Fuel Site Decommissioning
Owners / Site Operators
Having decided to decommission a site used for fuel storage, part of that process will involve an assessment of the existence of any contamination, and in the event that contamination is discovered, someone has to be responsible for pollution clean up.
The Environmental Protection Act 1990 (EPA) established the operation of the ‘polluter pays’ principle in the UK .
The EPA states that the responsibility for cleaning up contaminated land falls in the first instance to the person who knowingly caused or allowed polluting substances onto or under the land .
Unfortunately it is not always clear when the pollution occurred or there may be numerous parties who all could bear responsibility. Even if the responsible party can be identified, it could be impossible to trace them or they may not exist anymore.
So if no such party can be found, the responsibility for the clean-up passes onto the current owner or occupier of the land. Regardless of whether or not they caused or were even aware of the pollution.
Even a tenant with a lease term over 21 years could be deemed to be the owner of a contaminated site if their landlord becomes insolvent. The tenant could be liable for any costs associated with cleaning up the contamination by virtue of a covenant in the lease to comply with all statutory requirements that arise during the term of the lease.
So the discovery of pollution probably means contacting your Public Liability insurers to start the claims process.
However, from an insurance perspective, insurer’s definition of ‘pollution’ might not match your own.
Construction activities, especially on brownfield sites, have significant potential to cause adverse environmental impacts through pollution and/or release of existing contamination.
Examples of typical causes are:
- Handling and storage of fuels, solvents and other harmful substances at work sites
- Impact on Controlled Waters by surface water run-off into watercourses and soaking of pollutants into groundwater
- Creation of migration pathways for existing contamination by piling or excavating through impermeable ground
- Mobilisation of existing contamination by dewatering
- Disturbance of asbestos or lead paint through demolition/ renovation activities
- Creation of noxious odour or dust by site works migrating offsite and impacting adjacent properties
This could result in responsible parties facing liabilities as a result of:
- Third party claims for bodily injury, property damage, loss of use of assets/ business interruption, common law nuisance etc. (tort liability)
- Regulatory actions to clean up the pollution/contamination and/or abate the resulting statutory/public nuisance (statutory liability)
- Obligations to prevent and remediate serious environmental damage and to restore the environment (especially biodiversity/ natural resources) to its pre-damaged state (environmental damage liability).
Whilst tort liability usually requires fault and/ or foreseeability on the part of the polluter, statutory liability (including environmental damage liability) is mainly strict.
The main responsible party will usually be the contractor (as “the polluter”), but developers and site owners/employers can also potentially face liabilities where construction activities cause environmental impacts – especially if the contractor is no longer in existence when the liabilities arise.
Knowing and permitting pollution that you didn’t cause
Classification as a “knowing permitter” – the party that assumes legal liability even though they or their organisation didn’t cause the pollution – requires knowledge of the contamination, the power and opportunity to do something about it and the failure to act.
This means that it is possible for a buyer of a contaminated site to be deemed a ‘knowing permitter’ of contamination if it undertakes environmental investigations on the site that reveal a significant possibility of harm or water pollution and it fails to take preventative action.
In the event that contamination is discovered during the buyer’s due diligence process, they should ensure that arrangements are made with the seller to apportion or deal with any future clean-up costs and that their liability is limited as far as possible.
And it’s not just the environmental issues they need to consider; organisations could suffer irreparable damage to their reputation through adverse publicity too.
WHEN IS POLLUTION NOT POLLUTION?
Following the enactment of Environmental Protection Act in 1990, the Association of British Insurers put a standard exclusion in place for pollution liabilities in public liability policies, but cover is often written back as long as the pollution causes damage to third party property or injury to third parties and is:
The pollution event also needs to take place at a defined place and time.
Pollution and General Public Liability Policy Coverage:
- Gradual or Historic pollution – not covered
- Environmental Damage – biodiversity & natural resources restoration – not covered
- Statutory pollution liabilities – limited
- Own site remediation costs – not covered
And even if the pollution happens at a defined time and place, if you’ve not adequately maintained the equipment – whether it’s the tank, pipework, interceptors, bunds etc. – then it could hardly be considered unforeseeable, could it?
Leaking Pipe – 10 drips a minute = 600l in 6 months!!
In essence, if the pollution cannot be attributed to an identifiable and unforeseeable event at an identifiable place and time, then it’s unlikely the costs associated with the pollution will be insured.
What can you do?
For owners, aside from the obvious sound operational risk management (including suitable protections and regular maintenance of storage systems, bunding and interceptors), monitoring storage volumes closely can help identify any lack of system integrity that might lead to an uninsured claim.
For contractors, being aware of the potential mobilisation of existing contamination and run off whilst being on site, especially if you’re the principal contractor.
There are insurance policies available that include own site clean-up costs and mitigation costs, such as the Petrochemical policy available through Pen Underwriting. This policy includes access to a 24/7 spill response helpline and crisis management specialists to help manage any adverse publicity and demonstrate you’ve done all you can.
Specific Environmental Impairment Liability insurance can cover gradually occurring pollution, or liabilities arising from historic activities on sites you own or occupy.
Directors and senior employees of limited companies are not immune from prosecution following a pollution event either. Most Directors’ & Officers’ Liability policies now exclude claims relating to pollution. However, some policies will include indemnity for defence costs relating to legal action arising from pollution, such as the Pen Underwriting policy OAMPS Hazardous Industries can provide.
Unfortunately, pollution incidents can and do happen on even the most well managed sites and it is often not until such an incident occurs that businesses come to realise that many of the ensuing costs and losses they incur are not insured.
Speak with your insurance broker to discuss the solutions that would appropriately suit the risks your business is facing.
The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Pen Underwriting Limited nor OAMPS Hazardous Industries, part of Pen Underwriting Limited, accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.
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