Floods, while having the ability to destroy homes through various invasive measures, are also creating a headache for businesses that store potential contaminants that are being washed away by catastrophic amounts of water.
“Storing petroleum, solvents and chemicals are no match for the sheer force of water they are up against, no matter how well stored they are,” said David Corry, SVP and head of environmental at Argo Group. “This has led to businesses without environmental coverage feeling the pangs of a litigious culture in the wake of a run-off scenario.”
During a conversation with Insurance Business, Corry spoke about how a company can avoid the headache of litigation through environmental insurance and why this line of coverage has been increasing in popularity.
When a corporation is working alongside a broker to safeguard the operations and assets of a business, they typically work towards getting insurance for both known and unknown threats.
There is a slew of coverage options for corporate buyers to protect themselves from the unknown, but, as Corry noted, “environmental health insurance happens to be one of those where a company may say I've never I never had an allegation of environmental claim.”
“However, they most certainly have the exposure,” Corry said.
Contemporary property and casualty lines have pollution exclusions written within the policy, which is more problematic due to the erratic weather patterns and increased catastrophic episodes due to climate change.
“Business who are located in flood zones, especially in areas where water traditionally accumulates in higher quantities, are realizing that they are more vulnerable than they typically thought,” Corry said.
What becomes more problematic is that when if an event like this does occur and say a 2000-gallon tank is unintentionally dislodged from a parking lot and ends up on the driveway of a neighbouring residential area, it can be easily traced back to the business.
This opens up the inevitability of a claim, and worse yet, litigation.
“And so, if they do have a claim, they have no defence, they have no indemnity coverages,” Corry said. “So basically, they're self-insuring.”
For those businesses who do undergo a thorough and extensive risk analysis assessment based on exposure, they would ask more questions about the potential threats of using or storing chemicals, solvents and other potentially harmful materials.
“They might be thinking to themselves, can these chemicals leech off or escape by accident, and if so, does my existing property and casualty coverage protect against this,” Corry said. “The answer is going to be no, which creates the next step of speaking to a broker about environmental coverage.”
Businesses are increasingly looking to protect themselves from environmental hits, according to Corry.
“I have been working within this sector for over 18 years,” he said. “And I see more and more businesses buying this line of coverage, especially ones who traditionally have never purchased environmental insurance.”
This is sprung from a greater awareness of a business’s exposures and the exclusions in property and casualty policies, as well as executive risk policies.
“Directors’ and officers’ insurance never has any verbiage around pollution or other environmental matters,” Corry said.
What has resulted is a more meaningful effort to look beyond the traditional insurance appetite of most corporations and acquire broader coverage to avoid potential litigation.
“Whether a company is purchasing a site pollution policy, or a contractors’ pollution liability policy, some sort of risk is being transferred into the environmental marketplace,” Corry said.
Environmental insurance is booming with business from first-time buyers, which, according to Corry, “is pretty sticky, they always renew it.”
“That shows a bright future for this particular line of insurance.”
