Environmental Impairment Insurance: Q and A

Due to an overall increase in Environmental incidents being reported on, and not only the hazardous goods carriers losing their loads, but also the unsuspecting business owners who recently had to deal with liability claims following the 2021 Durban-riots’ aftermath, Sharné Liebenberg, Head of Logistics and Transportation at Apio, took the opportunity to do a Q and A with a couple of specialists in Environmental Impairment Liability Insurance.

In this blog article, Sharné asks Sjanine Tanner, Managing Director from Envirosure, to comment on a few questions and concerns regarding these types of losses.

Certain businesses and industries are susceptible to environmental dangers simply because of what they do. 

What we are concerned about are those companies that have an “unexpected event” (typically those that aren’t “expected” to have incidents) and are then left exposed, for example, the June 2021 Riots in Durban. How can these clients protect themselves against these types of events? 

“There is, unfortunately, a mentality that businesses assume they will never have a spillage, that the commodities they store won’t require a clean-up, they have never had a spillage before, and they run a good operation, thus how could they have a spillage?

Our legislation isn’t limited to large fuel/chemical manufacturers; it also applies to any product that could cause harm to the environment, and the business will be obligated to remedy any spillage. The riots highlighted that sometimes these spillages are completely outside the control of the business; even though the acts of violence caused catastrophic environmental impacts, the businesses still had a duty of care to take all measures to contain, reduce the impact and rehabilitate the affected environment.

We always caution to be prepared for the worst-case scenario; have the correct insurance in place, have spill response plans, ensure you have taken adequate measures to contain a spillage on your property, and train your staff of the procedures to follow. The riots additionally highlighted that environmental spillage is viewed as a consequential loss and will not be covered by SASRIA.”

What cases have you, Envirosure, had to deal with or have seen following this, and which “Extensions” of your product were those that were most “triggered” to have claims instituted against them? 

“Envirosure has our Riot and Strike Solution to cover these types of events. The bulk of the claims we experienced due to the riots were side tank fuel clean-ups due to trucks being torched.”

What should we, as business owners, “lookout for,” or what can we do to identify potential risks in our industries? 

“Always engage with product experts; we are here to guide brokers in identifying and mitigating their clients’ risks. We understand that environmental liabilities can be extremely complicated, so we aim to simplify them and guide you through the process.

Ask your clients if they store or transport any dangerous goods or potential pollutants. Often just by asking the question, you’ll see that most businesses do. Almost every business has a diesel generator these days. Trucks’ fuel tanks are a significant risk, irrespective of the type of load they are carrying.”

Can you give us an explanation of the differences in cover between a normal General Liability-product and the Environmental Liability-product? What are the major differences? 

“General liability sections, often, exclude environmental risks. A key area to highlight on this front is that there needs to be third-party damage for the liability section to respond. This will not cover any first-party, which refers to “own damage” or damage to property owned by the policyholder, damages and may potentially only be limited to damages to third-party property, injury, or death.

The environmental impairment cover offered by Envirosure covers first and third-party clean-up costs, which include containment, clean up and environmental rehabilitation. Environmental impairment is the bigger of the two exposures in our experience; by swiftly handling the spillage, you greatly mitigate the liability risk and reduce the cost of the claim. We do, however, offer a third-party liability extension to our cover, which clients can add as an extension to cover these losses.”

What industries are most susceptible to Enviro-type risks? 

“All dangerous goods operations and those that store or transport potential pollutants. Our claims frequency is higher on the transport-based risks; however, the magnitude of exposure will be higher for site-based risks.”

What are the most common “toxic” or dangerous but unknown products? Typically, those that one would never expect to be “dangerous”?

“Class 6 Toxic Substances are our higher-risk commodities due to the toxic nature of the goods and the specialised rehabilitation required if we could rehabilitate the product. Alternatively, incineration disposal which is extremely expensive. Unexpected products are generally food-grade products that are assumed to not cause any harm, such as cooking oil, alcohol, and milk.”

When considering the legislation around these scenarios, what are the statutes and acts that influence the public or that we must pay attention to?

“The National Environmental Management Act, commonly referred to as NEMA.” 

On the back of the last question, which types of claims are currently “trending” or dealing with the most? Is there any specific risk or product risk that’s now emerging that has not been dealt with before or has now become more prominent?

“There are no specific trends when it comes to environmental-type losses, but we do note certain commodities peak during certain times and around high demands (seasonal influences) – such as fuel tankers around holiday seasons.

Side-tank claims are becoming more and more prominent as proper clean-ups are being enforced (by means of appointing only those suppliers that are mandated, licensed, and approved in terms of legislation and insurer requirements). Another contributing factor is that the underlying HCV policies exclude or limit their offerings.”

Can you give us an example of the absolute worst claim that Envirosure has had to deal with since your business started? Is there any ONE specific event that stands out?

“Our largest claim to date was over 6 million Rand for a diesel tanker that overturned into a river – check out our CPD videos for more details on this incident.”

Envirosure Underwriting Managers is a niche underwriting agency that specialises in environmental impairment insurance in South Africa. Envirosure Underwriting Managers (Pty) Ltd is an authorised Financial Services Provider. FSP No: 38594. Envirosure Underwriting Managers underwrites on behalf of various insurers. The specific underwriter will be confirmed in the schedule and policy wording.

Talk to your Apio broker if you would like more information on Environmental Impairment Insurance: info@apio.co.za | 011 799-6400.