group news

Environmental Liability

New Obligations and Emerging Liabilities for Company Management

Many businesses could soon find themselves liability for environmental damage under a radical shake up of the existing regulations. 1st March saw the implementation of the EU Environmental Liability Directive under the Environmental Damage (Prevention and Remediation) Regulations 2009 which will be incorporated into law later this Year and provides a useful opportunity for businesses to understand their environmental obligations better.

Increasing Liability for Organisations

The new Regulations require almost any organisation involved in economic activity – including charities and public sector entities – to prevent environmental damage to water, land or biodiversity (protected habitats or species or ‘Site of Special Scientific Interest’).

New Obligations to Prevent Damage

The Rules impose a new obligation on organisations to prevent environmental damage and to notify the authorities if damage is about to occur or has already happened. Where environmental damage cannot be prevented, the directive requires organisations to carry out much more comprehensive clean-up work than they may have done previously.

Responsibility for Rehabilitation

Organisations must not only put right the pollution they cause, but will also have to rehabilitate a site back to its original condition. If that is not possible, or takes a long time to complete, a company can be obliged to pay compensation for blighting the area.

How Can Business Quantify the Risks? Sites will no longer be defined by the boundary of the property and firms will have to monitor so they can detect any changes that may constitute damage and notify authorities.  Failure to do so will mean the risk of fines and legal action.

Quantifying these risks will be extremely difficult...

The recent Bartoline Court case has meant firms will not be able to claim on their Public Liability policies for the cost of cleaning up their own site OR for any damage caused to neighbouring rivers or nature reserves, even if the pollution were caused by a fire or flood. As such, every firm needs to consider carefully their liabilities under these new regulations and the terms of their existing insurance cover and many companies that had not previously thought of themselves as being at risk of causing environmental damage now need to consider whether to investigate specialist environmental impairment insurance as a result of the new regulations.

Please contact us for further information.

Rising Claims in the Employment Arena

With the Confederation of British Industry predicting that nearly three million will be without jobs by the end of this year, the size of claims for ‘Breaches of Workers’ Rights’ is increasing, as many workers find it difficult to get alternative employment.

Employment Law experts advise firms to seek advice from professional consultants to ensure their procedures are robust, so if they do need to let workers go, they can do it in a way that is legally compliant.  This, in turn, should minimise the risk of having claims made against them.

If the unfortunate circumstance arises where redundancies are unavoidable, then employers have a first duty to ensure they meet their legal obligations to their employees.

If something does go wrong with the process, Management Liability Insurance does exist to cover against the cost of ‘Unfair Dismissal’ and ‘Discrimination Claims’, as well as other areas such as Theft by Employees.

For further information on the protection available, please contact us.

The “Now”

As you will by now be aware, Quinn Insurance Limited and Subsidiary Companies, including Quinn UK Limited, were placed into Administration on the 30 March 2010.  Paul McCann and Michael Macateer of Grant Thornton, are Joint Administrators.

Already, there is a lot of speculation and rumour mongering, not least from Insurers and the Broking profession.  We would stress at this point that Quinn Insurance Limited and Quinn UK Limited are able to meet legitimate claims made by existing Policyholders, as stated by the Administrators.

The other key point to understand is that presently, Quinn UK Limited is not transacting any new business but, can renew policies with policy holders.

What Action should I take today?

• Do not panic / make ‘knee jerk’ reactions, as this will send the wrong message to the insurance market.
• Keep abreast of the situation via your insurance intermediary, press articles and direct contact from Quinn.
• Start considering your renewal Options:

• Do I want to obtain alternatives?
• What will I need from Quinn i.e. Confirmed claims experience?
• What is my best option for renewal alternatives?

For Solicitors,focus on the Law Society/SRS for guidance and any change in approved insurer status.

• Develop a ‘contingency plan’ for further scenarios detailed below:
• If you wish to discuss your concerns and possible options, feel free to contact us via email:  sthomas@creativerisksolutions.co.uk

The Future?

Alas, we do not have a crystal ball and realistically, one of three things could eventually happen:

Stay in Administration for a period, and then come out of Administration as a trading entity.

• Sold as a going concern.
• Liquidated.

Obviously, each of these scenarios has different connotations and planning should consider a solution for all three.  Of course, the worst scenario is that of liquidation, which will lead to a substantial increase in demand for Insurance, which in turn would inevitably increase pricing.  In this scenario, we draw our memories back to the unwelcome and troublesome months after the Independent’s demise in 2001.  One, which, we are sure will resonate with you.

Our Role at Creative

We are here to assist businesses with the concerns and issues that they have with the current situation.  Additionally, we are working hard to have strong response plans in place for all of the above scenarios.  Now is not the time to discuss the merits of the current situation, but to ensure Quinn Insured businesses have options at the appropriate time.

Creative Risk Solutions took a strategic decision at our inception three years ago, not to deal with Quinn Insurance Limited.

Further points for Consideration

Quinn Insurance Limited

Formed in 2003

• Investigated by the Department for Work and Pensions in 2004
• Fined GBP 2.89 Million in 2008
• Withdrew from Moody’s credit ratings in July 2008
• Royal Institute of Chartered Surveyors removed Quinn from their list of Approved Insurers 2008
• Losses for 2008/09 in the UK are estimated at €2.5 Billion
• Quinn UK Limited holds roughly 10% of the Solicitors Professional Indemnity Market.

Anyone who thinks commercial insurance is an unfair cost should look at the plight of thousands of British businesses that have suffered in recent floods, says Simon Thomas, Managing Director of Cardiff-based insurance broker Creative Risk Solutions.

Just a week after the worst of the flooding in Yorkshire in June 2007, almost 7,000 businesses had submitted claims for an average of £100,000 of damage.

Soon, the problem for the UK insurance market was compounded when a similar and arguably more serious situation unfolded in Gloucestershire. Recent downpours in the north of England has seen the problem of flooding occur again for thousands of homeowners and businesses, many who have not yet recovered from the first disaster.

Not only were factories, shops, offices and warehouses hit by physical devastation which saw many towns and villages cut-off for a week or more, but the cost of business interruption in many cases was significant.

The deluge of rainfall that swamped Britain in the summer of 2007 is estimated to have led to payouts totalling £3 billion. A fear now, of course, is that this bill will have to be paid by the customers of insurance companies and will inevitably lead to higher premiums in the future.

But the flooding has still caused substantial costs, with the UK's largest insurer Aviva - best known for running Norwich Union - warning that it faced losses of £400 million as a result of flooding in June and July.

While there may well be an impact on premiums, our brokers at Creative Risk Solutions (www.creativerisksolutions.co.uk) believe it will not be significant and that, more importantly, the floods will lead to a number of positive outcomes.

Fierce lobbying from the insurance industry has, for example, now persuaded the Government to raise spending on flood defences to £800 million by 2011.

And German insurer Allianz has gone on the record saying the Biblical downpour should now act as an overdue "wake up call" for the industry to protect itself from the risk of flooding.

But what should you do and who should you turn to if you fear that your business may be at risk from a repeat of these terrible floods?

Simon Thomas, Director of Creative Risk Solutions encourages people to seek professional advice from their broker. “The industry does not rely on catch-all solutions, but is able to tailor individual insurance packages for every business and every situation.You should discuss the implications on your future insurance premium/excess directly with your insurer and/or broker while your local Environment Agency office should be able to tell you if there are any capital flood defence schemes planned for your area and on what timescale.

If you do need to carry out physical improvements to your premises then it also essential to get advice from a specialist, who could undertake a comprehensive flood risk assessment and recommend an appropriate set of measures for the property”.