By Michael Tighe, Assistant Vice President
A chemical spill, like the one experienced in Charleston West Virginia, reinforces the need for effective environmental insurance coverage. In addition to the immediate concerns of clean up and bodily injury claims, there are other issues that can be addressed by an environmental impairment liability policy (EIL), also known as Site Pollution Liability.
On January 9th the public became aware of an estimated 10,000 gallon spill of a chemical known to wash coal and reduce ash (4 -methylcyclohexane methanol) into the Elk River from Freedom Industries Chemical Plant. Days later it was discovered an additional 7,500 gallons of polyglycol ethers (PPH) also entered this water system one mile upstream from West Virginia’s American Water Company intake. A week later Freedom Industries filed Chapter 11 bankruptcy protection and reports indicate inadequate insurance to respond to this situation.*
Besides 3rd party Bodily Injury claims and river clean up, there are a number of other related costs and concerns that can be transferred to an insurance company. Many pollution policies allow the insured to immediately respond to an impending environmental situation. Emergency response coverage allows for the insured to mitigate a potential claim without waiting for a third party suit or governmental demand. It’s usually a sub-limited amount, but allows for an immediate response in an effort to reduce the amount of damage caused.
A feature on some newer forms includes protection of the insured’s reputation. Crisis management expense will allow the insured to hire a public relations firm to be on the front line, informing the press and public of what actions the insured is taking to reduce harm and where they are in that process. If offered, it is often a sub limit on the policy.
Besides the damage done to people and third party property, nearby businesses will lose income from fear of harm. Any business that uses water for anything other than flushing toilets is affected. Restaurants, hotels, hospitals, etc. will lose clients/customers due to the affected water source, in some cases shutting down or going out of business. In most cases environmental impairment property damage coverage includes the loss of use of third party tangible property that has not been physically injured. All businesses could be subject to business interruption due to a pollution condition, whether it started at their location or migrated from somewhere else.
Once the Elk River has been cleaned up to acceptable governmental standards, a restoration effort may take place. Environmental impact studies will find to what degree wildlife have been impacted by this incident. The natural balance of fish, algae, bacteria, clams, crayfish, insects, birds, plants, and animals may take years to restore. What may be beyond the initial scope of cleanup work, natural resource damage coverage is available in the marketplace to cover these long term expenses. This coverage funds the reintroduction of wildlife to its baseline condition.
When a substantial pollution event happens near a well-populated city, the effects can be catastrophic. Businesses and municipalities should be aware that pollution insurance is available and affordable to many. There are a number of carriers offering pollution policies and no two are the same. It’s important that owners of businesses and property are informed of their options and consider transferring that risk to a reputable insurance company.