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D&O insurance - pollution |
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Standard Directors’ and Officers’ (D&O) policies may cover a director for the
costs of defending criminal, regulatory and even civil proceedings arising
out of a pollution incident. This could be when the pollution incident results
from a director’s consent or connivance, or is attributable to any neglect. In
practical terms, since criminal fines are not insurable, it has only been
defence costs that have been covered by D&O policies to date.
However, concern is now being raised about the potential liabilities for
directors in respect of remediation costs. Under EPA 1990, persons who
‘caused or knowingly permitted’ contamination can be responsible for
addressing the harm (typically, through remediation costs). Recent
statutory guidance now specifically mentions directors for the first time,
alongside the existing liability of the Company, and it is said that ‘the
enforcing authority should apportion responsibility between the Company
and its relevant officers on a basis which takes into account the degree
of personal responsibility’. Thus, there are clear indications of an
increased focus on the personal liability of directors (something that
would be even more important if the company had since been wound up).
Directors and officers of companies that are likely to be involved in
contaminating sites, or which are redeveloping brownfield sites, should
begin to recognise the risk of personal liability for remediation costs and/or
compensation claims. At the moment, however, such claims are likely to be
outside the scope of existing D&O cover. Accordingly, consider extending
the scope of the insurance cover. Source: DentonWildeSapte.
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March 2006 |
