Farm & General Insurance urges companies to protect against clean-up costs

Existing insurance packages leave growers dangerously exposed to EU environmental legislation, according to Farm & General Insurance, which launched a package to address the problem at the South West Growers Show.

The new policy targets the liability created by a groundbreaking case in 2007. The case involved Bartoline, a small company that manufactures adhesives and packs hydrocarbons, which lost a major case to its insurance company.

Following a fire at its premises in Beverley, East Yorkshire, in May 2003, Bartoline faced a £600,000 bill for clean-up, even though it had insurance. In extinguishing the fire, foam and chemicals seeped into the environment, subsequently polluting two water courses.

The Environment Agency, which owns the beds and banks of one water course, billed Bartoline for the emergency clean-up.

Bartoline made claims on its policy with Royal & Sun Alliance (RSA) but, although the insurer paid out on a number of claims, it denied the claim for the clean-up expenditure.

In the case that followed, the courts ruled in favour of RSA, whose policy provided that it would indemnify Bartoline against legal liability for "damages" in respect of accidental loss of, or damage to, property. The case ruled for the first time that "damages" did not include clean-up costs.

This set a precedent for growers who would likely not be covered against environmental damages under their existing packages, which was underlined by an EU directive that came into force in March this year. The EU directive states that companies that pollute the environment are obliged to clean it up and carry out remedial work in the environment.

It extends to the company's own property and makes it a criminal offence to not report any accidents leading to damage to the Environment Agency.

Farm & General Insurance has devised a policy that can be added to an existing policy with another insurer. Consultant at the firm Roger Morgan said: "In two years' time there won't be a business without this type of cover. It is the most interesting change in insurance for more than 50 years."

He added: "This is the only standalone policy where companies can buy environmental cover. It costs £300, depending on the nature of the business, and covers up to £1m per incident."

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