Companies transporting potentially hazardous materials could be held liable for damages long after an incident. This is according to Gillian Wolman, head of Litigation Risk at Risk Benefit Solutions, who states that environmental risk management and environmental liability are becoming increasingly complex and difficult to navigate.
Yet, according to Wolman, many companies still transport goods without adequate environmental liability cover, either because they believe it is included in their public liability policy, or to save costs. She points out, however, that the risks associated with any single accidental spillage of hazardous materials could conceivably sink a company.
“Transport companies especially need a policy to protect third parties from pollution caused by the insured’s activities. These policies typically cover personal injury and property damage. A business may also be covered for clean-up costs to remove the hazardous substances and restore the property to working condition. Some insurance companies also allow the policyholder to add coverage for legal fees and investigation costs involved in pollution-related incidents,” she says.
Wolman adds that businesses need to make sure that gradual pollution is also covered. “A client should not just assume that his policy covers him for liability long after the event. Traditional public liability insurance policies usually exclude gradual pollution, and the cover offered under a gradual pollution liability policy may vary from insurer to insurer.”
However, transport businesses need more than to just be able to clean up hazardous materials after a spill.
“Some pollution problems develop slowly and are not discovered for some time or when it is too late. It may also not be clear as to exactly when and where the problem first started. This opens the door to massive claims against the transport company and clean-up costs that can run into millions of rands. There are also exposure risks that need to be seriously looked at. This would include the evaporative risk related to fumes from spillage.”
According to Wolman, transporters also need to be aware that businesses affected by a hazardous materials spill are likely to institute a claim for financial loss.
“A case in point is the 2013 oil spill that caused a section of the N3 toll road in KwaZulu-Natal to be shut down for clean-up. In this instance, the transport company was held liable for the spillage and SANRAL instituted a claim against the company for pure financial loss related to tolls during the cleanup,” she says.
“Similarly, if an accidental spill is located next to a golf course, the situation can become quite intricate. Not only will the responsible party have the environmental liability, possible damages and rehabilitation costs to deal with, they will also be liable for business interruption costs on behalf of the golf-course for the entire time that it is out of operation. The same can be applied to parks, hotels, farms and many other businesses. If a spillage occurs next to a river, the policyholder could be held liable for damages to all the businesses downstream of the incident,” Wolman continues.
Finally, businesses will need to be mindful of the exclusions in their policies, since certain materials and circumstances are just not being insured anymore.
“There will also be a deductible (first amount payable) on the policy that businesses will have to be mindful of in the event of a claim. Increasing the deductible will typically reduce the premium costs. However, when considering a limit, one needs to take into account the massive costs involved in the event of a claim, which can be catastrophic” concludes Wolman.