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Mandatory pollution insurance receives mixed reaction.

Mandatory pollution insurance receives mixed reaction

The concept of mandatory liability insurance for environmental damage has drawn a mixed reaction from the insurance industry.

Chris Rhind, president and chief executive officer of the Insurance Institute of Canada, believes that making pollution insurance mandatory is a "two-edged sword."

He said that although environmental safety and clean-up is necessary, and that industry is hard-pressed to pay the costs without incentives, the insurance industry is not the one to foot the bill.

"I don't think the (insurance) industry should be made the responsible party for cleaning up environmental damage," he said.

"If insurance companies provide the coverage then, in effect, they are letting the (polluting) companies off the hook," he said.

Rhind was commenting on a statement made by Environment Minister Jim Bradley at a conference attended by some 300 members of the insurance industry in May.

The minister said he could foresee the day when insurance policies will be required for businesses whose activities pose a risk to the environment.

"If you provide a fail-safe for those who pollute the environment, does that encourage the act?" questions Rhind.

The answer is no, according to David Eastaugh, president of Ian Elliot Limited, a Canadian insurance wholesaler with offices in Toronto and Montreal.

Eastaugh, whose company has been underwriting environmental liability insurance policies for the past five years, said the only people or companies his firm will insure are those who are currently attempting to control their own risk. Otherwise, he said the risk involved in insuring these companies is too great.

"You must provide support to companies which are already getting involved," he said.

Eastaugh, also a guest speaker at the insurance industry conference, explained that Bradley made the comment after being asked what he thought would happen if insurance companies proved reluctant to become part of environmental issues.

"He (Bradley) was just responding to a type of worst-case scenario," said Eastaugh.

However, Eastaugh agrees with the environment minister, that insurance companies must play a larger role by offering a form of coverage.

He admitted that insurers are currently reluctant to get involved.

From his Toronto office, the insurance executive explained that a form of pollution insurance was offered some years ago by most firms. However, when environmental safety issues became better understood and more prominent, these companies withdrew coverage.

"The problem was they never came up with an alternative," he said.

Helen Gagne, a representative with the Insurance Bureau of Canada, said past reluctance was due to a lack of proper controls regulating waste disposal.

Eastaugh commented that as our society's demands for a cleaner Canada increase, the country's insurance companies will have little choice but to address society's needs.

He further commented that while insurance companies were withdrawing coverage, industry was beginning to recognize, more and more, the fact that it requires environmental damage insurance.

Eastaugh said his company found this form of "specialty product," very attractive.

Currently there are two forms of environmental damage liability insurance offered by his firm.

The first, the environmental impairment liability policy, covers liability for damages caused by long-term or gradual pollution as well as sudden and accidental pollution.

Examples of gradual pollution could include the leaching of contaminates from a garbage dump into the water table over an extended period of time or sickness caused by smoke or gas emissions from a factory.

The "Cadillac policy," as Eastaugh refers to it, also responds to sudden pollution events which were previously covered under a general liability policy.

He said that, prior to selling a policy to any company, an inspector reviews the facility to ensure that adequate safety measures are in place.

Gagne explained that the big issue is the dollar figure attached to insuring against environmental damage. "The cost is so tremendous," she said.

Eastaugh disagrees.

Admitting that the size of the premium depends on the risk involved, he said that "for an average size company it only adds about 10 per cent to the overall insurance cost."

"Compare that to the size of the risk," Eastaugh insisted.
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Author:McDougall, Douglas
Publication:Northern Ontario Business
Date:Jul 1, 1990
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