Your status when it comes to being liable for polluting the environment
Being held guilty is a complete turnaround to the presumption of innocence until proven otherwise, and enough to turn your business world upside down when it comes to gradual or sudden environmental pollution.
At Econorisk’s August #Risk Series, Environmental Impairment Liability (EIL) expert, ITOOs James Brice informed guests that the best way to treat a pollutant is to keep it concentrated and contained. However, when it’s underground and unseen in a pipeline or storage tank; on a truck in transit; or produced in a refinery or plant – the chances are that the containment will leak sooner or later.
And when it leaks, it spreads, and for every year it spreads,
the rough estimate for cost of clean-up increases 10-fold.
Everything leaks sooner or later!
When you consider that an undetected pinprick hole found in a 43 000 litre tank could create a spill with a spread of 300 metres – it becomes a damaging, sudden and costly incident. This particular case resulted in a hefty R1.2 m clean-up, not including 3rd party costs.
ITOO offers a Tanksafe product that covers underground and above-ground storage tanks for common fixed facilities such as filling stations, factories, warehouses and depots. On the other end of the scale, gradual pollution can slowly cause widespread damage, making it much more expensive to clean up.
So, you thought you had a squeaky-clean site…
Businesses need to be cautious during property transfers. “If you find yourself with an environmentally compromised site, whether it is bought or leased industrial property, the clean-up bill could cost up to R5 to 10 million – not something you want to be left with if it wasn’t your fault to start with,” cautions Brice. If EIL cover is in place, you are able to indemnify yourself. “We have found that the Propsafe policy has been used as a means to solve deadlocks in negotiations where buyers and sellers can’t agree on the selling price, as in an international deal in the motor sector last year. The Buyer wanted a warranty that they were not buying a compromised site – in a situation where there was no time to do a 5-month risk assessment to reassess the one that had taken place five years earlier. The Seller took out a 3-year EIL policy and ceded it to the Buyer, which we wrote into the Sale and Purchase Agreement in lieu of a warranty. The price was not compromised, and the deal went ahead”.
EIL is worth serious consideration if you have a business with a concentration of pollutants that could ‘leak out’. And considering that milk can be a hazardous pollutant – there is some definite food for thought!
“Context is everything in this game”