Farmers are custodians of the countryside, but this summer they came under fire following freedom of information requests that detailed the number of pollution events they are responsible for each year.
Such events can result in prosecutions by the Environment Agency (EA) and the Scottish Environment Protection Agency (SEPA). They can also lead to large losses that will not be covered by general liability insurance policies.
In the UK slurry from dairy farms is a particular issue. The UK’s dairy herd produces enough manure to fill the Shard – the UK’s tallest building – in less than five days. Pollution events can also result from the release of silage liquor, the burial or inappropriate disposal of animal carcasses, fuel storage and the misuse or spillage of pesticides.
FARMERS UNDER FIRE
This summer the Bureau of Investigative Journalism and the Guardian published data showing there were 3,700 instances of agricultural pollution in England and Wales between 2010 and 2016. Just over 2,000 involved dairy farms, while 664 were linked to poultry farms and 444 to pig farms.
Figures from SEPA show there were a total of 1,587 serious pollution incidents emanating from Scottish farms between 2010 and 2016.
The investigation found that the EA brought 134 prosecutions to court between 2010 and 2016. In 95% of casesa guilty verdict was returned, and fines ranged from £300 to £45,000.
POLLUTION IS A PRICEY BUSINESS
But the costs from a pollution incident run much higher than the fines handed out. Those responsible must pick up the first and third-party clean-up costs. Under the European Liability Directive, culprits also have to return polluted environments to their original state and where this is not possible, they may have to complete compensatory work.
In the wake of a pollution incident picking up a large tab is the last thing that farmers want when they are already under pressure.
Most general liability insurance policies will provide cover for the third-party clean-up costs that arise from sudden and accidental (S&A) events. There are two problems with this level of cover.
First, many pollution incidents are not the result of S&A events. In many cases, ageing slurry or fuel tanks, for example, are the source of longstanding leaks that pollute the surrounding environment. Seeping slowly into the earth, the pollution is often not discovered until a significant amount has escaped.
Second, the third-party clean-up costs are only a small fraction of the overall costs associated with a pollution incident.
Most pollution incidents will occur on the insured’s land and without the appropriate insurance in place they will be left footing the bill to put their house in order.
Polluters are responsible for returning polluted environments to their original state this can be an expensive and time-consuming commitment that requires a significant amount of outside expertise and consultation to ensure the remedial work is carried out appropriately. There will also be certification and testing required to benchmark the progress made and then sign off the work formerly when complete.
Neither the costs associated with this work nor, first party clean-up costs are covered by a general liability policy. underscoring the importance of having an appropriate environmental insurance policy that will provide the breadth of cover required.
ACCESS TO EXPERTISE
When a pollution incident occurs, reacting quickly and in the right manner can mitigate the loss significantly. But knowing the correct course of action in such circumstances is not easy and expert advice can make an enormous difference.
Many environmental insurance policies will provide access to experts who will inform policyholders of what they should do following an incident to ensure its spread and environmental impact is limited.
The insurance policy will also cover the cost of carrying out loss mitigation work needed and prevent this being another blow to the bottom line.
As specialist environmental insurance becomes more affordable, farmers will have to ask themselves if they can afford not to put it in place.
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For more information, please contact Greory Schilz, Executive Vice President on 415-819-6585.