1. LIU Product Update
The next big thing: Environmental insurance for the rest of us
Any owner of property where environmental contamination is found may
become responsible for the cleanup—regardless of whether or not the
incident was the company’s fault or even its material.
When thinking of environmental insurance, common examples come
to mind: companies that handle large volumes of toxic materials and
firms involved in waste management. But recent natural and man-
made disasters have led to significant environmental consequences for
unprepared companies of all sizes within the construction, education,
manufacturing, hospitality, technology, retail, telecommunications and
agriculture Industries. No wonder more business owners in Australia
today are rethinking the need for Environmental Impairment Liability (EIL)
coverage.
Here are four important reasons why businesses of all sizes and classes are
potentially at risk from environmental exposures.
1. Liability as a property owner
When it comes to environmental exposure the property owner where
environmental contamination is found may become responsible for the
cleanup—even if it was caused by the landlord’s tenant (and not the
landlord). Even conscientious property owners who do everything possible
to comply with environmental regulations may find themselves at risk for
this type of exposure.
Most recently, commercial building owners in Sydney found themselves
incurring environmental clean up costs when flooding occurred in the
underground parking garages of their properties.
The storm surge floodwaters compromised boilers, diesel tanks, and
transformers, filling lower floors with contaminated water. In some cases,
the extensive clean up meant tenants could not return for some time and
the building owners suddenly had to confront the reality of an incident
that had a considerable disruptive effect on their business.
Most General Liability (GL) policies have significant limitations on pollution
liability or exclude such liability outright. EIL insurance not only protects
clients actively involved in an environmental incident (e.g. tenant), it could
also protect clients who may become responsible for the contamination
(e.g. landlord). EIL policies provide coverage for bodily injury, property
damage, defence costs, cleanup and restoration expenses, loss of rents and
business interruption.
2. Power Outages
As environmental liabilities can arise from both natural and man-made
disasters a commonly overlooked exposure is a company’s dependence on
its power source.
Any company could easily find itself in a similar situation to one
manufacturer, a mobile phone case maker, that uses a process involving
plastic extrusion. A sudden disruption in the local power supply recently
shut down its pollution control equipment, resulting in a discharge of
untreated waste that exposed neighbours to harmful fumes and spilled
contaminants into the sewage system.
The information in this document is presented by Liberty International Underwriters (a trading name of Liberty Mutual
Insurance Company ABN 61 086 083 605 Incorporated in Massachusetts, U.S.A. The liability of members is limited). This
information is intended to provide general information only. It should not be relied on as insurance advice in any jurisdiction.
Refer to the policy wording for the complete terms and conditions. Please contact LIU for a Licence to use and distribute this
document. This information is current as at August 2015.
Please Contact AlanThorn on Ph: +61 2 8298 5838 E: Alan.Thorn@libertyiu.com or visit www.liuaustralia.com.au

2. Almost immediately environmental protection officials came knocking at
the manufacturer’s door, along with concerned local residents and media.
While losing power once meant no lights for a few hours, with today’s
IT infrastructures powered by electricity, the operational consequences
of even a minor blackout can be far-reaching. Even having a backup
generator is no guarantee against disruption, since generators often run
out of fuel or suffer performance problems when operating continuously
for more than a limited period.
EIL insurance covers contamination resulting from waste water discharged
into a body of water, as well as waste material seeping into the soil or
penetrating the ground water. EIL policies also cover exposures arising
from toxic air emissions, including problems impacting a facility’s indoor air
quality as a result of problems with the HVAC systems.
3. Not as harmless as you think
Materials do not need to be classified as a hazardous waste, or chemical,
fuel or petroleum product to create an EIL loss. Environmental claims
encompass a broad range of potential contaminants, some of which
are seemingly benign, yet wreak havoc when spilled or seep in large
quantities into habitats where they’re not supposed to be. For example,
environmental claims have resulted from cooking grease that has escaped
down a drain over a prolonged period of time that ultimately created
noxious fumes in a city’s sewage system.
EIL can fill the coverage gaps created by a host of environmental exclusions
common in GL policies, including pollution, fungus, mould, bacteria, lead
and more, depending on the policy.
4. Public scrutiny
A badly handled environmental problem can damage a brand and haunt
a business for years. Because the majority of environmental incidents
can negatively impact people’s health, quickly responding to—and
minimising—an environmental event is crucial. There’s a business
imperative to do something and, if you don’t, the company’s reputation
may be irreparably damaged.
The general public’s sensitivity to the consequences of environmental
events is far greater than it was in the past. It is now heightened by
catastrophic occurrences such as oil spills and the increased frequency
of intense natural disasters like the Brisbane floods, Cyclone Yasi and the
Sydney Storms. Furthermore, with today’s improved testing methods and
modern record-keeping technology, it’s far easier to assign liability and link
people or companies to the rubbish and waste streams they’ve created.
As such, businesses face greater EIL exposure. While public reaction cannot
be controlled solely by having coverage, an EIL policy can help mitigate the
effect of an environmental event, allowing businesses to respond quickly
and minimise negative publicity.
Finally, perhaps the biggest emerging influence on EIL losses is the impact
of social media given it provides an immediate, mainstream platform which
allows everyone to interact, express opinions, and share their concern
about environmental issues against corporate offenders, large and small.
Indeed, concerned residents are increasingly driving national conversations
this way.
For more information on Liberty International Underwriters’EIL solution,
please contact Alan.Thorn@LibertyIU.com or visit www.liuaustralia.com.au
The information in this document is presented by Liberty International Underwriters (a trading name of Liberty Mutual
Insurance Company ABN 61 086 083 605 Incorporated in Massachusetts, U.S.A. The liability of members is limited). This
information is intended to provide general information only. It should not be relied on as insurance advice in any jurisdiction.
Refer to the policy wording for the complete terms and conditions. Please contact LIU for a Licence to use and distribute this
document. This information is current as at August 2015.
Please Contact AlanThorn on Ph: +61 2 8298 5838 E: Alan.Thorn@libertyiu.com or visit www.liuaustralia.com.au