Aspects of insurance for environmental damage claims: Some issues raised by proposed hydraulic fracturing

Pages45-73
Date14 December 2017
Published date14 December 2017
AuthorKuschke, B.
Citation(2016) 22 SAJELP 45
45
ASPECTS OF INSURANCE FOR
ENVIRONMENTAL DAMAGE CLAIMS:
SOME ISSUES RAISED BY PROPOSED
HYDRAULIC FRACTURING*
Birgit Kuschke
Hydraulic fracturing or fracking can cause immeasurable damage to
the fragile Karoo ecosystem and its water resources. The old adage that
where damage goes, insurance is certain to follow, most certainly applies.
Insurance against environmental damage such as that which will result from
fracking poses unique challenges, for both property and liability insurance.
Years often pass between the polluting conduct, the eventual manifestation
of the damage and the eventual submission of a claim by an insured
against his insurer. Damage is often progressive and the health of victims
deteriorates over time. This will no doubt be the situation in the Karoo, as
past experience in other countries such as the United States has shown that
the true extent of environmental damage caused by fracking activities only
manifests in future. The purpose of this contribution is to sensitise potential
insurers and potential insureds of the risks and complexities of insurance
claims against long-term environmental damage. Different insurance
trigger events that activate insurance cover follow the different phases of
polluting events or conduct and the resulting detrimental consequences.
Insurance claims for loss or damage can vest on an act-committed basis,
where the insurer who provided cover at the time at which the polluting act
occurred incurs liability to pay out under the policy. The insurer remains
liable even where the eventual loss only manifests in future. In this case
an insured has a claim against a historical insurer, which can prove to be
to his disadvantage if the insurance company has ceased to exist, policy
limits are insufficient or policy provisions are outdated. Where a policy is
issued with a loss-occurrence or loss-manifestation trigger, the loss may be
claimed when the loss or damage caused by the pollution becomes evident,
irrespective of when it was caused. In the case of insurance with a claims-
made trigger, the policy that is in force at the time when the insured has
suffered and assessed his loss and is able to submit an insurance claim,
provides cover. It is irrelevant when the polluting event occurred or when
the loss became evident. Insurance issued on a claims-made basis leads to
* This article was previously published in Afrikaans in the academic
journal LitNet, and has due to keen interest been updated, restructured and
submitted for publication in English.
BLC, LLB (UP) LLD (UNISA); Associate professor of Law, University
of Pretoria.
(2016) 22 SAJELP 45
© Juta and Company (Pty) Ltd
46 SOUTH AFRICAN JOURNAL OF ENVIRONMENTAL LAW AND
POLICY
retroactivity where an insurer inherits older historical claims, which can
be prejudicial for insurers. Where an insured changes insurers and changes
from a claims-made to a loss-occurrence trigger, and a loss occurs yet
manifests only in future, the insured may not enjoy coverage at all. Risk
managers, policyholders, brokers and agents must launch due diligence
investigations to determine the scope and extent of insurance coverage by
evaluating the effects of these specific trigger events.
1 INTRODUCTION
The one theme that dominates our age and is part of the
daily narrative is the protection of the environment. Due to
various environmental catastrophes and the manifestation of
environmental damage caused over the past decades, international
awareness on the issue of liability for the clean-up, restoration,
compensation for damages and the insurability thereof has
increased profoundly.1 In South Africa, due to extensive mining
activities and often uncontrolled development the manifestation
of long-term damage has increased rapidly over the past decade.2
Personal injury claims against the large mining companies pending
1 See the case discussion by RL Sweigart ‘UK Supreme Court Pulls
Trigger on Asbestos Liability Insurance’ (2012) Summer Perspectives on
Insurance Recovery Newsletter on the judgment by the UK’s highest court in
the case of Employers’ Liability Insurance ‘Trigger’ Litigation: BAI (Run Off)
Ltd v Durham & Ors, [2012] UKSC 14 (delivered on 28 March 2012). This
finally resolved a long-pending dispute over insurance claims by the relatives
of workers who died after being exposed to asbestos in the workplace. By
only taking UK law into consideration, the Court ruled that insurance liability
in the UK is triggered when an employee is exposed to asbestos, not when
the ensuing disease mesothelioma manifests itself. The legal battle has been
on-going in the UK since 2006 and has delayed the resolution of thousands
of injury and death claims. For the alternative position in the USA, see the
various web pages published by the International Risk Management Institute
Inc., such as Trigger Theories and the CGL available at www.https:irmi.com
(last visited on 12 September 2015) on the existing theories in comprehensive
general liability policies.
2 In South Africa gradual long-term soil pollution caused by slow leaks
in fuel storage tanks at OR Tambo Airport, and gradual seepage of toxic mine
waste into the Witwatersrand groundwater were exposed. The leaching of
petroleum products into the soil caused soil and groundwater pollution, and
caused harm to neighbouring properties and affected human health. Liability
claims and insurance claims by and against ACSA (the Airport Company of
South Africa) are continuing.
© Juta and Company (Pty) Ltd

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