Environmental Risk and Universities/Colleges May 24 th , 2013 CURIE - - PowerPoint PPT Presentation

Environmental Risk and Universities/Colleges

May 24th, 2013 – CURIE Seminar

George Boire Marsh Canada Limited | Environmental Practice Leader Toronto, Canada

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30 May 2013

Agenda

• What are Environmental Risks and Why do you need to Manage them?
• Potential environmental management solutions
• Insurance Solutions
• Claims
• Questions?

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Environment, Sustainability, and Corporate Social Responsibility

• Environmental risk as a concern became somewhat mainstream in/around

1980’s

• Sustainable Development initially defined as “Meeting the needs of the

present without compromising the ability of future generations to meet their needs” (Brudtland Commission 1987)

• Sustainability – three-legged stool including economic, environmental,

and social responsibilities

• Today Environmental Risk needs to be looked at in the context of

Sustainability

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What are Environmental Risks?

• Legacy or Historical Risks

– Past activities on a site(s) have resulted in pollution conditions – Ongoing legal issues (e.g. fines, suits) related to past activities – Joint, several and retroactive liability regimes – Typically an issue during transactions (eg purchase/sale, refinancing, redevelopment)

• Operational Risks

– Ongoing activities of company have inherent environmental risks – New Regulations can result in the need for expenditures/upgrades

• Contracting and Errors & Omissions (i.e. Professional) Risk

– Contractors & consultants who perform work on your site(s)

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Emerging Environmental Risks

• Reputational Risk
• Climate Change Risk

– Physical – Regulatory

• Products Liability Risk
• Product Stewardship
• Natural Resource Damages
• Green Construction Risks

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Universities & Colleges – typical/potential environmental risks

• Historical pollution conditions
• Pollution from neighbouring properties
• Fuel storage/handling related spills/leaks
• Asbestos in/on older buildings
• Mould in buildings
• Hazardous materials handling (eg labs, medical/research facilities)
• Research projects
• Construction/redevelopment work

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Environmental Risk Management Drivers and Stakeholders

• Environmental Regulations

– Eg. Changes in Cleanup Standards

• Financial and Non-Financial Reporting Requirements
• Lenders and Insurers Requirements
• Counterparties in transactions
• Local populations/governments
• Civil-Society/Non-Government Organizations (NGOs)
• Shareholders including Institutional Investors and Activist Shareholders
• Transactions

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Managing Environmental Risk

• Identify - e.g. due diligence (Phase I and II

Environmental Site Assessment, Compliance reviews, etc.)

• Prevent - e.g. develop environmental

management system (eg ISO14001)

• Avoid - e.g. don’t buy site/company
• Remove - e.g. remediate contaminated site
• Transfer - e.g. indemnity agreements

including purchase of environmental insurance coverage

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Traditional “Risk Handling” Techniques

• Environmental Indemnification
• Risk Financing:

– Loan/collateral guarantees; – Trust funds; – Letters of Credit; and – Escrow funds.

• Purchase Price Negotiations

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Environmental Insurance A Strategic Risk Management Tool

• Can provide coverage for claims related to both historical and
• perational pollution conditions
• Can back-up or substitute for an indemnity
• Can neutralize the effect of “unknown” environmental conditions
• Can address regulatory re-openers/changes in regulations
• Can reduce toxic tort risks
• Can facilitate financing

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Do you have the right environmental/pollution coverage?

• General Liability

– Common Pollution Exclusions

• Absolute Pollution Exclusion
• Named Peril and/or Time Element
• 3rd Party Bodily Injury/Property Damage
• No on site Clean Up Coverage
• Waste/Waste management activities not covered
• Excess Liability - Named Peril and/or Time Element
• 3rd Party Bodily Injury/Property Damage
• No Clean Up Coverage

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CURIE

• Keith Shakespeare’s presentation

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Environmental Insurance Solutions

• Pollution Legal Liability – both legacy and operational risks
• Contractors Pollution Liability – construction and operational phase risks
• Underground Storage Tanks policies
• Combined GL/EIL (eg Chartis EAGLE)
• Closure/Post Closure Environmental Insurance

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Pollution Legal Liability

(Note: Claims Made policy)

Timeline of Coverage* Policy Inception

Covers “New” Pollution Events Covers “Unknown Pre-existing” Contamination * Discovery or Third-Party Trigger ON-site /OFF-site cleanup coverage for contaminants on, within

• r under the site:
• unknown pre-existing
• new conditions

Bodily Injury on and off site Property Damage

• n and off site,

including NRD (natural resource damage) Non-owned disposal sites Business Interruption/ Extra Expense/ Project Delay Transportation

TORT CLEANUP OTHER

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Pollution Legal Liability Coverage

• Terms of up to 10 years currently available for historical coverage – 5 years for
• peration risk coverage
• Limits of up to $50 million from selected carriers
• Individual risks or portfolio/multiple site programs
• Coverage for non-owned sites, mould, and transportation available
• Known conditions generally excluded unless localized, well delineated and/or risk

assessed (ie formal regulatory review process involved)

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Contractors Pollution Liability (CPL)

• Coverage for claims related to pollution conditions caused by, or

exacerbated, by a contractor(s)

• Can be annual policies purchased by a specific contractor or project

specific policies which can cover general contractor and some/all of their sub-contractors – Becoming common on large infrastructure projects and other public private partnerships (“PPP”) – Can be owner or contractor controlled programs

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Premium Variables

• Variability of Risk (Severity/Frequency)
• Current/Future Site Use and Surrounding Occupancies
• Environmental Management Policies/Procedures (ie Loss Control)
• Competition Between Insurers
• Claims History for Insured and Type of Risk
• Conditions in overall Commercial Insurance Market

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Trends In Claims

• Most claims we have seen have been discovery of pollution conditions
• n insured’s sites:

– Source can be historical on-site activity and/or from an adjacent site(s).

• Some claims related to offsite impacts from an insured’s site:

– Remediation costs; and – Diminution in value.

• Not many claims related to government orders (so far…)
• Often result from investigations related to transactional activity

including new site construction, purchase/sale, and decommissioning

• Still relatively new line of insurance coverage so it will take time for

more trends to come to light

Questions? Thank You!

George Boire SVP, Environmental Practice Marsh Canada Limited 416 349 4791 | george.boire@marsh.com

M110905 (C110906TP): 2011/09/14