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Dirty business

Industrial pollution is costing more than the insurers reckoned. And we will all have to pay.

Over the last few years pollution has become the biggest headache for insurers around the world. Changes in the law, American court decisions and a greater willingness to sue by individuals and environmental lobby groups have meant that many insurance companies have been faced with frighteningly huge bills.

Automatic provision

Many claims bedevilling insurance underwriters at Lloyds of London arise from the 1950's to 1970's when pollution cover was provided automatically as an addition to a standard insurance policy. The underwriters had no idea of what would come: a rash of old cases of industrial and chemical pollution. Many of these claims were from the USA where the principle of "strict liability" applies. A company can be liable for pollution on its land even if it was unaware of it and had not owned the land when the pollution occurred. On the basis of strict liability many millions of dollars have been paid out to claimants, although more recently some American court rulings have gone the insurers' way. Insurers are now beginning to make provisions for 30 and 40 year old liabilities.

Strict liability

Many environmentalists in Europe favour the strict liability ruling as they think it will discourage companies from polluting land irresponsibly and might even enhance their efficiency. Various European countries, including Italy, Greece and Holland, have signed a convention on environmental pollution, embodying the principle of strict liability. It has not yet been imposed on the whole of the European Union.

The UK, which does not apply the strict liability principle, maintains the legal position that if future pollution could not reasonably be foreseen on the basis of diligent research and best current knowledge, the owner of the land could not be held responsible. British environmentalists are campaigning for strict liability and also support the introduction of a national register of contaminated land.

Joint and several liability

In the USA the principle of joint and several liability is wreaking even more damage to insurers. This principle means that if, say, a chemical factory fouls a field, not only the chemical company but also its directors, bankers and investors can be held liable. And each can be obliged to pay the full damages for the pollution, granting the victims damages of many times what they originally applied for.

To respond to this, a "super fund" in the States has been set up - financed by levies on industry and insurers, to cope with environmental pollution claims on an industry-wide basis.

Such a draconian principle as joint and several liability has pushed insurers to even more caution. They are reluctant to provide blanket cover for unforeseen environmental damage under a general protection policy. Premium rates have soared and policies are much more restrictively worded.

Industry suffers

As well as rising costs for insurance cover, manufacturing companies fear that multinationals will be tempted to set up in places such as Bhopal in India where companies are not obliged to pay heavily for environmental damage - or even the death of workers. There is a growing worry that increasing environmental constraints could damage the competitive position of companies in Europe.

Reading for meaning

When you read an article, you can often guess the words you do not know from the context.

Find words or expressions in the above article which have the following meanings:

a. energetically seeking to influence
b. causing trouble
c. a great and sudden number of
d. improve
e. very careful and thorough
f. polluted
g. excessively severe
h. comprehensive
i. increased greatly

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