Senate Transit Underwriters - Pollution Liability

POLLUTION LIABILITY INSURANCE MADE EASY

The purpose of this overview is to provide both a broad guideline insight into the application of current legislation regarding the transportation of hazardous goods in South Africa, and a more detailed insight into the specialized pollution liability insurance product available from Senate, designed to address the risk.

Whilst there is an incredibly long listing of chemicals and substances which are classified as hazardous, the easiest rule of thumb for a transporter to use as a guideline, when deciding if a product is hazardous, is to ask the question "can you eat it?" if not, it is probably classed as hazardous.

Herewith follows: The Legal Perspective - explanations of the law, followed by Cover Provided By The Policy, you can either scroll down or click on the heading below to go directly to this section.

Cover Provided By The Policy

The Legal Perspective

The relevant issues to be considered in instances of a road transporter creating a pollution situation whilst goods are in transit, are defined by the National Environmental Management Act, the National Road Traffic Act 1996 (plus corresponding S.A.B.S. Codes), and to a certain extent the Occupation Health & Safety Act.

It is not our intention to herein discuss the operational legal requirements of the transporter. For more information in this regard, please click on www.fleetwatch.co.za, which you will find most useful in explaining the varied requirements with which transporters must comply.

The focus of our attention is on the liabilities and responsibilities which attach to a transporter once an incident has occurred, which has polluted the environment. A truck accident spilling hazardous chemicals can be classified as an emergency incident. The control of an emergency incident is provided for in section 30 of N.E.M.A (National Environmental Management Act), which must be read in the context of the White paper on Disaster Management and the National Water Act, 36 of 1998.

"Incident"

An incident is described as:

"an unexpected sudden occurrence, including a major emission, fire or explosion leading to serious danger to the public or potentially serious pollution of or detriment, whether immediate or delayed".

The above definition is wide, and would include spills in the course of transit.

The "responsible person"

This includes all three of the following categories:

"any person who -

is responsible for the incident;
owns any hazardous substances involved in the incident; or
was in control of any hazardous substances involved in the incident at the time of the incident".

Therefore the transporter is included under (iii), and the wording of the definition implies strict liability on both (iii) and (ii), being the transporter and the owner of the goods.

The responsible person must take the following measures as soon as is reasonably possible, after knowledge of the incident:

take all reasonable measures to contain and minimise the effects of the incident, including its effects on the environment and any risks posed by the incident to the health safety and property of persons:
undertake all clean-up procedures;
remedy the effects of the incident;
assess the immediate and long-term effects of the incident on the environment and public health".

It is clear that the responsibilities of the transporter go well beyond the immediate "mopping-up" procedure.

The "relevant authority"

Section 30 of N.E.M.A. also makes extensive reference to the rights of the relevant authority where the incident occurred, defined as:

a municipality with jurisdiction over the areas in which an incident occurs:
a provincial head of department or any other provincial official designated for that purpose by the MEC in a province in which an incident occurs;
the Director-General;
any other Director-General of a national department."

The powers of the relevant authority allow them to instruct the transporter to fulfill their obligations relating to reasonable measures, with a specified time. How long this specified time might be is anyone's guess, however it can be assumed that this is at the discretion of the relevant authority. Any verbal instruction given by the relevant authority must be confirmed in writing by them within seven days.

Should the responsible person fail to comply, or inadequately comply, or there is uncertainty about who is the responsible person, or there be an immediate risk of serious danger to the public or potentially serious detriment to the environment, then the relevant authority may itself take measures it considers necessary to:

contain and minimise the effects of the incident;
undertake clean-up procedures; and
remedy the effects of the incident.

(9) A relevant authority may claim reimbursement of all reasonable costs incurred by it in terms of subsection (8) from every responsible person jointly and severally.

(10) A relevant authority which has taken steps under subsections (6) or (8) must, as soon as reasonably practicable, prepare comprehensive reports on the incident, which reports must be available through the most effective means reasonable available to-

the public;
the Director-General;
the South African Police Services and the relevant fire prevention service;
the relevant provincial head of department of municipality; and
all persons who may be affected by the incident".

Therefore the relevant authority is entitled to recover such expense from the transporter, but these costs must still be reasonable. The transporter must pay for the clean-up and environmental rehabilitation costs, but that does not mean he must automatically pay any invoice presented. He has the right to challenge the reasonableness of any bills presented.

Disclaimer: Senate does not hold itself out as being an expert in legal matters. The above is for reference purposes only. It is advised that you consult your lawyer to offer individual / specific guidance. No liability will attach to Senate for any loss suffered as result of the abovementioned information or advice, howsoever caused.

Cover Provided By The Policy

The policy will pay for the cleaning-up costs at the accident scene incurred by a clean-up company or municipality representatives such as the fire department, etc. In addition, the policy will pay for all amounts which the Insured becomes legally obliged to pay as a result of an incident occurring, which has caused damage to anybody's property (other than the Insured's own property), including such things as ongoing environmental rehabilitation costs and legal costs involved.

Obviously these damages and expenses must have resulted from an incident (pollution release) involving the goods being carried (transported cargo) whilst these were being transported by one of the specified trucks (covered vehicle).

It is not necessary that there be a motor accident involved. The conveying truck might for example, have burst a valve of the tanker trailer, thereby causing chemicals to leak out into the environment. The only requirement is that the incident is unexpected, accidental and unintended. This would then not cover for example, someone purposefully dumping waste into a river over an extended period of time.

Clean-up costs

As with any liability policy, the Insured is not to accept liability or assume any obligation or expense without consent by Insurers. This becomes problematic in the case of needing give the go-ahead for clean-up at 3:00am at an accident scene, which if not done promptly, will result in a potentially larger claim. For this reason, Section III Clause 1B4 allows the Insured to incur clean-up costs without first consulting with Insurers, provided that Insurers are informed as soon as is practical thereafter.

Insurers have the right (but not the obligation) to become pro-actively involved in the logistics of the clean-up process. This means that Insurers may choose to call in their own preferred clean-up specialists thereafter, or may allow for whomever started the job to complete this through to finality.

Other compensation

Typical to any liability policy, any demands for compensation summonses or any other relevant information must be timeously passed onto Insurers for evaluation. Insurers reserve the right to appointing their own attorney's etc, to become involved in any legal action against the Insured by any third parties.

Important aspects of the policy

Date of loss
The incident giving rise to the damage and costs must have occurred during the period of insurance. The policy will not pay for damages only now being claimed for by third parties resulting from an incident, which occurred prior to the policy incepting.

Covered vehicle
The incident must have resulted from goods being transported by a vehicle specified by registration number on the policy schedule. The reason for this is that the premium charged is strongly influenced by the number of trucks transporting goods around. The higher the number of vehicles, the higher is the probability that one of them will be involved in an incident leading to a claim. Covered vehicles are usually specified by the registration number of the horse / truck, with cover applying to any trailer attached thereto. Alternatively, it may prove cheaper and more practical for the Insured to specify the trailers instead. E.g. if he has a large fleet but only has three tankers used to transport chemicals, and the rest of the fleet transport non-hazardous general goods for which no cover is needed.

Limit of insurance
The limit as specified by the policy, is an annual aggregate amount. This means that if an Insured is covered up to R5 million, the most Insurers will pay is up to a maximum of R5 million per annum, regardless of the number of claims. This also means that in the above example, if the Insured has a claim for R1 million halfway through the year, he only has R4 million worth of cover left for the rest of the year. It is possible to reinstate cover back up to the full limit subject to an additional premium.

Deductible / excess
The excess is applicable on a per incident basis, not on a per claim basis. An Insured may face more than one claim resulting from the same incident, e.g. a truck overturns carrying acid, there may be several claims presented from this one accident:

Clean-up costs at the scene
A farmer downstream whose livestock have died from drinking the water
A passing motorist whose vehicle was damaged from driving through the spill
The municipalities costs to re-tar the road surface
The excess would therefore not apply to each individual claim.

Territory covered
The policy automatically provides cover for incidents occurring in South Africa, Namibia, Botswana, Lesotho, Swaziland, Zimbabwe and Malawi.

Claim notification
It is required that the Insured notify Insurers within 30 days of an incident occurring. If this does not occur, indemnity for the loss will be fortified. This is to protect Insurers rights to choose to become involved in the clean-up process and take suitable measures to prevent a potentially larger loss if proper steps are not taken quickly. Please ensure that this is brought to the attention of the Insured. Prompt notification to Senate of any potential claim is strongly recommended.

How are premiums calculated?

As with any policy, an Insurer will try to evaluate the amount of risk introduced by the proposer, factors which will influence the premium quoted for the pollution liability cover are:

Limit:
The higher the limit requested, the higher is the Insurers potential to be called upon to pay.

Fleet size:
The more trucks there are in a transporters fleet moving goods around, the higher is the probability that one or more of these trucks will be involved in an incident resulting in pollution, and therefore a claim.

Claims history:
A bad claims history will influence the premium. Severe past losses will usually indicate to the Insurer that this transporter either lacks adequate risk management, pushes the drivers into extended driving hours, or is involved with that transport of goods more susceptible to claims. Many other factors could have been the cause of an adverse claims history, including bad luck. However, as Gary Player used to say, "the more I practice, the luckier I become".

Minimum premiums:
There are minimum premiums applicable to this cover. These are currently R1 470.00 per month, or R15 700.00 per year.

What are the standard excesses applicable?

There are currently standard excesses applicable to the pollution liability cover. These are dependant upon the limit of cover requested, and are detailed as follows:

LIMIT: EXCESS:

R1 million R45 000

R2 million R50 000

R3 million R55 000

R4 million R60 000

R5 million R65 000

R7.5 million R75 000

R10 million R85 000

R15 million R100 000

NB: Please note that it is also possible to obtain excess buy-down cover from Senate, to insure the applicable excess. As standard, when providing you with a quote for the pollution liability cover, an additional quote will be provided for the excess buy-down product.

How to get a quote for the unique Pollution Liability Policy:

It will be required that the Insured completes the Pollution Liability proposal form, and faxes this through to us. A copy of this proposal form can be obtained by clicking on the applicable option below. You are also able to view the policy wording by clicking on the applicable option below. Should you experience any problems, please do not hesitate to contact us.

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