Environmental Liability Insurance

Article excerpt

ENVIRONMENTAL LIABILITY INSURANCE

Concern about environmental liability is increasing, fueled by catastrophic environmental disasters that make the front pages. But the headlines skirt the tough issues of insurance and liability. Within the scope of general liability insurance for industrial and commercial operations, only protection against sudden and accidental pollution usually is granted; protection against gradual pollution is available in a few countries only under special circumstances.

In the United States, environment impairment liability (EIL) has been a concern for some time (MR June, page 50). Now, interest in environmental impairment liability is growing in Western industrialized nations, propelled by the environmental problems of Eastern Europe.

A comparison of the models existing in six Western nations--the United States, United Kingdom, Sweden, France, Italy and the Netherlands--indicates many similarities in coverage for gradual pollution, and these similarities were summarized recently by Wilhelm Zeller, member of the board of Germany's Cologne Reinsurance Co., for a Management Centre Europe audience. Management Centre Europe is the European arm of the American Management Association/International.

One of the most difficult aspects of environmental impairment liability insurance--when gradual pollution is covered and strict liability is in effect--is the ability to pinpoint an exact event that initiated the pollution, according to Zeller. Some policies attempt to alleviate this difficulty by defining a specific coverage trigger. In Britain, for instance, a clearly identifiable environmental impairment is required. A standard U.S. 1986 model and Dutch policies are based on the "normal" claims-made principle; that is, as a precondition, the first written claim for damages must be made during the period of the policy.

The British model blazes a new trail, based on the earlier of two specific points in time: During the policy period, either the claim for damages must be filed against the policy-holder or the first recognition of the circumstances must reasonably be expected to lead to a claim for damages. …