Environmental Risk and Universities/Colleges

Transcription

1 Environmental Risk and Universities/Colleges May 24 th, 2013 CURIE Seminar George Boire Marsh Canada Limited Environmental Practice Leader Toronto, Canada

2 Agenda What are Environmental Risks and Why do you need to Manage them? Potential environmental management solutions Insurance Solutions Claims Questions? 1

3 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 2

4 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) 3

5 Emerging Environmental Risks Reputational Risk Climate Change Risk Physical Regulatory Products Liability Risk Product Stewardship Natural Resource Damages Green Construction Risks 4

6 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 5

7 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 6

8 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 7

9 Traditional Risk Handling Techniques Environmental Indemnification Risk Financing: Loan/collateral guarantees; Trust funds; Letters of Credit; and Escrow funds. Purchase Price Negotiations 8

10 Environmental Insurance A Strategic Risk Management Tool Can provide coverage for claims related to both historical and operational 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 9

11 Do you have the right environmental/pollution coverage? General Liability Common Pollution Exclusions - Absolute Pollution Exclusion - Named Peril and/or Time Element -3 rd 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 -3 rd Party Bodily Injury/Property Damage - No Clean Up Coverage 10

12 CURIE Keith Shakespeare s presentation 11

13 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 12

14 Pollution Legal Liability (Note: Claims Made policy) TORT Bodily Injury on and off site Property Damage on and off site, including NRD (natural resource damage) CLEANUP ON-site /OFF-site cleanup coverage for contaminants on, within or under the site: unknown pre-existing new conditions OTHER Non-owned disposal sites Business Interruption/ Extra Expense/ Project Delay Transportation Timeline of Coverage* Covers Unknown Pre-existing Contamination Policy Inception * Discovery or Third-Party Trigger Covers New Pollution Events 13

15 Pollution Legal Liability Coverage Terms of up to 10 years currently available for historical coverage 5 years for operation 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) 14

16 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 15

17 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 16

18 Trends In Claims Most claims we have seen have been discovery of pollution conditions on 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 17

19 Questions? Thank You! George Boire SVP, Environmental Practice Marsh Canada Limited

20 M (C110906TP): 2011/09/14