Presentation on theme: "Environmental Impairment (Pollution) Insurance"— Presentation transcript:
1 Environmental Impairment (Pollution) Insurance L’Oreal USA, Inc.
2 Pollution Insurance Objective: Explain how environmental insurance works to protect L’Oreal’s interests:Pollution EventInsurance Policy Terms & Conditions:Basic Coverage ExplanationKey ExclusionsClaim discovery and reporting requirements
3 What is Considered a Pollution Event? Gradual or sudden discharge, dispersal, release, or escape of any:Solid, liquid, gaseous or thermal irritant, contaminant or pollutantIncluding smoke, vapor, soot, fumes, acids, alkalis, chemicals, and wasteInto or upon land, or any structure on land, the atmosphere, or any watercourse or body of water, including ground water
4 L’Oreal’s Environmental Insurance Coverage Zurich North American Insurance CompanyPolicy Number: EPCPolicy Term: 1/16/2009 – 1/16/2014Limit of Liability$5 Million each pollution event$10 Million policy (5 years) aggregate limitDeductible - $25,000All L’Oreal named locations90 Days to report new owned or leased locations
5 Pollution Application Reliance upon insurance application:Description of surrounding environmentHistorical use of each locationEnvironmental reportsType of raw materials used in manufacturingEffluent treatment and dischargeReported underground storage tanksAir emissionsMethods of disposalPrevious environmental issues
7 What’s Insured? Clean-up Costs On-Site and Off-Site (Including non-owned locations and transportation of materials)Required by governmental authorityReasonable and necessary cost of removal and remediationBusiness interruption expensesLegally obligated to pay (off site)Example: Storage tank or runoff from fighting fire seeps into ground and further contaminates groundwater under facility.
8 What’s Insured? Pollution Legal Liability On site and off site (Including non-owned disposal sites, divested locations and transportation of materials)Bodily Injury and Property DamageIncluding fungus / sporesLimited Lead and Asbestos coverage (for third-party bodily injury only)Legal Expenses / duty to defendExample: A gradual discharge of contaminants leaks into neighbors property. Neighbor sues for clean-up and alleged bodily injuries.
9 Key Policy ExclusionsKnowingly wrongful acts or deliberate non-compliance with government mandatesUnreported underground storage tanksUpgrades or maintenance without physical pollution eventFines, penalties and punitive damagesEmployee injuriesCovered by Workers’ Compensation Insurance
10 Key Definitions Bodily Injury Property Damage Clean-up Costs Physical injury, sickness, disease, mental anguish or emotional distress sustained by any person, including deathProperty DamagePhysical injury to or destruction of tangible property, including loss of useClean-up CostsReasonable and necessary costs incurred in the investigation, removal, remediation, neutralization (and monitoring) of contaminated soil, surface or ground water
11 Key Policy Conditions Cooperation with insurer Do not admit liability without written consent of the insurance companyEnvironmental events discovered and reported during the policy period.By a responsible insured in amounts or concentrations that exceed allowable levels established under governmental authorityA responsible insured is an officer, member of management, employee with responsibility for compliance, environmental or legal affairs, or risk management
12 Notification of Potential Claims Notify Insurance or Regulatory AffairsNew pollution events that are reasonably expected to result in a claimProvide written notice to the insurer containing particulars sufficient to identify the:Cause of the pollution eventTime, place and locationWhen first aware of eventKnown third-parties impactedInvestigative or engineering reports
13 Clark 2006 Claim Experience Release from alcohol storage tank on November 10, 2006Underground pipes corroded and cracks in concrete vault allowed alcohol to seep into soilUST and connections identified on insurance policy applicationReported to insurer within the policy periodResults of ground water monitoringDEP and environmental consultants reportsActual invoices for expensesEstimated clean-up expenses $400KEstimated legal expenses $100KClaim recovery still unknown, but expected to be settled by mid-2009
14 Environmental Impairment Liability (EIL) Summary L’Oreal has insurance coverage for a gradual, or sudden and accidental pollution eventZurich Insurance Company $5MM / $10MMClean-up costs, legal liability and legal expensesCoverage for on or off site, and transit90 days to report new locationsClaims have to be reported during the policy periodBetter to advise Regulatory Affairs or Insurance, even if uncertain, before the insurance policy expires