In February 2014, a coal ash spill at Duke Energy’s Dan River Steam Station in North Carolina triggered not only environmental remediation issues, but also a hefty lawsuit against Duke’s CEO, COO and 14 of its officers and directors. It all stemmed from a broken storm water pipe under a coal ash pond that leached up to 39,000 tons of coal ash into the Dan River. The lawsuit claimed that Duke Energy knew about the contamination for years but failed to do anything about it, exposing the company to billions in liability.
The Duke Energy lawsuit brings into sharp focus how environmental issues can turn into liability exposures, and how environmental liability insurance may be necessary for you and your business.
Origins and future of environmental insurance
Since the 1980s, the environmental liability insurance market has grown significantly. Its growth was likely fueled by a number of developments, including increased public awareness about environmental issues, a surge in environmental cleanup programs and the effects of worsening climate change.
Combined with the ever-evolving regulatory landscape, it all sets a perfect stage for increased exposure to environmental liability claims. Let’s review some ways you can determine your company’s risk profile for environmental liability.
Identify environmental hazards in the workplace. Environmental issues may not be immediately obvious, so take some time to survey your workplace to find hidden hazards. Your employees may also provide clues, so ask for their observations. Consider offering anonymous suggestion boxes for those who may not feel comfortable discussing them face-to-face. Trade publications may help you identify environmental hazards, or a hired professional who is trained to look for them in your workplace.
Understand the extent of hazards outside your company. Environmental contamination or pollution can certainly compromise the health and well-being of your employees. But they can also affect the world outside the walls of your company. As with the Duke Energy example, nearby homeowners, other businesses, entire communities and ecosystems have felt the impact of environmental hazards. You may even be shipping contaminated products to communities farther away.
Determine the measures required for containment. Your first priority is to ensure contamination never occurs. If it happens, you must be prepared to mitigate the hazard with protocols and processes. Determine whether you can remove a hazard, once a spill or leak has occurred. If that’s not possible, figure out the steps you need to take to minimize the effects of the contamination.
Document what you’ve found and share with employees and officers in your company. Now that you’re aware of the environmental hazards in your company, record and document your findings and develop a game plan to eliminate or reduce the risks. Share your findings with the employees and officers in your organization. This shows that, should a greater risk occur, you have laid the groundwork to eliminate or mitigate the hazards.
Prudent strategy
A number of factors can affect your level of environmental liability risk. Some, like human error, are almost impossible to completely eliminate. Because of this, and because environmental liability exposures are always changing (think new equipment and the condition of old equipment, product modifications, climate change, etc.), protecting your company with environmental liability insurance is a prudent strategy.
Need assistance in developing your program? We can point you in the right direction and determine the best environmental liability insurance coverage for your business needs.
