Five tips for handling an environmental crisis

Environmental claims arise from a wide range of causes and the costs can quickly rise into the millions of pounds. With environmental regulation broadening in scope, businesses are having to tighten up on their exposures. Emma Bartolo of ACE, who hosted a workshop for conference delegates on how to manage this complex risk, explains her top five practical steps for risk managers.

1.      Get specialist help

Environmental claims tend to be complex, time-consuming and expensive and require a range of specialists – most of whom will not be available in-house. It is imperative that the appropriate specialists are deployed in the event of an incident. These could include: environmental consultants and eco-toxicologists to help deal with the environmental remediation and biodiversity damage; specialist loss adjusters to provide practical assistance with the clean-up activity; and specialist legal advice to ensure that the response is compliant with local environmental laws.

In a world of social media and instant news, access to crisis management services is also invaluable. Some carriers offer expert crisis management services to help manage any publicity linked to an environmental incident and prevent it harming the company’s reputation. 

2.      Speed is of the essence

Clients are often slow to react in the event of an environmental incident as they are ill-prepared for the complexity of managing it. It is common for the intricacy of handling an environmental loss to be underestimated, and managing a loss of this nature can divert management resources and money away from the core operations of the organisation. Unfortunately, the lack of immediate remedial action can exacerbate the problem and substantially increase costs.

Another common issue is that clients notify their insurers too late after the event has occurred, and late notification can lead to a breach of policy terms and conditions, as well as being in breach of legal reporting requirements.

3.      Legal advice is vital

Environmental law is complex and differs between countries. Often the environmental risks associated with newly-acquired, subsidiary or joint venture companies in foreign markets can be difficult to assess, as these companies may not always operate to the standard of the parent company.

Should there be evidence of criminality when the claim is being investigated, insurers can provide legal support to assist clients who are required to be interviewed by the Environment Agency or other environmental regulatory bodies.  

4.      Don’t assume you’re covered

Clients often wrongly assume they have cover under their general liability policy, so when the claim is presented they get a shock when they find it is not. Without specific environmental cover, the client is left to handle, and pay for, the clean-up and all associated works. 

Tailored environmental policies are designed to provide a broad range of flexible insurance to cover all the risks – both first and third party associated with the claim – and should also provide access to specialist assistance. This is vital for protecting the business and for handling the incident appropriately.

5.      Ensure transparency of actions

Incident response is perhaps the most complex challenge of all, and a strong partnership between insured, broker and carrier is essential for a successful outcome. This partnership approach helps to ensure that the legal, clean-up and crisis management teams work together closely throughout the incident and minimise the overall impact to the environment and the business.

Emma Bartolo is UK & Ireland Environmental Risk Manager at ACE. She hosted the workshop Proactively Managing Environmental Crises, at Airmic’s annual conference in Liverpool in June.

Emma Bartolo of ACE