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Environmental Impairment (Pollution) Insurance Environmental Impairment (Pollution) Insurance L’Oreal USA, Inc.

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Presentation on theme: "Environmental Impairment (Pollution) Insurance Environmental Impairment (Pollution) Insurance L’Oreal USA, Inc."— Presentation transcript:

1 Environmental Impairment (Pollution) Insurance Environmental Impairment (Pollution) Insurance L’Oreal USA, Inc.

2 Pollution Insurance Objective: Explain how environmental insurance works to protect L’Oreal’s interests: Explain how environmental insurance works to protect L’Oreal’s interests: Pollution Event Insurance Policy Terms & Conditions: Basic Coverage Explanation Key Exclusions Claim 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 pollutant Solid, liquid, gaseous or thermal irritant, contaminant or pollutant Including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste Including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste Into or upon land, or any structure on land, the atmosphere, or any watercourse or body of water, including ground water Into 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 Company Policy Number: EPC 2857482 01 Policy Term: 1/16/2009 – 1/16/2014 Limit of Liability $5 Million each pollution event $5 Million each pollution event $10 Million policy (5 years) aggregate limit $10 Million policy (5 years) aggregate limit Deductible - $25,000 All L’Oreal named locations 90 Days to report new owned or leased locations

5 Pollution Application Reliance upon insurance application: Reliance upon insurance application: Description of surrounding environment Historical use of each location Environmental reports Type of raw materials used in manufacturing Effluent treatment and discharge Reported underground storage tanks Air emissions Methods of disposal Previous environmental issues

6 What’s Insured? Clean-up Costs Legal Liability

7 What’s Insured? Clean-up Costs On-Site and Off-Site (Including non-owned locations and transportation of materials) Required by governmental authority Reasonable and necessary cost of removal and remediation Business interruption expenses Legally 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 On site and off site (Including non-owned disposal sites, divested locations and transportation of materials)  Bodily Injury and Property Damage Including fungus / spores Including fungus / spores Limited Lead and Asbestos coverage (for third-party bodily injury only) Limited Lead and Asbestos coverage (for third-party bodily injury only) Legal Expenses / duty to defend Legal Expenses / duty to defend Example: A gradual discharge of contaminants leaks into neighbors property. Neighbor sues for clean-up and alleged bodily injuries.

9 Key Policy Exclusions Knowingly wrongful acts or deliberate non- compliance with government mandates Unreported underground storage tanks Upgrades or maintenance without physical pollution event Fines, penalties and punitive damages Employee injuries Covered by Workers’ Compensation Insurance Covered by Workers’ Compensation Insurance

10 Key Definitions Bodily Injury Physical injury, sickness, disease, mental anguish or emotional distress sustained by any person, including death Physical injury, sickness, disease, mental anguish or emotional distress sustained by any person, including death Property Damage Physical injury to or destruction of tangible property, including loss of use Physical injury to or destruction of tangible property, including loss of use Clean-up Costs Reasonable and necessary costs incurred in the investigation, removal, remediation, neutralization (and monitoring) of contaminated soil, surface or ground water Reasonable 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 company Do not admit liability without written consent of the insurance company Environmental events discovered and reported during the policy period. By a responsible insured in amounts or concentrations that exceed allowable levels established under governmental authority By a responsible insured in amounts or concentrations that exceed allowable levels established under governmental authority A responsible insured is an officer, member of management, employee with responsibility for compliance, environmental or legal affairs, or risk management A 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 Affairs New pollution events that are reasonably expected to result in a claim Provide written notice to the insurer containing particulars sufficient to identify the: Cause of the pollution event Cause of the pollution event Time, place and location Time, place and location When first aware of event When first aware of event Known third-parties impacted Known third-parties impacted Investigative or engineering reports Investigative or engineering reports

13 Clark 2006 Claim Experience Release from alcohol storage tank on November 10, 2006 Underground pipes corroded and cracks in concrete vault allowed alcohol to seep into soil UST and connections identified on insurance policy application Reported to insurer within the policy period Results of ground water monitoring Results of ground water monitoring DEP and environmental consultants reports DEP and environmental consultants reports Actual invoices for expenses Actual invoices for expenses Estimated clean-up expenses $400K Estimated legal expenses $100K Claim 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 event Zurich Insurance Company $5MM / $10MM Clean-up costs, legal liability and legal expenses Coverage for on or off site, and transit 90 days to report new locations Claims have to be reported during the policy period Better to advise Regulatory Affairs or Insurance, even if uncertain, before the insurance policy expires Better to advise Regulatory Affairs or Insurance, even if uncertain, before the insurance policy expires

15 Questions or Comments


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