In early April, the cargo ship M/V Marathassa spilled over two tons of oil into British Columbia’s English Bay, a multimillion dollar fiasco that turned all of North America’s eyes to environmental insurance protection.
But which types of clients benefit from these policies? The answer yields a surprising response.
“Being an environmental insurance carrier, we aren’t typically just looking for accounts that are ‘environmental,’ said Katrine Nielsen, assistant vice president, Berkley Canada. “Most commercial business has some type of environmental exposures, be it a potential leak from fuel or chemical storage, the purchase of a new site with unknown existing contamination, or a building contractor causing mold due to inadequately sealed windows.”
In fact, almost every commercial sector could potentially be found liable for environmental damage, making affiliated coverage a prerequisite for a wide range of business transactions.
“What we are seeing now is a move towards contractual requirements for environmental insurance,” Nielsen said. “For instance, banks may request a site policy to protect their loan, or a contractor may be required to evidence environmental insurance prior to even bidding on a project.”
One of the biggest misconceptions about environmental insurance is that many enterprises believe they will be covered under general liability policies.
In actuality, Nielsen notes that the market is moving towards a more advanced understanding of potential liabilities, as well as an increasingly complicated legal framework. This is causing many casualty providers to shy away from covering these types of risks.
“Many commercial clients believe they have adequate environmental coverage under their general liability policy, when in fact, environmental coverage is either excluded or only offered with a sudden and accidental trigger,” said Nielsen. “It would be prudent for any commercial client who is looking to offset their environmental liabilities to carefully consider a dedicated environmental policy.”
Coverage can be tailored to clients’ individual risk profiles. Berkley Canada, for instance, features such offerings as Project Pollution Policy, which provides for first party cleanup costs, as well as Excess Pollution Policy. It also boasts Fixed Site Environmental, which protects “directors and officers in the event that there is no other source of indemnification” – which many enterprises now consider a priority after the recent Northstar case.
If nothing else, the Marathassa oil spill outside Vancouver should provide a cautionary tale to businesses that operate without environmental coverage, as costs can accumulate much faster than most Canadians realize.
“Millions of dollars have already been spent to contain the fuel, and millions more will be spent to investigate the extent of impact. The beaches, water quality, and marine life will all be investigated. Oftentimes the full extent of damage is not recognized until years later,” Nielsen said. “For many companies, this can be financially crushing, but a properly placed environmental policy would offset many of those liabilities.”