ENVIRONMENTAL INSURANCE IN POLAND

Transcription

1 - 1 - Ksymena Rosiek MA Cracow University of Economics Industrial and Ecological Policy Department ENVIRONMENTAL INSURANCE IN POLAND Environmental insurance is one of the financial instruments used while accomplishing Environmental policy of the state. Being an economic and market instrument it accomplishes to the highest degree the polluter-pays-principle (PPP). This is why its significance is increasing in Poland. The aim of this study is to present the development of environmental insurance in Poland up till now. Therefore the place of the environmental insurance in the literature and the regulations in Polish law concerning it will be presented. What will be discussed is also the idea and the different sorts of ecological risk as well as the range of ecological responsibility. Furthermore, different kinds of environmental insurance already existing in Poland will be analysed. Insurance plays a main part in the economy by contributing to the market stabilisation. It has essential functions both economic and social. In the literature on the subject it is most often defined as an economic mechanism superior task of which is to compensate for (or fully remove) the negative effects of the events of fate by dividing the duty of compensating among many units, which are not endangered by the same events 1. Environmental insurance includes the events of fate of the ecological character. Theoretically those may be the events caused by natural forces (floods, hurricanes, hail) as well as man s economic activity (breakdown of industrial installations causing environmental damage). The conception of environmental insurance can be met while classifying the sort of insurance (which is mainly put into practise). It distinguishes the kinds of risks such as for example fire, theft, nuclear or ecological 2 risk. The characterisation of environmental insurance should be started from bringing near the term of risk. On the base of insurance theory there are many different definitions of risk, 1 T. Sangowski: Economic insurance policies. Poltex, Warszawa 1998 p T. Sangowski: Bases of insurance policies Vol. I. Poltex, Warszawa 2000, p. 39

2 - 2 - including also the ecological risk. Therefore it is indispensable to systematise the terms that will be used in this study. Risk is understood as a potential variability of results (the state of practical reality, in which there is a possibility of an inconvenient deviation of actual result from the one assumed or expected in the situation given). Risk is an objective category (not depending on the receiver), while the subjective category is the uncertainty. Risk should not be identified as danger which is the cause or the source of loss 3. The appearing here category of loss is mostly understood as financially represented loss. What is understood as an ecological loss is the result of disturbing the ecology, which leads to harm of one s possessions or health, or makes some of the potential or recreational use of the environment impossible 4. The definitions of ecological risk quoted in the literature differ over the range of the risk included. From concentrating merely on sudden events such as ecological or industrial disaster to widely understood risk including postponed results connected for example with deterioration of property such as monuments or disadvantageous influence on people s health. Therefore ecological risk can be both narrowly and widely understood. The ecological risk, in its original meaning, includes the possibility of lowering the quality of the environment, injuring the ecology or a disaster occurring. The ecological risk, in its general meaning, includes the health, cultural, material and financial risk 5. This is the elementary though not only way to divide risk. Below there are other criteria of risk division presented which are essential in classifying the ecological risk. The first of the criteria of the division of risk refers to the character of fate events (sources of danger). There are therefore natural risk (elementary) created by nature itself such as flood or hurricane risk as well as social risk created by man and his activities such as a risk of the exhaustion of deposits or a risk connected with use of natural forces. The second criteria is the sort of loss. Taking this under consideration the division can be made into personal risk (illness or loss of health risk) and property risk (risk of fire or loss of crops). 3 T. Sangowski: Bases of insurance policies Vol. I. Poltex, Warszawa 2000, p. 29 and following and C. A. Williams Jr, M. L. Smith: Risk managing in comparison with insurance policies. Wyd. Naukowe PWN, Warszawa 2002, p.28 and following 4 T Żylicz: Economy facing environmental problems, PWN, Warszawa 1989 p.63 and following quoted after: J. Famielec: Ecological loss and benefit in the state economy, Wyd. Naukowe PWN, Warszawa- Kraków 1999, p G. Borys: Ecological risk as an instrument for ecological development. In: Applicational aspects of a permanent development. edited by: S. Czaja, Economy and Environment Library No 29, p. 21

3 - 3 - The division into original and derivative risk is also important. The original risk is the risk of appearing of an ecological danger (the risk of contamination of drinking-water), while the derivative one is the risk caused indirectly by appearing of the ecological danger such as for example deterioration of people s health conditions, people being poisoned because of drinking contaminated water). The sources of ecological risk may be things such as using the ecology, introducing changes in it, the work of natural forces. They also include environmental care since use of some legal and administrative tools may cause harm (for example a detriment of income, increase of activity expenses) 6. Damages caused by appearing of ecological danger can therefore have either an original or derivative character. They can be also divided into damages caused by a sudden occurrence or long-drawn neglect. Not all damages can be insured. The latter are fundamentally acknowledged as not to insure. Polish legislation secures the possibility to claim compensation. Anyone who through illegal influence on the ecology is directly exposed on damage or was thus harmed may claim the unit responsible for this danger or for disturbing to restore the condition consistent with law and take the precaution particularly by installing the devices protecting from danger or disturbing. In case when it is impossible or excessively difficult a claim to stop the activity that is being the cause of this danger or disturbing can be made nd entry of the quoted act, i.e. the Act on Environmental Protection, concerning the responsibility for damage caused by influencing the ecology refers to the regulations of Civil Law. It means that, as in the majority of countries, the responsibility for the damages is based on third party liability insurance rule understood as the third party liability insurance of economic units for ecologically disadvantageous influence on the ecology caused by productive or transport activity as well as different kinds of service activities or consumption 8. It should be acknowledged that the term of economic units also includes households. To describe the third party liability insurance of economic units for ecologically disadvantageous influence on the ecology a term of ecological responsibility is used. What can be distinguished are the ecological responsibility for proved fault as well as the responsibility for (potential) risk, sometimes called the responsibility for ecological risk. 6 G. Borys: Ecological risk as an instrument for ecological development. In: Applicational aspects of a permanent development. edited by: S. Czaja, Economy and Environment Library, No 29, p At from 27 th April, 2001 Environmental Care Law J. of L. of 2001, No 62 item 627 pos B. Fiedor, A. Graczyk: The responsibility and the ecological insurance policies. In: Market instruments used in the environmental care. edited by: S. Czaja, Economy and Environment Library, No 29, p. 85

4 - 4 - This means that the damage is not necessary to occur. The unit is also responsible for creating risk of damage to appear and on account of that it should undertake certain actions leading to prevent damage and loss from appearing. The ecological responsibility on the base of a proved fault usually refers to sudden, single local occurrences, whereas the responsibility for long-drawn damages is connected with the regulation concerning the responsibility for posing a threat. There is, however, no such category of responsibility based on distance influence, that is connected with the propagation of pollution on larger areas introduced systematically into ecology 9. The activity of economic units carried on in accordance with the regulations and in the range of the permission obtained for exploiting the ecology resources does not exclude these units from the responsibility for the damage caused by their activity 10. This means that the sufferer can claim compensation for the damage being the result of the activity of the unit, under condition, however, that the dependence of sustained damage upon the activity included in the administrative decisions. The distant influence is not insured since it does not fulfil the basic criteria of insurance possibilities. In this case it is impossible to define the date when the damage occurred and therefore calculate the ecological risk. It is also often impossible to define unequivocally the polluter as well as to estimate the influence of the natural conditions on the loss resulting from the damage. What is also usually not fulfilled is the fortuity criteria. Setting up the third party liability insurance for causing harm to the ecology performs certain functions such as securing the restricting the occurrence of damage and ecological loss (preventive function), justifying the units to undertake precautions, recording and inspecting the amount of pollution generated (economic function) as well as making it easier for the sufferers to claim compensation. The environmental insurance is dynamically developing in the highly developed countries. In Poland the system of environmental insurance including the insurance against natural disasters and third party liability insurance for ecological damage can be noticed to begin forming Fiedor, A. Graczyk: The responsibility and the ecological insurance policies. In: Market instruments used in the environmental care. edited by: S. Czaja, Economy and Environment Library, No 29, p The statute of 27th April 2001: Environmental Care Law J. of L. of 2001, No 62 item 627 pos G. Borys: Ecological risk as an instrument for ecological development. In: Applicational aspects of a permanent development edited by G. Dobrzański, Technical University of Białystok Publ., Białystok 2002, p. 119

5 - 5 - On account of that, environmental insurance can be divided into two basic groups: property and personal insurance and third party liability insurance. The property insurance pertaining to the ecological risks that is offered in Poland covers with the insurance protection those damages that were caused mainly in the course of activity of the natural forces such as for example hail, shock wave, a load of snow, a strike of a lightning, gale, flood, water flowing down the slopes, rainfall or snowfall, ground sinking, avalanche, crop damage, fire (cause by either a strike of a lightning or arson). Different insurance companies offer a different range of insurance protection dividing it usually into an original and a widened range and as a result of that (setting up different) differentiating the insurance premium. The ecology exploited by the unit cannot be however recognised as an object to insure. What is excluded from insurance range is damage caused by long-drawn slow processes, effect of nuclear power and other elements of the ecology. Personal insurance policies offered by Polish insurance companies which include life, accident and illness insurance do not exclude in the overall conditions of the contract such events as death, accidents and effects of accidents as well as illnesses that were caused by either an ecological disaster or slow and long-drawn influence of the contaminated environment on human body. However, some insurance companies exclude such cases when harm was caused either directly or indirectly by nuclear radiation or by the influence of the activity of nuclear power or resulting from the effects of poison, gas or exhaust emissions. What is usually excluded from other personal insurance contracts (against accident, professional disease, illness) is compensation for fate events appearing as an effect of disasters resulting in nuclear, chemical pollution or radiation 12. For the economic units keeping an activity that can pose a threat to the ecology it is also possible to enter into a third party liability insurance contract. Insurance can be either compulsory or voluntary. Compulsory insurance is described by law. The insured can freely choose the insurance company, while the insurer cannot refuse signing an insurance policy, but it settles the height of rates and insurance premium. Compulsory insurance is appointed when there is a high probability that in case when damage occurs the state would have to meet most of the expenses connected with the damage. At the same time so-called negative selection is eliminated that is a situation when the insured units are those the most exposed for the 12 T. P Lenart, A. Pietrewicz: Ecological insurance policies as an instrument of hastening the pro-ecological changes in state s economy. Typescript, available at: p. 4

6 - 6 - negative effects of certain risk and when compensation is secured for those who were harmed because of the fault of the third party In Poland compulsory are: third party liability insurance for the owners of motor vehicles, against damages caused in the course of vehicular traffic, third party liability insurance for the farmers on the base of running a farm, third party liability insurance for causing nuclear damage, third party liability insurance for the damage caused by oil pollution in the sea transport, To insure the buildings that are part of a farmstead against fire and other fate events (property insurance). Insurance for third party liability insurance for causing nuclear damage and insurance for third party liability insurance for the damage caused by oil pollution in the sea transport are environmental insurance. It is disputable whether to treat the latter as ecological since according to Polish law environmental insurance policies are those based on civil liability rule. Voluntary third party liability insurance policies (the OC policy), connected with ecological risk can be found among general regulations of the third party liability insurance policies taken on the account of running an economic activity and for the product as well as in the clauses extending the third party liability insurance policy and also in the third party liability insurance policies for the transport agents. In the third party liability insurance policies for economic units available in Poland some of the insurance companies make it possible to take out the third party liability insurance on the base of sudden and accidental pollution of the environment. They include personal or property damage that arises as the cause of emission, scattering, releasing or escape of smoke, exhalation, soot, dust or any other irritants that may pollute or contaminate the ground or its surface, atmosphere, a stream, river, canal or reservoir. The third party liability insurance policy of a product includes damages caused by introducing a dangerous or defective object. They do not usually comprise the damage caused by products consisting of asbestos or produced with the use of magnetic or electromagnetic field. There are few companies that offer, under similar conditions, a third party liability insurance policy against damage done to the environment that is consistent with the 72-hour Clause. The insurance comprises personal or property harm caused also by the effect of appearing of the dangerous substances, but the following conditions must be additionally fulfilled:

7 - 7 - Condition of sudden occurrence of the damage; the event that causes the damage must not be the result of the lack of precision in running the company, must not be intended or expected, The moment of the start of the emission of the substance must be covered by the validity period of the insurance policy, The fact of substance s emission must be revealed within 72 hours from the first moment of emission, Personal or property damage resulting in it must occur within 72 hours from the first moment of emission, Any claims on the insurer should be notified immediately, not later than within 30 days from the first day of emission. The duty of proving the starting moment of substance s emission is laid upon the insured. The insurance policy for transport agents excludes from the range of basic compensation protection all the damages that happened as a result of activity of nuclear power or radiation of radioactive substances, harm done to the environment or connected with transporting the articles of higher risk. On behalf of the insured, the policy may also concern the risk of these damages appearing. In Poland the number of compulsory policies connected with the responsibility for ecological damages is still insignificant. In the EU and in other highly developed countries an increasing number of compulsory policies is introduced such as for example gas piping operators responsibility (Austria, Switzerland, Holland), policies for environmental threatening activities (Portugal, Switzerland, Germany), insurance policies for responsibility connected with products dangerous for the environment 13. In many countries there are also ecological deposits, that is amounts of money reserved in case of disaster that may happen while transporting dangerous substances. In case when no accident happened all the deposits are given back. Since the compulsory insurance policies are a significant burden for company s finances, they should be introduced gradually. In case of insurance policies that are as outstanding as the environmental ones, there are new factors that affect the increase of the number and sorts of insurance policies available 13 I. Kwiecień: The part played by compulsory insurance policies The OECD countries in comparison with Poland. Insurance News, 2000, No 1 /2 p. 42

8 - 8 - which is mainly caused by increasing ecological consciousness. They include the social inflation, cases won at court and moral risk. The first phenomenon, that was observed in the United States, called the social inflation describes a constant rise of the height of compensation that is adjudicated by court. As a result of that the expenses of the companies activity rise as well as the height of the insurance premiums. What is more, if the company is sued and the case is won, it is endangered by a a number of new cases appearing, as there are usually more victims who do not claim the compensation until the first case is won. Units cannot be insured against damages caused by their regular activity. This causes the rise of risk of running an economic activity based on the use of natural resources. The moral risk is the third aspect that influences the development of insurance policies. It is connected with possible chance, that the unit that is insured against the results of ecological risk may try to weaken the preventive actions undertaken to prevent accident that may cause some damage to the environment to happen. In order to avoid it, it is advisable to enable inspections of the installation condition as well as actions undertaken by the insured unit that will be carried by specialist from insurance companies. It is common to exclude from the service provided the results of accidents caused by one s neglect. What is often introduced is so called insured unit s individual share which serves as a compensation for damaged done to the third parties. The environmental insurance market is slowly developing in Poland. It is related to a low ecological consciousness of both people and economic units. Especially among the countryside population there is a conviction that in case of any ecological disaster such as flood, help from the state will be provided nevertheless. Many farmsteads do not even have the compulsory third party liability insurance policies. It is also probably connected with the weak financial condition of small farms. People in Poland usually do not realise that they are entitled to claim compensation for the damage caused by companies. While taking economic units under consideration it is scarcely taken into account that damage expenses may cause bankruptcy of the unit. In Poland the development of environmental insurance policies is inevitable. The acts: the Ecology Protection Law and the Insurance Law are indispensable legal frames for the development. This instrument is also recommended by the Poland s 2 nd ecological policy. What should be recollected, however, is that environmental insurance policies, especially the

9 - 9 - compulsory ones, strongly influence the activity costs of the units. Introducing such should be therefore gradual.

10 BIBLIOGRAPHY: 1) G. Borys: Ecological risk as an instrument for ecological development. In: Applicational aspects of a permanent development. edited by: G. Dobrzański, Wyd. Politechnika Białostocka, Białystok 2002, 2) G. Borys: Ecological risk and its ordination on the ground of the theory of insurance. In: Market instruments in the environmental care. edited by. S. Czaja, Billioteka Economy and Environment No 29, 3) B. Draniewicz, Environmental responsibility for damage done to the environment caused by a company of increased or high risk selected problems. Law and Environment, 2003, No 1 4) J. Famielec: Ecological loss and benefit in the state economy. Wyd. Naukowe PWN, Warszawa- Kraków ) B. Fiedor, A. Graczyk: The responsibility and the environmental insurance policies. In: Market instruments used in the environmental care. edited by: S. Czaja, Biblioteka Economy and Environment No 29 6) I. Kwiecień: The part played by compulsory insurance policies The OECD countries in comparison with Poland. Insurance News, 2000, No 1 /2 7) T. P Lenart, A. Pietrewicz: Environmental insurance policies as an instrument of hastening the pro-ecological changes in state s economy. Typescript, available at: 8) T. Sangowski: Bases of insurance policies. Vol. I Poltex, Warszawa ) T. Sangowski: Economic insurance policies. Poltex, Warszawa ) Williams Jr, M. L. Smith: Risk managing in comparison with insurance policies. Wyd. Naukowe PWN, Warszawa ) The statute of 27th April 2001: Environmental Care Law J. of L. of 2001, No 62 item ) General conditions of arrangements: TU Allianz 2001, BTUIR Heros S.A. 2002; TUIR Partner S.A 2001; TUIR Warta SA 2002,