who might have a need for environmental impairment liability insurance. These 4 steps outline how you might help your client in obtaining a quote for environmental impairment liability.

Step 1.

If the client thinks that they might need insurance cover against known or unknown polluting liabilities, you should help your client to 
– identify their particular requirements 
– Figure out how best to protect themselves against decline of known liabilities or against currently unknown expected liabilities.

Step 2.

After figuring out that the company has a need for this type of insurance cover, there is certain information that must be provided. 
The following information is minimal information that has to be provided 
– A property engineering report 
Or a 
– Phase 1 environmental assessment report 
This document should cover all historical and usage of the site, details of the sites operation and site setting and sensitivity.

While working with your client, you should be able to get all this information together, which could also be already compiled if the client has specific licenses from the EPA for the site. 
Any current information that the client has giving to the EPA would suffice for the insurance company to give a quote.

Step 3.

Usually the information from step 2 will be enough information for insurers to issue a quote. You and your client should then be able to regulate the following: 
– How much cover to buy at one time. 
– Appropriate levels that can be deducted 
– Capacity of coverage required.

Step 4.

Once the decision is made to purchase the EIL cover, the application form should be completed which includes the relevant details highlighted in the above steps. Also this will have to have a declaration that the Insured knows of no claims or areas that could result in a claim. This is very important and the Proposer makes it.

All policy wordings should be agreed at the start, also insurers should be able to provide a signed and stamped policy within 30 days of receipt of application form. If there is any additional cover needed, you and your client will have to make the changes to the information that has been given to the insurer.