1. 1 Environmental Claims The Growing Scope for Environmental Liabilities & Uninsured Losses David Waller, LLB (Hons) ACII, ACILA, Divisional Director CILA – 16 th June 2011

2. 2 Legal Liabilities for Environmental Damage Common Law – Negligence: Nuisance: Rylands v Fletcher: Trespass: Statutory Provisions  Duty of care owed; duty breached; foreseeable damage.  Substantive damage of foreseeable nature resulting from defendant’s activity.  Strict liability for escape of non-natural thing (but restricted to “extraordinary” usage in Transco v Stockport MBC).  Deliberate act in relation to land. -Environmental Protection Act 1990 – Part 2A. -Water Resources Act 1991. -Environmental Damage (Prevention & Remediation) Regulations 2009. -Environmental Civil Sanctions Order 2010.

3. 3 POLICY COVER PER ABI WORDING, POST 1990 Operative Clause would read:-  In the event of accidental personal injury or loss of or damage to property… etc.  Insurers will indemnify the policy holder against (1) legal liability for compensation up to the limit of indemnity and (2) costs and expenses.  Usual exception will seek to exclude own land/property and pollution/contamination other than “caused by a sudden identifiable unintended and unexpected incident which occurs in its entirety at a specific time and place during the period of insurance”. 3

4. 4 Summary of potential shortfall in cover  Buildings  Even All-Risks covers can exclude first party damage by pollution/contamination  Own Land  Not included within Buildings or other first party covers.  Remediation to prevent/mitigate Third Party Liabilities not covered under Liability wordings (Yorkshire Water –v– Sun Alliance).  Gradual Incidents  Liability cover exclude Pollution Liabilities unless caused by a “sudden identifiable unintended and unexpected” incident.  Statutory Charges  After Bartoline –v– RSA 2006 – Water Resources Act 1991, Environmental Protection Act 1990, EDR 2009 and Environmental Civil Sanctions Order 2010 – not covered as do not comprise a “Legal Liability” for damages per operative clause.

5. 5  Land – Environmental Protection Act 1990 Part IIA  Contaminated Land Regime  Land is defined as contaminated if “significant harm is being caused or there is a significant possibility of such harm to be caused, or pollution of controlled waters is likely to be caused”. A significant pollution linkage (SPL) must be identified  The regime identifies two types of people which may be liable under the principle “the polluter pays”. Class A - Those who have caused or knowingly permitted the presence of contaminants Class B - The owner or the occupier of the land Legislation 5

6. 6  Controlled Waters  Water Resource Act (1991) Part III Chapter 1  Section 161 – Authority shall be entitled to carry out anti-pollution work and operations if: Pollution is likely to enter controlled waters Contamination has entered controlled waters to restore as reasonably practicable the flora and fauna dependent on the aquatic environment prior to the pollution incident. Legislation 6

7. 7 The Environmental Damage (Prevention and Remediation) Regulations 2009  This is the transposition of the Environmental Liability Directive (ELD) into UK law (1 st March 2009)  Liable persons  Operator of occupational activity carried out under EC legislation listed in Directive is strictly liable for preventive or remedial measures due to imminent threat of or actual environmental damage to natural resources, that is: Water Land Protected species and natural habitats 7

8. 8 The Environmental Damage (Prevention and Remediation) Regulations (continued)  Environmental damage threshold  Land: significant risk of adverse effect on human health  Water: significant adverse effect on ecological chemical or quantitative status and ecological potential of waters  Protected species and natural habitats: significant adverse effect on attainment or maintenance of conservation status 8

9. 9 The Environmental Damage (Prevention and Remediation) Regulations (continued)  Remediation  Land Removal of significant risk of adverse effect on human health  Water and protected species and natural habitats: Primary remediation Complementary remediation Compensatory remediation 9

10. 10 Environmental Civil Sanctions Order 2010 Regulator provided with enforcement options short of prosecution of polluter. Options include: Intention:  Restoration notice (e.g. re-stock the fish…)  Fixed monetary penalty  Variable monetary penalty (up to £250,000).  Stop notice (cease the activity; contain pollution on site…)  Third party undertaking (compensate the TP…)  Enforcement undertaking – detailed binding agreement  Provide structure and measurability to environmental damage  Direct funds to environmental clean-up rather than costly legal battles

11. 11 Insurance Solutions?  Environmental Impairment Liability insurance.  Increasingly available, at more competitive rates e.g. specialist cover offered by endorsement to some existing policyholders.  Cover not subject to “sudden identifiable” restrictions, covers own land clean up and statutory as well as civil liabilities.  Regulator enforced remediation – including habitat damage (primary, complementary and compensatory). 11

12. 12 CASE STUDY  Operational landfill site with 867 domestic residences between 200 and 500 m from site perimeter.  Complaints of landfill gas odours ongoing for over 2 years.  High profile Claimant Solicitors attempting to recruit clients for class action, potential for damages and costs at several million.  Claim ongoing, including investigating evidence of level of landfill gas (if not beyond actionable thresholds, defend!), involvement of sub-contractor and if necessary pro-active settlement to mitigate costs. Potential restrictions as to class of persons with a right of action.  If liability proven, this arises due to ongoing operational issue (not a “sudden identifiable” incident) and covered only by virtue of specialist Environmental wording.

13. 13 Any Questions?