Climate change, the environment and pollution are priorities of governments, legislators, regulators and activists. Commercial activities and its polluting affects over many years have everyone concerned about melting polar caps, ocean acidification, ozone layer depletion, and acid rain to name a few. 

Heightened public sensitivity to pollution events caused by commercial enterprises can garner enough negative publicity as a privacy breach. The law will challenge an organization’s due diligence or lack thereof. And in the case of knowingly committing an offence, criminal sanctions will be assessed against the Corporations and its directors and officers. Whether it’s the application of absolute or strict liability, in the eyes of the courts, polluters will pay.

Corporations need to take a singular green focus on their pollution exposures as they should their technology risks, to assess the apparent and latent operational risks in all their activities. Unfortunately, this green focus gets a cursory look and addressed in the context of overall enterprise risk and insurance portfolio review. But without a green focus, the potential damaging costs could put a company in the red.

Whether you feel the likelihood of a pollution event, whether sudden and accidental, or gradual is low to moderate, like fire, the consequences are severe. A pollution event, whether occurring on it’s own occasioned by another contributing peril (commonly referred to as concurrent causation), can create indirect costs beyond direct property damage or bodily injury. Indirect costs can include clean up costs and waste disposal, remediation expenses, third parties liabilities, diminution of property values, regulatory/court fines & penalties, business interruption and reputational damages.

To expand the concept of a pollution event, the pollutant itself doesn’t need to be a toxic substance, but really any substance, in any form, released into the environment where it doesn’t belong and needs to be removed. Contrary to saying, we should be crying about spilt milk.

The environmental risk exposures are different for manufacturers, contractors, realty. Each has their elevated risk points; premises & operations, off site and completed operations, product liability and transportation. 

A plastics manufacturer sustained a fire causing partial damage to exterior and interior production line. Although the loss was partial, the fire released toxic fumes into the neighbourhood, friable plastic from burnt inventory combined with water used to contain  the fire created a by product that made its way into the sewer drains on the property, this contaminant made its way into a adjacent stream. This fire loss illustrates the ensuing pollution exposures.

To avoid seeing the red, effective risk management is required to mitigate the environmental risk. The green focus should implement risk control to prevent the event from happening, and implement post loss controls should a pollution event occur. Risk financing should include a proper integration of Directors & Officers insurance and a customized environmental liability policy to address the operational risks mentioned above. This coverage design is essential in protecting the executives as well as the corporate entity. The major caveat here, Commercial General liability policies carried by organizations are very restrictive or non responsive to pollution coverage. It’s best to ask Am I covered now?, then after a loss.

Yes, the green focus can keep your company out of the red, maintain business continuity and sustained profitability by effectively managing your environmental risks.

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