ENVIRONMENTAL LIABILITIES AND INSURANCE IN ENGLAND AND THE UNITED STATES First Edition by Valerie Fogleman Partner and Head of Environment Group Barlow Lyde & Gilbert Solicitors, London Visiting Professor University of Ghent WSIL - 267_part - I.indd 310/10/2009 1:11:47 PM First edition published 2005 ISBN 1 85609 303 4 © Barlow Lyde & Gilbert British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library. Notice of Terms of Use All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher and copyright owner. While the principles discussed and the details given in this book are the product of careful study, the author and publisher cannot in any way guarantee the suitability of recommendations made in this book for individual problems, and they shall not be under any legal liability of any kind in respect of or arising out of the form or contents of this book or any error therein, or the reliance of any person thereon. Printed and bound in Great Britain by Bell & Bain Ltd. Glasgow Published in 2009 by Witherby Seamanship International Ltd 4 Dunlop Square, Livingston Edinburgh, EH54 8SB Scotland, UK Tel No: +44(0)1506 463 227 Fax No: +44(0)1506 468 999 Email: info@emailws.com www.witherbyseamanship.com WSIL - 267_part - I.indd 410/10/2009 1:12:00 PM vii FOREWORD by Sir Hugh Rossi Chairman of the House of Commons Environment Select Committee 1983-1992 If there is one theme that dominates our age, it is that of the environment. Protecting the environment from the impact of the dynamic growth of economic activity in the world is probably the one political topic that can mobilise most young people. A key aspect, though not one about which many individuals are well informed, is the question of how society sets out to make the economy pay for prevention and clean up of damage to the environment. That is the gap that this book covers exhaustively in relation to England and the United States. Valerie Fogleman exposes very clearly how the same factors have come into play in both countries with similar effects, first in the USA and later in England. England has in fact avoided many pitfalls thanks to learning from the US experience. In both countries, the legislatures and the courts have developed environmental liability regimes in response to the ever-increasing public will that the costs of preventing and cleaning up pollution should be met, and should be paid for by appropriate parties. Over time the polluter-pays principle has become generally recognised as the fairest and most economically sound basis for such regimes. Inevitably, however, the public purse, property owners and insurance companies have also been called upon to pay out large additional sums, often for historic contamination. Within the liability regimes, the rising cost to insurers of claims for bodily injury and property damage have forced up premiums. Cover has often been withdrawn for gradual or indeed any pollution. Yet, new liability insurance markets have been emerging and separate insurance policies are offered by specialist insurers to enable businesses to continue their economic activity in the interest of society as a whole. Valerie Fogleman’s thorough knowledge of the environmental liability regimes in both countries, as well as of the international and domestic insurance and reinsurance industries, allows her to give such a clear exposition that the reader is able to draw revealing comparisons and thus gain a real sense of the key underlying issues. WSIL - 267_part - I.indd 710/10/2009 1:12:00 PM viii ENVIRONMENTAL LIABILITIES AND INSURANCE IN ENGLAND AND THE UNITED STATES She also highlights the new European-wide environmental liability regime which was introduced in 2004 and is becoming part of English law. It enshrines the polluter-pays principle and aims to promote the development of financial instruments, notably insurance products, to protect the environment against damage from economic activity. Understanding the management of environmental liability is a complex task for any person working for a private or public organisation. This new contribution will prove an extremely valuable and timely publication. WSIL - 267_part - I.indd 810/10/2009 1:12:00 PM ix PREFACE This book examines various types of environmental liabilities. It examines the common law as it applies to bodily injury and property damage from environmental harm. It also examines legislative criminal and civil environmental liabilities in England and the United States (“US”), including their history, evolution and regimes to remediate contamination. Related topics include the redevelopment of brownfield sites, financial security requirements, the cost of cleaning up contamination and the interaction of environmental law and insolvency law. The book also examines the many aspects of insurance for environmental liabilities including policies that are designed to provide cover for environmental liabilities, pollution- related claims against general and public liability policies and the history of the withdrawal of insurance for environmental liabilities from general liability policies in the US and, to a lesser extent, from public liability policies in England. The US environmental legislation that is examined in Part A of the book is predominantly federal legislation. This is because federal legislation establishes the main liability systems to regulate pollution and the nationwide programmes to clean up contamination in the US. The book describes how the federal legislation applies to the 50 states, the District of Columbia and the US territories and how it is implemented and enforced by them and the US Environmental Protection Agency (“EPA”). The chapter on insurance coverage disputes, meanwhile, covers state law. This is because insurance law in the US is state, not federal, law. Federal courts frequently exercise jurisdiction over insurance cases but they apply substantive state law in doing so. Due to the highest court of each state being the final decision-maker on the application of state law to insurance coverage disputes, the decisions that are discussed are predominantly those of such courts. The focus of Part B of the book on England is not meant to preclude its use in other parts of the United Kingdom (“UK”). Much of the law that is examined applies to the entire UK. The book does not, however, discuss the differences between the law in England and that in Wales, Scotland and Northern Ireland. The focus of the environmental law examined in this book is environmental liability law. In some cases, an overview of the regulatory system for polluting activities and operations is set out to provide the necessary basis to discuss environmental liabilities arising out of the regimes, environmental insurance for them and financial security requirements. The book contains several commonly used terms. For example, the book refers to a plaintiff instituting a law suit in the US and a claimant instituting an action in England. It also refers to contamination being cleaned up in the US and contamination being remediated in England. An insurance policy that provides cover for third-party claims is referred to WSIL - 267_part - I.indd 910/10/2009 1:12:00 PM x ENVIRONMENTAL LIABILITIES AND INSURANCE IN ENGLAND AND THE UNITED STATES as a public liability policy in England and a general liability policy in the US. Although the terminology differs, the meaning of the terms does not have a material difference. The common terms in each country are simply used rather than to attempt to select a common term for both countries. References to the fiscal year in Part A are to the US government’s fiscal year. The US fiscal year begins on 1 October and ends on 30 September and is referred to by the year in which it ends. Thus, fiscal year 2003 began on 1 October 2002 and ended on 30 September 2003. In Part B, references to the financial year are to the UK government’s financial year. The UK government’s financial year begins on 1 April and ends on 31 March. The table of cases includes English, US, European Community (“EC”) and European Court of Human Rights (“ECHR”) cases. The tables of English and US primary and secondary legislation, meanwhile, are set out separately to account for differences in the style of citing such legislation in each country. For example, English statutes are cited by reference to a specific statute, which may be amended or supplemented by a subsequent statute. US federal statutes are referred to by the title of the United States Code (“USC”) in which they are codified. English statutory instruments are cited by reference to a specific statutory instrument which may be amended or supplemented. US federal regulations are cited by reference to the title of the Code of Federal Regulations (“CFR”) in which they are codified. Due to this difference in style, English statutes and statutory instruments are listed chronologically; US federal statutes and regulations are listed alphabetically. To do otherwise would simply confuse and serve no useful purpose. The book contains a table of acronyms and abbreviations. The table includes not only acronyms for the alphabet soup that environmental law has become but also abbreviations of the many case reporters, codes and sources of administrative guidance. The law in the book is stated as of 1 February 2005. Valerie Fogleman February 2005 WSIL - 267_part - I.indd 1010/10/2009 1:12:00 PM xii ABOUT THE AUTHOR Valerie Fogleman is Partner and Head of the Environment Group at Barlow Lyde & Gilbert, solicitors, London. Prior to joining BLG in 1992, Valerie spent over 22 years in the US where, among other things, she was Natural Resources Law Fellow at Lewis & Clark College in Portland, Oregon, Teaching Fellow at the University of Illinois College of Law in Champaign, Illinois and an associate with the law firm of Gary, Thomasson, Hall & Marks PC in Corpus Christi, Texas. She has a B.L.A., J.D. and M.Sc. from Texas Tech University and an LL.M. from the University of Illinois. In 2003, Valerie was appointed a Visiting Professor at the University of Ghent, Belgium, where she teaches Comparative Environmental Liability Law. Valerie is a solicitor of England and Wales and a member of the Texas State Bar. She is the author of Guide to the National Environmental Policy Act (Quorum Books), Hazardous Waste Cleanup, Liability, and Litigation (Quorum Books) as well as numerous articles on environmental law and insurance. She is also a contributing author to Commercial Environmental Law and Liability (Sweet and Maxwell) and the internet publication, isurv environment of the Royal Institution of Chartered Surveyors. She is recognised as a leading environmental lawyer by Euromoney’s Best of the Best, the International Who’s Who of Environment Lawyers, Chambers & Partners Directory, the Legal 500 and Legal Experts. Valerie can be contacted at vfogleman@blg.co.uk and v.fogleman@btinternet.com WSIL - 267_part - I.indd 1210/10/2009 1:12:00 PM xiii CONTENTS (A detailed table of contents appears at the beginning of each chapter) Foreword vii Preface ix Acknowledgements xi About the Author xii Table of Contents xiii List of Tables xxv Table of US Statutes xxix Table of UK Statutes xli Table of US Regulations Ixiii Table of UK Statutory Instruments lxvii Table of European Community Legislation lxxix Table of International Conventions lxxxvii Table of Cases xciii Acronyms and Abbreviations clxxi Chapter 1 Introduction 1 1.1 Introduction 1 1.2 Environmental Liabilities, Insurance and Related Matters in the United States 2 1.3 Environmental Liabilities, Insurance and Related Matters in England 5 1.4 Comparisons 7 Part A: United States Chapter 2 History of Federal Environmental Liabilities 9 2.1 Introduction 9 2.2 History of Federal Environmental Legislation 9 2.3 Creation of the US Environmental Protection Agency 13 WSIL - 267_part - I.indd 1310/10/2009 1:12:00 PM xiv ENVIRONMENTAL LIABILITIES AND INSURANCE IN ENGLAND AND THE UNITED STATES 2.4 Differences Between the Common Law and Environmental Legislation 14 2.5 Major Federal Environmental Statutes 15 Chapter 3 Reasons for Insurance Claims from Past Pollution Incidents 21 3.1 Introduction 21 3.2 Reasons for Contamination from Past Pollution Incidents 22 3.3 Reasons for Insurance Claims for Harm Caused by Past Pollution 24 3.4 Problems in Other Countries 27 Chapter 4 Federal Environmental Liabilities 29 4.1 Introduction 31 4.2 Governmental Authorities 32 4.3 Environmental Legislation 35 4.4 Co-operative Federalism 36 4.5 Reporting Requirements 37 4.6 Environmental Information 40 4.7 Environmental Offences 42 4.8 Actions by Non-Governmental Organisations and Other Persons 56 4.9 Clean Water Act 62 4.10 Resource Conservation and Recovery Act 64 4.11 Above Ground Storage Tanks 92 4.12 Oil Pollution Act 94 Chapter 5 Financial Responsibility Requirements 113 5.1 Introduction 114 5.2 Categories of Requirements 115 5.3 Activities and Facilities Covered by the Requirements 116 5.4 Mechanisms for Compliance 116 5.5 Motor Carrier Act 124 5.6 Resource Conservation and Recovery Act 129 5.7 Comprehensive Environmental Response, Compensation and Liability Act 146 5.8 Other Financial Responsibility Requirements 149 Chapter 6 Superfund Programme 153 6.1 Introduction 155 6.2 Background 158 6.3 Hazardous Substance Response Trust Fund 158 6.4 National Contingency Plan 162 6.5 Implementation 162 6.6 Discovery of Contaminated Sites 167 6.7 CERCLA Information System 168 6.8 Clean-Up Actions 171 6.9 Lead Agency 173 WSIL - 267_part - I.indd 1410/10/2009 1:12:00 PM CONTENTS xv 6.10 Removal Programme 174 6.11 National Priorities List 176 6.12 Clean-Up Standards 191 6.13 Clean-Up Measures 195 6.14 Clean-Up Process 196 6.15 Enforcement 205 6.16 Unilateral Administrative Orders 212 6.17 Judicial Actions 214 6.18 Prohibition of Pre-Enforcement Judicial Review 215 6.19 Cost-Recovery Actions 216 6.20 Contribution Actions 220 6.21 Contribution Protection for Settlors 222 6.22 Liens 223 6.23 Settlements 223 6.24 Public Involvement 231 6.25 State Role 232 6.26 State Causes of Action 233 6.27 Federally-Required Commencement Date 235 6.28 Claims Against the Superfund 237 6.29 Reforms 238 6.30 Status of the Superfund Programme in the Mid 2000s 242 6.31 Federal Facilities Programme 243 6.32 State Mini-Superfund Programmes 245 Chapter 7 Superfund Liability 251 7.1 Introduction 251 7.2 Scope of Liability 251 7.3 Standard of Liability 256 7.4 Limit of Liability 256 7.5 Causation 257 7.6 Pre-requisites for Liability 258 7.7 Potentially Responsible Parties 266 7.8 Secondarily Liable Potentially Responsible Parties 275 7.9 Governmental Entities 287 7.10 Exemptions to Liability 289 7.11 Defences 291 7.12 Health Assessments 302 7.13 Natural Resource Damage 303 7.14 Contractual Transfers of Liability 313 Chapter 8 Brownfield Sites and Voluntary Clean-Up Programmes 315 8.1 Introduction 316 8.2 Brownfield Sites 317 8.3 Differences Between Brownfield Programmes and Voluntary Clean-Up Programmes 320 WSIL - 267_part - I.indd 1510/10/2009 1:12:00 PM xvi ENVIRONMENTAL LIABILITIES AND INSURANCE IN ENGLAND AND THE UNITED STATES 8.4 Other Contaminated Sites 320 8.5 State Voluntary Clean-Up Programmes 322 8.6 Federal Brownfield Programme 328 8.7 Brownfields Tax Initiative 341 8.8 Brownfields Revitalization and Environmental Restoration Act 341 8.9 Designated Federal Clean-Up Funds 345 Chapter 9 Claims for Bodily Injury and Property Damage 347 9.1 Introduction 348 9.2 Restatement of the Law 349 9.3 Principles of Liability 350 9.4 Nuisance 356 9.5 Strict Liability for Specified Activities 372 9.6 Negligence 378 9.7 Trespass 384 9.8 Measure of Damages for Injury to Property 391 9.9 Stigma Damages 394 9.10 Infliction of Emotional Distress 399 9.11 Medical Monitoring 402 9.12 Fear of Cancer of Other Disease 408 9.13 Factors Increasing the Likelihood of Claims 412 9.14 Factors Increasing the Likelihood of Substantial Damage Awards 413 Chapter 10 Interaction of Environmental Law and Bankruptcy Law 419 10.1 Introduction 419 10.2 Automatic Stay 420 10.3 Ability to Abandon a Contaminated Facility 420 10.4 Dismissal of Bankruptcy Proceeding 422 10.5 Clean-Up Costs as Administrative Expenses 423 10.6 Discharge of Liability for Clean-Up Costs 423 10.7 Contingent Claims 425 Chapter 11 History of Insurance for Environmental Liabilities in General Liability Policies 427 11.1 Introduction 428 11.2 Comprehensive General Liability Policies 428 11.3 Availability of Insurance for Pollution in the Mid to Late 1980s 429 11.4 Comprehensive/Commercial General Liability Policies 431 11.5 London Market General Liability Policies 440 11.6 Pollution Endorsements to Commercial General Liability Policies 442 11.7 Time Element Clauses 445 11.8 Other Pollution Endorsements 455 WSIL - 267_part - I.indd 1610/10/2009 1:12:00 PM CONTENTS xvii Chapter 12 Insurance Coverage Disputes 457 12.1 Introduction 460 12.2 General Liability Policies 461 12.3 Insurance Law in the US 466 12.4 Federal and State Governmental Participation in Actions 469 12.5 Rules of Construction 472 12.6 Duty to Defend 482 12.7 Duty to Indemnify in the Absence of a Suit 488 12.8 Damages 491 12.9 Property Damage 496 12.10 Clean-Up Costs as Defence or Indemnity Costs 497 12.11 Bodily Injury 499 12.12 Accident 501 12.13 Occurrence 502 12.14 Pollution Exclusionsv 537 12.15 Time Element Endorsements 585 12.16 Owned Property Exclusion Clause 590 12.17 Alienated Property Exclusion Clause 594 12.18 Personal Injury Endorsement 595 12.19 Duty of an Insured to Mitigate Damage 599 12.20 Duty to Notify 600 12.21 Known Loss Doctrine 607 12.22 Choice of Law 610 12.23 Right to a Trial by Jury 616 12.24 Lost Policies 617 12.25 Long-Arm Jurisdiction 620 12.26 Property Policies 622 Chapter 13 Proposals to Terminate Pollution Insurance Coverage Litigation and Repeal Retroactive Liability 633 13.1 Introduction 633 13.2 Comprehensive Environmental Trust Authority 634 13.3 National Environmental Trust Fund 635 13.4 Environmental Insurance Resolution Fund 636 13.5 Proposals to Repeal Retroactive Liability 640 13.6 Effect of Repealing Retroactive Liability 645 13.7 Capping the National Priorities List 648 13.8 Conclusions 649 Chapter 14 Environmental Insurance Policies for US Risks 651 14.1 Introduction 652 14.2 Types of Policies 652 14.3 Finite Risk Programmes 668 14.4 Environmental Surety Bonds 669 WSIL - 267_part - I.indd 1710/10/2009 1:12:00 PM xviii ENVIRONMENTAL LIABILITIES AND INSURANCE IN ENGLAND AND THE UNITED STATES 14.5 Other Methods of Transferring Environmental Liabilities 670 14.6 Environmental Insurance Market 670 Chapter 15 Potential Cost of Liabilities from Past Pollution 681 15.1 Introduction 683 15.2 Superfund Programme 684 15.3 Estimated Costs of Superfund Liabilities Not Included in the Superfund Programme 696 15.4 Transaction Costs of Superfund Clean Ups 707 15.5 Other Governmental Clean-Up Programmes 710 15.6 Estimated Total Clean-Up Costs 719 15.7 Estimated Costs for Bodily Injury and Property Damage 720 15.8 Estimates of Re/insurers’ Pollution-Related Costs in the 1980s 723 15.9 Estimates of Re/insurers’ Pollution-Related Costs in the Early and Mid 1990s 725 15.10 Amendments to Reporting Requirements 730 15.11 Estimates of Re/insurers’ Pollution-Related Losses in the Late 1990s 731 15.12 Reporting Environmental Liabilities and Reserving for Environmental Losses During the 1990s 733 15.13 Estimate of Insurers’ Pollution-Related Losses in the Early 2000s 736 15.14 Potential Increase in Costs Borne by Insurers 737 Chapter 16 Case Studies 739 16.1 Introduction 740 16.2 Love Canal, New York 741 16.3 Rocky Mountain Arsenal, Colorado 762 16.4 Times Beach, Missouri 775 16.5 Stringfellow Acid Pits, California 791 16.6 Laskin Poplar, Ohio 806 16.7 Cape Girardeau, Missouri 811 16.8 Palos Verdes, California 814 Part B: England Chapter 17 History of Environmental Liabilities 817 17.1 Introduction 818 17.2 Water Pollution 819 17.3 Disposal of Waste on Land 822 17.4 Remediating Contaminated Land 827 17.5 Creation of the Environment Agency 869 WSIL - 267_part - I.indd 1810/10/2009 1:12:00 PM CONTENTS xix Chapter 18 Previously Developed Land, Brownfield Sites and Voluntary Remediation 871 18.1 Introduction 872 18.2 Previously Developed Land and Brownfield Sites 872 18.3 Planning Regime 873 18.4 Building Controls 894 18.5 Voluntary Remediation 895 18.6 Governmental Policies to Redevelop Previously Developed Land and Brownfield Sites 896 18.7 Governmental Financial Assistance for Previously Developed Land and Brownfield Sites 907 18.8 Tax Initiatives 909 Chapter 19 Regulatory Environmental Liabilities 917 19.1 Introduction 921 19.2 Public Authorities 921 19.3 Environmental Legislation 926 19.4 Investigations and Inspections 928 19.5 Reporting Requirements 938 19.6 Environmental Information 941 19.7 Environmental Offences 953 19.8 Actions by Non-Governmental Authorities and Other Persons 973 19.9 Water Pollution 980 19.10 Integrated Pollution Control 1007 19.11 Integrated Pollution Prevention and Control 1009 19.12 Waste 1020 19.13 Sites of Special Scientific Interest 1044 19.14 European Sites 1046 19.15 Statutory Nuisance Regime 1049 19.16 Underground Storage Tanks 1057 19.17 Above Ground Storage Tanks 1060 Chapter 20 Financial Security Requirements 1063 20.1 Introduction 1064 20.2 Categories of Requirements 1065 20.3 Waste Disposal Sites 1065 20.4 Directive on the Landfill of Waste 1089 20.5 Transfrontier Shipments of Waste 1093 20.6 Planning Controls for Mineral Workings 1096 20.7 Future Financial Security Requirements 1099 Chapter 21 Regime to Remediate Contaminated Land 1107 21.1 Introduction 1110 21.2 Objectives 1110 WSIL - 267_part - I.indd 1910/10/2009 1:12:01 PM xx ENVIRONMENTAL LIABILITIES AND INSURANCE IN ENGLAND AND THE UNITED STATES 21.3 Legislation and Guidance 1111 21.4 Enforcing Authorities 1116 21.5 Funding 1118 21.6 Contaminated Land 1123 21.7 Significant Harm and Significant Possibility of Significant Harm 1124 21.8 Likely or Actual Pollution of Controlled Waters 1126 21.9 Pollutant Linkage 1128 21.10 Significant Pollutant Linkage 1139 21.11 Natural Resource Damage 1139 21.12 Exemptions 1140 21.13 Inspection Strategies 1142 21.14 Inspections 1144 21.15 Determination of Contaminated Land 1148 21.16 Insufficient or Inconclusive Information to Make a Determination 1155 21.17 Failure to Make a Determination of Contaminated Land 1156 21.18 Boundaries of Contaminated Land 1158 21.19 Types of Contaminated Land 1159 21.20 Special Sites 1160 21.21 Remediation Standards 1172 21.22 Remediation Process 1176 21.23 Licensing Remedial Actions 1193 21.24 Review of Remediated Sites 1194 21.25 Remediation Registers 1194 21.26 Provision of Information on Contaminated Land 1203 21.27 National Reports on Contaminated Land 1206 21.28 Public Participation 1206 Chapter 22 Enforcement of the Contaminated Land Regime 1209 22.1 Introduction 1213 22.2 Persons 1213 22.3 Appropriate Persons 1214 22.4 Class A Persons 1214 22.5 Class B Persons 1231 22.6 Exemptions from Liability 1234 22.7 Search for Class A Persons 1237 22.8 Notification of Contaminated Land 1238 22.9 Consultation Process 1239 22.10 Emergency Remediation Actions 1244 22.11 Agreements on Liabilities 1248 22.12 Remediation Statement 1249 22.13 Exclusion, Apportionment and Attribution 1252 22.14 Exclusion Tests 1254 22.15 Attribution Criteria 1273 22.16 Orphan Linkages and Sites 1276 22.17 Apportionment Criteria 1276 WSIL - 267_part - I.indd 2010/10/2009 1:12:01 PM CONTENTS xxi 22.18 Hardship and Other Considerations 1281 22.19 Prohibition on the Service of a Remediation Notice 1290 22.20 Remediation Notices 1297 22.21 Non-Compliance 1312 22.22 Judicial Review 1316 22.23 Complaints to Ombudsman 1317 22.24 Enforcing Authority Costs 1317 22.25 Signing Off 1319 22.26 Charging Notices 1320 22.27 Access Rights to Conduct Remediation 1321 22.28 Retrospective Liability 1324 22.29 Modified Joint and Several Liability 1327 22.30 Limit of Liability 1328 22.31 Limitation Periods 1328 22.32 Overlap with the Works Notice Regime 1329 22.33 Interface with the Planning Regime 1331 22.34 Interface with Health and Safety Legislation 1332 22.35 Types of Appropriate Persons 1332 Chapter 23 Civil Actions for Environmental Damage 1351 23.1 Introduction 1353 23.2 Causation 1353 23.3 Standards and Scope of Liability 1359 23.4 Common Law Causes of Action 1362 23.5 Nuisance 1363 23.6 Negligence 1380 23.7 Trespass 1400 23.8 Bodily Injury 1401 23.9 Fear of Cancer or Other Diseases 1402 23.10 Property Damage and Financial Loss 1403 23.11 Damages 1405 23.12 Statutory Causes of Action 1409 23.13 Human Rights Act 1418 23.14 Factors Affecting Claims for Harm from Environmental Damage 1424 23.15 Contribution Actions 1427 Chapter 24 Interaction of Environmental Law and Insolvency Law 1429 24.1 Introduction 1429 24.2 Waste Management Licences and Landfills 1429 24.3 Disclaiming Interests in Contaminated Land 1436 24.4 Pollution Prevention and Control 1436 WSIL - 267_part - I.indd 2110/10/2009 1:12:01 PM xxii ENVIRONMENTAL LIABILITIES AND INSURANCE IN ENGLAND AND THE UNITED STATES Chapter 25 Other Environmental Liability Regimes 1437 25.1 Introduction 1438 25.2 European Community 1439 25.3 Directive on Environmental Liability with Regard to the Prevention and Remedying of Environmental Damage 1445 25.4 International Agreements 1494 Chapter 26 Withdrawal of Insurance for Environmental Liabilities in General Policies 1503 26.1 Introduction 1503 26.2 Public Liability Policies 1504 26.3 Professional Indemnity Policies 1515 26.4 Property Policies 1519 26.5 Directors’ and Officers’ Policies 1520 26.6 Other Policies 1520 Chapter 27 Cover for Environmental Liabilities in Public Liability and Property Policies 1521 27.1 Introduction 1522 27.2 Rules of Construction 1522 27.3 Public Liability Policies 1526 27.4 Non-Disclosure and Misrepresentation 1574 27.5 Lost or Destroyed Policies 1576 27.6 Discovery of Insurance Cover for Environmental Liabilities 1577 27.7 Property Policies 1579 Chapter 28 Environmental Insurance Policies for UK Risks 1581 28.1 Introduction 1581 28.2 Types of Policies 1582 28.3 Finite Risk Programmes 1589 28.4 London Environmental Insurance Market 1590 Chapter 29 Potential Cost of Liabilities from Historic Pollution 1603 29.1 Introduction 1603 29.2 Early Estimates of the Amount of Contaminated Land and the Cost of its Remediation 1604 29.3 Environment Agency Report 1611 29.4 Anticipated Date of Preliminary Estimates of the Amount of Contaminated Land 1615 29.5 Potential Scale of Groundwater Pollution 1615 29.6 Potential Scale of Contamination from Various Operations and Activities 1618 29.7 Residential Sites 1627 WSIL - 267_part - I.indd 2210/10/2009 1:12:01 PM CONTENTS xxiii 29.8 Ministry of Defence Sites 1630 29.9 Nuclear Installations 1630 Part C: United States and England Chapter 30 Comparisons Between English and US Environmental Liabilities and Insurance and Related Topics 1635 30.1 Introduction 1640 30.2 History of Environmental Liabilities 1640 30.3 Land Use Law 1646 30.4 Governmental Authorities 1650 30.5 Environmental Legislation 1655 30.6 Reporting Requirements 1660 30.7 Environmental Information 1661 30.8 Investigatory Powers 1664 30.9 Environmental Standards 1664 30.10 Environmental Offences 1665 30.11 Actions by Non-Governmental Organisations and Other Persons 1673 30.12 Directors and Officers 1675 30.13 Water 1676 30.14 Waste 1680 30.15 Storage Tanks 1686 30.16 Financial Security Requirements 1689 30.17 Programmes to Remediate Contamination from Past Pollution Incidents 1693 30.18 Liability for Remediating Contamination from Past Pollution Incidents 1720 30.19 Natural Resource Damage 1744 30.20 Brownfield Land 1752 30.21 Voluntary Remediation Programmes 1756 30.22 Claims for Bodily Injury and Property Damage 1758 30.23 Interaction of Environmental Law and Insolvency Law 1765 30.24 Withdrawal of Cover for Environmental Liabilities in General Liability Policies 1769 30.25 Cover for Environmental Liabilities in Public/General Liability Policies 1772 30.26 Environmental Insurance Policies 1783 30.27 Potential Cost of Liabilities from Past Pollution Incidents 1795 Index 1803 WSIL - 267_part - I.indd 2310/10/2009 1:12:01 PM 427 CHAPTER 11 History of Insurance for Environmental Liabilities in General Liability Policies 11.1 Introduction 11.2 Comprehensive General Liability Policies 11.2.1 Qualified Pollution Exclusion 11.3 Availability of Insurance for Pollution in the Mid to Late 1980s 11.4 Comprehensive/Commercial General Liability Policies 11.4.1 Absolute Pollution Exclusions 11.4.1.1 1986 Version 11.4.1.2 1988 Version 11.4.1.3 Differences Between 1986 and 1988 Versions 11.4.1.4 1996 Version 11.4.1.5 Personal Injury Coverage Part Exclusion 11.4.1.6 Carbon Monoxide Exception 11.4.1.7 1998 Version 11.4.2 Total Pollution Exclusions 11.4.2.1 1988 Version 11.4.2.2 1997 Version 11.4.2.3 1999 Version 11.4.3 Fungi and Bacteria Exclusions 11.5 London Market General Liability Policies 11.5.1 NMA 1333 Qualified Pollution Exclusion 11.5.2 NMA 1685 Qualified Pollution Exclusion 11.5.3 NMA 1686 Absolute Pollution Exclusion 11.6 Pollution Endorsements to Commercial General Liability Policies 11.6.1 Pollution Liability Coverage Extension Endorsement 11.6.2 Limited Pollution Liability Exclusion Endorsement 11.7 Time Element Clauses 11.7.1 Insurance Services Office Limited Exception Pollution Endorsements 11.7.1.1 Named Peril Limited Exception for a Short-Term Pollution Event 11.7.1.2 Limited Exception for a Short-Term Pollution Event 11.7.1.3 Comparison of Exceptions for Short-Term Pollution Events 11.7.2 Other Clauses 11.8 Other Pollution Endorsements WSIL - 267_part - III.indd 42710/10/2009 4:17:42 PM 428 ENVIRONMENTAL LIABILITIES AND INSURANCE IN ENGLAND AND THE UNITED STATES 11.1 Introduction As a general rule, cover for environmental risks in the United States (“US”) is excluded from the body of comprehensive/commercial general liability (“CGL”) policies. Cover must, therefore, be obtained either by purchasing an endorsement that writes back cover or an environmental insurance policy. This chapter describes the history of the withdrawal of cover for environmental risks in general liability policies. It also discusses problems caused by the withdrawal of cover for clean-up contractors, that is, contractors who clean up contaminated sites. 11.2 Comprehensive General Liability Policies Before 1969, the standard CGL policy and most London market general liability policies did not exclude cover for environmental risks. There was not considered to be a need to do so before that time because common law claims arising from exposure to pollutants and legislation imposing liability for remediating contamination were both rare. The history of pollution exclusions in the CGL policy began in 1969 as a response to several pollution incidents including the oil spill from offshore drilling near Santa Barbara, California, the oil spill from the Torrey Canyon and the correct perception that the US Congress would enact environmental legislation designed to mitigate the risks to human health and the environment from pollutants. 11.2.1 Qualified Pollution Exclusion In 1969, the Insurance Rating Bureau (“IRB”), a predecessor of the Insurance Services Office (“ISO”), drafted the following exclusion, IRB-G335, as an optional endorsement to the standard CGL policy. The endorsement, which was available in many states between 1970 and 1973, excluded cover for: “bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental”. The exclusion is sometimes known as the qualified pollution exclusion because it does not bar cover for all pollution, that is, it writes back cover for “sudden and accidental” pollution. The IRB drafted a further qualified pollution exclusion endorsement, IRB-G336, for policies covering risks arising from oil and natural gas exploration and production, oil pipeline operations and the construction and dismantling of oil rigs. The exclusion bars cover for bodily injury or property damage arising from the discharge, dispersal, release or escape of oil or other petroleum substances or derivatives into or upon any water WSIL - 267_part - III.indd 42810/10/2009 4:17:42 PM