EIL – Case Studies

In May 2013 we introduced valuable Environmental Impairment Liability cover to all of our Farm Combined Policies and there is a wealth of information, including a useful FAQ in the Literature Library area of our website.   From a farmers’ perspective it’s always more useful to understand the tangible benefits of introducing new covers by providing examples of where the cover has been called upon in the event of a loss.

There are two real life examples summarised below – one where the farmer had purchased the full Environmental Impairment Liability cover and the other where the Farmer had sought an alternative, cheaper cover which did not include his full liabilities.

Case Study 1

The Insured was driving his tractor, towing insecticide spraying equipment over a bridge when a component part of the sprayer suffered catastrophic failure as a result of which the liquid contents were discharged to ground and into the watercourse beneath the bridge.

The spillage comprises circa. 5,000 litres of diluted mixed products including fungicides and insecticide from the Insured’s trailer/sprayer which were spilled into the watercourse and quickly migrated downstream into the main river.  As expected there was a substantial impact to the watercourses and inhabitants and significant invertebrate and fish kill was confirmed.  Statutory Regulators, The Environment Agency, were immediately notified who carried out extensive containment and monitoring works and claims were submitted from third party landowners and Angling Societies.

Strict legal statutory liabilities attached to the Insured in respect of the environmental contaminatin and the relevant legislation  governed by the “Polluter Pays” policy.  These liabilities attached to the Farmer at civil law (negligence and nuisance) in respect of damage to third party property/land including the Angling Societies.  The Farmers insurance policy was called upon under the Public Liability section in respect of these parties.  However, the Statutory Costs incurred by the Environment Agency relating to the significant clean up operation was not covered under the standard Public Liability policy but the Farmer had an Environmental Liability extension which provided the required indemnity.

The fish kill was assessed in excess of 6,000 fish and in addition there was significant invertebrates mortalities in the affected watercourses.  The claim overall was settled for just short of £120,000, the majority of this failling for consideration under the Environmental Liability extension to the policy subject to a £500 policy excess.

It’s worth noting that whilst the Environment Agency initially indicated an intention to potentially prosecute the Insured under the relevant legislation, as a result of the significant assistance provided to the Regulators from the insurance funded consultants/contractors, a decision ultimately was made to issue the Insured with a caution only, thus no fines weree levied on this occasion.

Case Study 2

The Insured were farmers and landowners farming 8,000 acres on a mixed dairy and arable basis.  The claim related to alleged impact to controlled waters by sediment which allegedly had been caused during tree felling operations conducted by contractors on behalf of the Farmer.

It was reported that the sediment had entered a stream and travelled downstream to a significant river and various fishing lakes.  The cause of the incident was considered to be due to a road becoming rutted during the tree felling operations. Significantly increased rainfall then allowed run off from the road to enter the stream.  It is estimated that the pollution of the stream would have been ongoing for several weeks before the problem was first notified by a member of the public to the Regulators.

Statutory Regulators (Environment Agency) coordinated a significant remediation operation downstream of the forestry operations.  Significant fish kill was recorded in the watercourse and the fishing lakes downstream.  On the facts, a strict statutory liability attached to the Farmer in respect of costs incurred by the Environment Agency and in undertaking clean up to controlled waters.

A civil legal liability attached to the Farmer in the common law tort of negligence on the basis that the Farmer had failed to exercise reasonable care in the management/operation of the forestry operations, albeit carried out by a contractor, as a result of which foreseeable loss/damage was sustained to third party property.

A substantial claim for damages was submitted by Solicitors representing several Angling Associations.  It was claimed that sediment run off had impacted the lake and river and that this had prevented fishing for long periods of time.  In addition, it was claimed that the increased sedimentation had resulted in a reduction in the spawning of the young fish and also contributed to substantial fish mortalities.

In total, claims intimated against the Farmer were in excess of £250,000.

The Farmer had a standard Public Liability policy which provided for indemnity in respect of pollution/contamination only in the event that the incident was sudden and accidental.  The policy provided no additional cover in respect of statutory liabilities in the form of costs levied by the Regulators.

The Farmer had previously been offered Environmental Liability cover but this had been refused due to other rising costs he had to consider.  All claims submitted to Insurers were repudiated on the basis that the continual pollution of the watercourse over a several week period did not constitute a sudden and identifiable incident whilst in addition the statutory charges levied by the Environment Agency did not constitute damages/compensation as per the wording of the Public Liability policy.

The Farmer was obliged to deal with uninsured losses following commencement of litigation at circa £200,000 plus legal expenses.