ART solutions for landowners pollution culpability
- Herman Schoeman, MD of Guardrisk

There is very little insurance cover available in the traditional insurance market for liability relating to the slow and gradual pollution of land from activities like landfill, waste, leaking oil reservoirs and petrol reservoirs. This comes at a time when companies' environmental liabilities are mounting, as authorities increasingly enforce environmental laws.

The traditional market offers South African companies environmental impairment liability cover, which is generally only for sudden and accidental pollution. Directors, and officers, liability policies could provide protection to directors for liability arising out of environmental impairment, but there is sometimes an exclusion for pollution.

In terms of the principles of the National Environmental Management Act, 1998 (NEMA), the cradle to grave principle is incorporated into law. This means that responsibility for the environmental and health consequences of a product, process or service, starts with the extraction or processing of the raw materials and extends through manufacturing and use to include ultimate disposal of products or waste. Consequently, a person retains responsibility for their waste even if it is transferred to another person for disposal or treatment off site.

According to NEMA and the National Water Act, 1998 (NWA), breaching an environmental stature not only invokes a criminal sanction, provision is also made for the recovery of costs and damages for the rehabilitation of the environment or for preventing damage to the environment. Directors and officers of companies can, in certain circumstances, be held criminally liable for environmental wrongdoing and b required to pay what are, in effect, civil damages, if they have failed to take all reasonable steps to prevent the committing of an offence.

Effectively, a statutory duty of care is placed on the owner of land or premises or the person in control to take reasonable measures to prevent contamination from taking place. If that person, after being directed by the authorities to investigate and assess the impact of such pollution fails to take such steps, then the authorities may take reasonable measures to remedy the situation and may recover such costs from the individual concerned.

The legislation is far reaching: new owners of land may even be held liable for historic contamination which occurred prior to their taking ownership of the land. However, it would be possible for a claim to be instituted against the previous owner if it could be proved that appropriate steps were not taken to prevent environmental damage.

The alternative risk transfer (ART) industry can provide self insurance facilities that will allow landowners to self insure for environmental liabilities in a structured manner. This would include a degree of risk transfer, provided by the ART insurer, in combination with a self insurance facility. These ART products would typically come in where traditional insurance is not available, for example, for gradual environmental impairment.

ART could also conceivably protect the value of land by providing a policy to cover the liability of future owners of the land, since buyers may be hesitant to buy potentially contaminated land if such a policy is not in place.

The inherent flexibility of ART vehicles is particularly useful when applied to the broad liability of environmental damage. With most South African companies' environmental risks inadequately covered, the ART industry certainly has a role to place in an area that is set to remain firmly in the spotlight.

For further information please contact:
Herman Schoeman, MD of Guardrisk
Telephone: +27 11 669-1001

Issued by:
Melanie Davis, PR@Work
Telephone: +27 11 615-3309 / +27 83 225 7450