Pollution insurance is a type of insurance that covers costs related to pollution. This can include the costs of
brownfield
In urban planning, brownfield land is any previously developed land that is not currently in use. It may be potentially contaminated, but this is not required for the area to be considered brownfield. The term is also used to describe land prev ...
restoration and cleanup, liability for injuries and deaths caused by pollution. Most businesses will purchase broad
commercial general insurance or
property insurance
Property insurance provides protection against most risks to property, such as fire, theft and some weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, or ...
policies but these usually contain an "absolute pollution exclusion" and thus rarely cover pollution, although there may be limited pollution coverage.
Pollution insurance usually takes the form of first-party coverage for contamination of insured property either by external or on-site sources. Coverage is also afforded for liability to third parties arising from contamination of air, water, or land due to the sudden and accidental release of hazardous materials from the insured site. The policy usually covers the costs of cleanup and may include coverage for releases from underground storage tanks. Intentional acts are specifically excluded.
The largest players in this industry are
AIG
American International Group, Inc. (AIG) is an American multinational finance and insurance corporation with operations in more than 80 countries and jurisdictions. , AIG companies employed 49,600 people.https://www.aig.com/content/dam/aig/amer ...
,
XL, Ace and
Zurich. One of the purposes for such insurance policies is so that when companies that cause environmental disasters go bankrupt, the victims can still be compensated. The insurance may also protect against cost overruns or regulatory changes that increase the cost of cleanup. The director of China's EPA (SEPA) has called for imposing mandatory pollution insurance on polluting industries.
According to the
Cato Institute
The Cato Institute is an American libertarian think tank headquartered in Washington, D.C. It was founded in 1977 by Ed Crane, Murray Rothbard, and Charles Koch, chairman of the board and chief executive officer of Koch Industries.Koch Ind ...
, legal theories of
joint and several liability
Where two or more persons are liable in respect of the same liability, in most common law legal systems they may either be:
* jointly liable, or
* severally liable, or
* jointly and severally liable.
Joint liability
If parties have joint liabili ...
(e.g. under
Superfund) and requirements by courts that insurers pay to help polluters clean up their own property (regardless of the insurance contract) have hurt the pollution insurance industry; but nonetheless, the basic idea of pollution insurance remains sound. Cato claims, "With the help of insurers and risk analysts, corporate risk managers select cost-effective products and processes, which minimize the sum of insurance premiums, expected payments to victims (in excess of insurance coverage), and risk-reduction expenditures."
United States
In the United States, the federal U.S. Comprehensive Environmental Response, Compensation & Liability Act of 1980 (CERCLA), also known as Superfund, is the predominant law.
However, there are also important state laws with similar or additional requirements. In 2013, the State of Oregon passed Oregon Environmental Cleanup Assistance Act which significantly increased the responsibility of insurers to cover pollution.
See also
*
Environmental economics
Environmental economics is a sub-field of economics concerned with environmental issues. It has become a widely studied subject due to growing environmental concerns in the twenty-first century. Environmental economics "undertakes theoretical or ...
*
List of environmental issues
This is an alphabetical list of environmental issues, harmful aspects of human activity on the biophysical environment. They are loosely divided into causes, effects and mitigation, noting that effects are interconnected and can cause new effects. ...
References
External linksLexis Nexis 26/2/2013 published the article “Environmental Insurance” on both the Environmental Law Community and the Insurance Law Community
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Pollution
Types of insurance