There is an increased interest in business involving hazard, such as chemicals, energy and construction, in wanting to cover pollution liability.
Under the Public Liability Insurance Act (PLIA), 1991, all companies involved in hazardous activities take a mandatory Rs 5-15 crore public liability cover, depending on their paid-up capital. They can opt to take an equal amount of pollution liability cover, as an extension of the former.
“Though there is an extension to the public liability cover, it does not insure gradual loss. For example, a construction company builds a residential complex on land which was historically used for a chemical plant and the water has been contaminated,” said a senior executive of a large insurance brokerage.
A standalone pollution liability policy covers both sudden accidental loss and slow and gradual losses, including onsite clean-up costs, third-party body injuries and property damage.
A multinational company has recently taken a $10-million (Rs 47 crore) cover from Tata AIG General Insurance. It came out with such a cover only around a year earlier, the first to do so (and so far the only one).
Close to 10 companies have since taken this cover, said a source. HDFC Ergo insurance is working is on a similar product with Chubb. Premium rates varied from 0.5 per cent to 1 per cent, depending on the nature of the business.
Awareness of the need is rising, due to instances like that of the Vellore district forum which had filed petitioned the Supreme Court against hazardous industries for polluting the Palar river, the only source of potable water in the area. The court asked the central government to appoint someone to assess the loss caused to the environment and determine compensation for the affected people. The compensation was estimated at Rs 67 crore.
“There demand coming from construction companies involved in both residential and commercial complexes. Earlier, these companies used to take clearance from the pollution control board but with increasing awareness, they are taking the cover,” said K Ramachandran, Executive Director, J B Boda Insurance Brokers.
He added that in two or three cases, lenders have declined to make the financial closure without the clearance.
“To secure business enterprises against the risk of environmental damage and its severe financial impact, we have launched this product. It is based upon the international experience of our joint venture partner in covering environmental exposures of clients in jurisdictions like the EU and the US, where environmental regulations are very strict and unsparing,” said Gaurav Garg, managing director of Tata AIG.
