A new report highlights critical gaps in insurance coverage for environmental risks associated with the transition to greener technology.

Property policies will not respond to losses arising from on-site damage to the environment, according to the paper from Charles Taylor Adjusting.

“It’s important for all organisations to understand the size of the environmental exposures they have and to ensure their insurance program will respond if needed,” head of environmental technical and special risks Graham Hawkins says in the report, titled Going Green Carries Its Own Environmental Risks.

Businesses “would be grateful to their broker” for arranging specialist environmental cover, because they will only have to contribute the applicable excess and “not have to find funds for all the necessary ... clean-up costs”.

In many instances, public, general and motor liability policies exclude losses arising from environmental damage to areas of biodiversity. 

“They don’t cover the cost of clean-up for the policyholder’s own site and they don’t cover the cost of clean-up actions imposed by regulators under their statutory powers,” Mr Hawkins says.

“Even if the policyholder has an environmental extension to their standard cover, a legal liability still needs to be established before this cover is triggered. If damage is caused by the actions of an unknown third party, then arguably the extension will not trigger. In addition, extensions don’t generally provide emergency or mitigation cost cover.”

That leaves site owners with significant uninsured costs and “would likely lead them to question the quality of advice received from their insurance broker”. With a premises pollution liability policy, plus property and liability policies, the “settlement would be very different”, Mr Hawkins says. 

“The premises pollution liability cover responds to pollution occurring at and migrating from the insured’s site and to the statutory demands of the regulator. This means all the on-site and off-site clean-up costs are covered.”

The policy would also cover costs to reinstate affected biodiversity on and off-site, he says.

See the paper here.