13 Dec ESI Webinar Summary – Brownfield Land Development: Transfer of Pollution Risk
We recently held another successful ‘Beyond Remediation’ webinar, looking at the different aspects of risk management that focus on commercial project management and leadership aspects more than technical.
Jon Cooke, Managing Director at ESI, now part of Stantec, was joined by Duncan Spencer, Director at EDIA, to offer delegates insight on how liabilities associated with historical pollution may not be completely dealt with through the planning process and development of brownfield land.
What is Environmental Insurance?
Duncan started the session with a brief overview asking, ‘does environmental liability exist?’, often cases are low profile in the press. Duncan gave an example of a housing estate where there have been years of litigation, but unless you were local, or a specialist hydrogeologist, you probably wouldn’t be aware. The case also illustrated the timescales that can be involved, running over 30 years, with civil and follow up actions still ongoing.
Duncan reiterated that a similar issue could happen to other residential developments; although everything was done properly with planning, this was irrelevant to the realisation of the liability as it can take a long time for these things to “flush through”. Liability bounce back i.e. the ability to control liability through the development process reduces at each stage. Conversely, the ability for liability to bounce back can increase. Insurance can be one of the commercial tools used to prevent this bounce back.
Scope of Environmental Insurance Cover
Duncan went on to provide an overview of the basics which form environmental insurance.
- Clean up
- Property damage
- Bodily injury
- Site Pollution Liability (SPL) – covers liability for pollution in or under or migrating from a property.
- Contractors Pollution Liability (CPL) – pollution created by contractor and pathways created by the contractor.
Duncan explained the product types suitable at each stage; pre-development, development and post-development giving examples of cases relating to these different points in development.
Benefits and Limitations
Environmental insurance can provide a financial provision for your development as well as being a recognised tool in the process. Duncan explained that you do however need to consider carefully the planning regime, as planning is a key tool for the management of pollution. But achieving planning permission does not remove liability and with the added pressure to develop brownfield sites, Duncan warned that we may see sites that could be inadequately remediated.
There are key limitations to these products as insurance contracts often have restrictions, conditions and limitations that you need to be aware and careful of.
An integrated strategy
Duncan explained how he works with these policies and specific projects, going through the transfer of liability to the contractor and he provided examples of different pollution scenarios and how these instances are covered.
Key to this, Duncan reiterated, is working as a team, with your legal team, contractors and the consultants, all playing an important role in the development process.
Jon concluded the session with a case study of a residential development project EDIA and ESI has worked on together. The site had a previous history of contaminant use and following a programme of statutory remediation it’s now been brought to market and purchased by a developer. The site investigation showed evidence of some residual contamination and the fate of this contamination during development needed to be considered. The risk needed to be reduced and the advice was to have a risk management strategy combining pathway control, but also incorporating an appropriate insurance for the contractor and the developer. Jon explained that ESI developed a conceptual model to look at the risk so it could be technically addressed in conjunction with the underwriter. Jon stressed the importance for ESI and EDIA to discuss risk management techniques at an early stage so that the liabilities could be effectively managed.
Duncan finished off the session by summarising that from the examples given it’s clear that environmental issues can be complex. The development process doesn’t always mitigate the risk, so there can always be a residual risk. But, when used correctly, with the right team, environmental insurance can unlock development projects.