Insurers have warned that the outcome of a landmark case to be heard by the Court of Appeal this week could lead to pollution-related exclusions on public and general liability policies.
The case will decide whether clean-up costs arising from pollution are covered by a public liability policy.
Experts said if the judges ruled in the policyholder’s favour then it could lead to insurers imposing exclusions on all public liability policies.
The case concerns manufacturer Bartoline, which was ordered to pay for the clean-up costs following severe pollution to nearby watercourses. It claimed for the costs under its public liability policy.
Bartoline’s insurer Royal & SunAlliance refused to pay the claim and Bartoline sued for breach of contract.
The court ruled that Bartoline could not claim its clean-up costs as “damages” under its public liability policy.
Toby Lennon, environment underwriter at Chubb, said: “If the appeal is successful, then R&SA and others may act in unison to impose clear exclusionary wordings on all of their public liability policies.”
But he added that, due to commercial pressures, endorsements were a more likely outcome than absolute exclusions.
R&SA already use endorsements for third-party clean-up costs.
There is less clarity, however, on what will happen if the initial decision is upheld.
Lennon said: “It will be interesting to see whether insurers rely on this decision or still impose exclusion wordings.”
Bob Martin, director of environmental consulting and solutions at Aon, said that the problem was compounded by the state of the market. He said: “In a soft market, underwriters are looking for ways to provide more appealing cover. Some are writing what they call Bartoline clauses to cover such risks.”
Martin added: “Too many people are relying on the wrong sort of policy. Bartoline is a blessing in disguise.”
A senior source added that it was unlikely that the court case would act as a catalyst to change. He said: “The thing that will stop this is the insurers themselves. There is a strong fear among insurers of breaking ranks, and having their business dropped by both brokers and clients.”
