Historical Contamination Cover

Insurance can be arranged for liabilities associated with pre-existing historic contamination. Cover can also be arranged for contingent liability exposures associated with previous divestments by the target company. It is possible to combine both operational and historic pollution cover into a single policy.

The policies can be extended to cover consequential losses such as business interruption or economic loss associated with contamination (e.g. loss in rental income, costs of relocation, diminution in property values etc).

In particular, the cover generally extends to the following:

• Third party claims for property damage or bodily injury
• Regulatory clean up costs - on or off site
• Legal defence costs, costs of investigation etc
• Change in law

Negotiation of warranties and indemnities form a significant part of structuring corporate transactions. Such contractual mechanisms are regularly used to allocate liability for environmental risk.  Often this issue can become a deal breaker.

Insurance policies can give back to back cover for contractual liabilities flowing from indemnities and warranties.  Cover is limited to liability arising from the relevant contract.  The definitions and provisions of the contract can be written directly into the insurance policy which removes any possibility for potential gaps in cover.  It does not automatically include any liability that the insured might have outside the terms of the relevant contract. This can be addressed separately.  This form of cover can be used to unlock negotiations and protect the balance sheet of the indemnifying party.

Policy duration can be tailored to suit although generally the maximum policy for historic contamination is 10 years.  Beyond 10 years a different approach is required (Blended Finite Programmes).

In addition to cover for potential liability from the contamination at the site insurance can be put in place to provide protection against remediation cost overruns (Cost Cap).