Most contractors are expected to meet environmental insurance criteria today – something that would have been a rarity as little as three years ago.
“Back then, there would have been an easier way to negotiate those insurance requirements away with other considerations; but that really isn’t happening anymore,” says Ricardo Philip, AVP national product line leader for environmental risk, Markel Canada. “Now people realize that they have to get the coverage. If you look at a traditional P3 arrangement construction project, if performance or insurance criteria isn’t met, people don’t get paid. So, we find ourselves facing an unprecedented demand in the Canadian marketplace for environmental coverage.”
Environmental exposure risks have outstripped the coverages provided in a typical commercial general liability policy – and normally that would provide brokers a tremendous opportunity to pitch a variety of environmental coverages to clients.
And although there remain brokers who will still shy away from those coverages due to the perceived risks, the product has evolved into what is now a more affordable – and less risky – insurance coverage that brokers need to start selling now, says Philip.
“They should do it right away, they should do it right now,” says Philip. “And it is the perfect time to do it. The insurance marketplace has been very soft, and many of our clients have been able to take advantage of some very good pricing conditions over the last four or five years for traditional P&C insurance.”
It is those savings on the P&C side that can be supplemented by offering environmental coverage, adds Philip. More importantly, it ensures that clients are properly protected, as illustrated by some recent tragedies.
“In the last five years, it’s become more prevalent. We’ve seen losses in some cases that haven’t been adequately covered by traditional insurance placement,” says Philip. “Events like Lac Megantic, where there has been a significant environmental impact and loss associated, has called into question how environmental insurance may not be contemplated as seriously as it should be in the routine cycle of insurance.”
The 2013 Lac Megantic rail disaster in Quebec killed 47 people and resulted in some $200 million being distributed in settlement funds to the victims’ families alone, along with the collapse of the Montreal, Maine and Atlantic Railway. Questions were also raised on potential negligence in regards to transporting crude oil in the flawed DOT-111 tanker cars, which have been known to rupture during derailments, creating environmental hazards.
While many clients are concerned with their property and casualty and cyber liability covers, “sometimes environmental insurance gets lost in the background, even though it is in some cases more important,” says Philip.
When you don’t have traditional insurance responding to an incident, “there has to be a lot of goodwill and business decisions to pick up for that coverage,” he says. “Right now in today’s delicate economic cycle, there is only so much of that to go around.”
While there is the traditional pollution “give back” from a CDL policy that will often provide coverage under the IBC 2313 endorsement, “anybody with significant environmental exposures should be looking well beyond that.”
Improved underwriting and the inclusion of industry experts on environmental exposure risk have produced a variety of specific products for clients looking for coverage.
To meet the changing needs of today’s client, Philip points to five coverages recently developed by Markel Canada: Contractor’s Pollution Liability (CPL) application; Environmental Impairment Liability; Environmental Contractors Program; Pollution Event Insurance; and the Environmental Consultants program.
As professionals are held to higher standard than non-professionals, when a question of liability arises, any claim or allegation leading to a claim with respect to their business, it may result in a damaged reputation and financial destruction, says Philip. This makes the Environmental Consultants program so important.
“Our program is designed to provide broad cover for engineers, biologists, geologists, chemists, testing laboratories and any other consultants in the environmental field,” he says. “The policy itself has no environmental exclusion and can provide cover for prior acts exposure.”
Tomorrow: The value of underwriting expertise for environmental risk