With a growing awareness of environmental concerns and tougher environmental regulations from all levels of government, more and more construction companies are taking steps to protect themselves against environmental risks.

Environmental Risk Insurance is becoming an increasingly important cover for construction businesses of all sizes in order to avoid of heavy fines and penalties and the resulting damage to both a business’ reputation and its bottom line.

Pollution can bring about a number of risks and exposures for companies and many standard business insurance policies provide partial cover for some of the risks that arise when an industrial pollution event occurs. There are, however, gaps in this coverage due to various policy exclusions.

This means that several common events will not be covered, such as the gradual pollution of an area due to a slow leak or contamination. This type of pollution is a hard to identify problem which can be environmentally disastrous, not to mention financially disastrous for any company.

Companies without an Environmental Risk policy may also encounter potential grey areas surrounding various types of pollution incidents. This means it may not be possible for companies to prove all stated conditions that are required for pollution coverage when making a claim.

On top of this, environmental damage liabilities, such as biodiversity or natural resources restoration, also may not be covered.

According to Terry Phillips of Honan Insurance Group, “with the focus on potential environmental damage due to the government’s hard-line stance, some insurers now offer carefully worded policies to protect companies against the financial risks involved in environmental pollution. These Environmental Insurance policies can cover sudden and accidental pollution as well as gradual pollution.”

“Basically it ensures that a business is covered if the unfortunate event of environmental pollution occurs.”

What does Environmental Risk Insurance cover?

Some insurers now offer carefully worded policies to protect companies against the financial risks involved in pollution. These Environmental Insurance policies can cover sudden and accidental pollution AND gradual pollution for:

• First party clean-up costs
• First party business interruption from pollution
• Third party injury
• Third party property damage
• Third party clean-up costs
• Defence costs
• Fines and penalties (but not for criminal acts)
• Business interruption
• Fines and penalties

Some Environmental Risk policies are structured to target particular businesses and the operational risks they may face, such as Fixed Site liability cover which covers businesses in the following industries:

• Chemical Manufacturing, Blending and Distribution
• Mining
• Utilities
• Bulk Storage
• Laboratories
• Industrial Facilities
• Recyclers
• Landfills
• Water Treatment Plants
• Waste Treatment Storage Facilities

Overall, the benefit of an Environmental Risk insurance policy is that it can fill the gaps in pollution liability coverage that exist in a company’s existing insurance policies. This can significantly reduce exposures that may be uninsured under the business’s pollution liability policy.