Skip to main content
SpringerLink
Log in

The Role of Environmental Liability Insurance in Contaminated Land Legislation of China: Theories and Case Study

  • Chapter
  • First Online:
Developing an Appropriate Contaminated Land Regime in China

Abstract

This chapter discusses the application of insurance as one of the common financial security tools for environmental risks arising from land contamination. After a discussion of the relationships between environmental risks and insurance, it provides a brief overview of the functions of environmental insurance and the features of insurance policies designed to cover contaminated land liabilities. It also reviews key policy issues in applying insurance to manage land contamination risks and outlines insurance policies as response to environmental liabilities arising from contaminated land in the US and UK. Moreover, the applicability of environmental insurance for contaminated land related risks in China is discussed. This chapter concludes with several suggestions for developing environmental insurance policy in China for contaminated land risks management.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 84.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Hardcover Book
USD 109.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    Michel Vaté and David M Dror, ‘To Insure or Not to Insure? Reflections on the Limits of Insurability’ in D M and Preker A S (eds), Social Reinsurance: A New Approach to Sustainable Community Health Financing (World Bank Publications, October 2002) 125.

  2. 2.

    James W Broderick, Daniel R Lavoie and Andrew J Perel, ‘Environmental Risk Management and the Role of Environmental Insurance’ (2000) 10(1) Environmental Quality Management 3.

  3. 3.

    Alberto Monti, Environmental Risks and Insurance: A Comparative Analysis of the Role of Insurance in the Management of Environment-related Risks (OECD, 2003).

  4. 4.

    Generally speaking, environmental damages include damages to air, water, soil and biodiversity. Traditional third-party damages, for example, bodily injury, property damage, and economic losses, have been assigned to industrial enterprises.

  5. 5.

    Paul K Freeman and Howard Kunreuther, ‘Managing Environmental Risk through Insurance’ in T Tietenberg and H Folmer (eds), The International Yearbook of Environmental and Resource Economics 2003/2004 (Edward Elgar Publishing Limited, 2003) 159. Earlier edition of Freeman’s exploration on the environmental insurance, see Paul K Freeman and Howard Kunreuther, Managing Environmental Risk through Insurance, Studies in Risk and Uncertainty (Kluwer Academic Publishers, 1997) 21–30.

  6. 6.

    Monti, above n 3.

  7. 7.

    Ibid.

  8. 8.

    See, eg, Mark W Pauly, ‘Environmental Liability Insurance as a Handmaiden to International Trade and Investment’ (April 1997) 22(No 83) The Geneva Papers on Risk and Insurance 211; Brownfields Technology Support Center, Assessment of Environmental Liability Insurance Options for Cleanup Activities (May 1999) <http://www.brownfieldstsc.org/pdfs/InsuranceLiab.pdf>; Lucas Bergkamp, ‘Environmental Risk Spreading and Insurance’ (2003) 12(3) Review of European Community & International Environmental Law 269; Benjamin J Richardson, ‘Mandating Environmental Liability Insurance’ (2003) 12 Duke Environmental Law & Policy Forum 293.

  9. 9.

    James W Broderick, Daniel R Lavoie and Andrew J Perel, ‘Environmental Risk Management and the Role of Environmental Insurance’ (2000) 10(1) Environmental Quality Management 3; see also Monti, above n 3.

  10. 10.

    David J Dybdahl, A user’s Guide to Environmental Insurance (December 2011) American Risk Management Resources LLC <http://erraonline.org/usersguide.pdf>.

  11. 11.

    Todd S Davis and Scott A Sherman, Brownfields: A Comprehensive Guide to Redeveloping Contaminated Property (American Bar Association, 3rd ed, 2010), 199.

  12. 12.

    ‘Ideal conditions’ refers to situation when risk can be well defined. For example, assuming rationality and perfect information, economic actors are able to calculate the actual value of a given risk by discounting the magnitude of the loss by the probability of its occurrence. Monti, above n 3, 1.

  13. 13.

    If actors are willing to pay even more than the discounted value of the risk in order to transfer its harmful consequences to some other parties, we call this willing risk averse. Similarly, if they prefer to retain the risk of loss, rather than transferring it by paying upfront an amount equal to its discounted value, we call such willing risk preferring. If they are indifferent with respect to the alternative between retaining the risk and transferring it to someone else by paying upfront an amount equal to its discounted value, it is risk neutral. Ibid.

  14. 14.

    Richardson, above n 8, 271.

  15. 15.

    Ibid.

  16. 16.

    Monti, above n 3.

  17. 17.

    Ibid.

  18. 18.

    Other than extra explain, these two concepts may be used as synonymies to each other in this book.

  19. 19.

    Freeman and Kunreuther, above n 5, 25.

  20. 20.

    Vaté and Dror, above n 1, 125.

  21. 21.

    Ibid 126; see also Michael Faure (ed), Deterrence, Insurability, and Compensation in Environmental Liability: Future Developments in the European Union, Tort and Insurance Law Series (Springer-Verlag New York LLC, 2003) 123–179.

  22. 22.

    Christian Gollier, Insurability, Encyclopedia of Actuarial Science (John Wiley & Sons, Ltd, 2006).

  23. 23.

    Vaté and Dror, above n 1, 125.

  24. 24.

    Ibid 127.

  25. 25.

    Baruch Berliner, Limits of insurability of risks (Prentice-Hall, 1982). See also Vaté and Dror, above n 1, 127.

  26. 26.

    Freeman and Kunreuther, above n 5, 159.

  27. 27.

    To be quantifiable with sufficient degree of confidence, the risk should ideally meet three criteria: (1) probabilistic character; (2) considerable amount of statistical information on occurrence of hazardous events and amount of resulted losses, (3) statistical independence. See Richardson, above n 8.

  28. 28.

    Robert Irwin Mehr and Emerson Cammack, Principles of Insurance, Irwin Series in Insurance and Economic Security (R D Irwin, 6th ed, 1976) 34–7.

  29. 29.

    Some insurance are facing small group of people instead of large classes, For example, Lloyd’s of London is famous for insuring the life or health of actors, actresses and sports figures. Ibid.

  30. 30.

    Ibid.

  31. 31.

    Vaté and Dror, above n 1, 127.

  32. 32.

    Davis and Sherman, above n 11, 189.

  33. 33.

    This is the first reported contaminated land transaction case in China; court information about this case is inaccessible while this paper been written. Detail information for this case, please refer news reports, Yao Haiying, Truth Behind China’s Biggest Contaminated Land Reimbursement Incident (3 March 2010) <http://www.time-weekly.com/show.php?contentid-5985.html>; Chen Lei, Disaster from Brownfield: People in New-built Communities Are Suffering Unknown Risks? (2010) <http://www.soufun.com/news/2010-06-02/3407551.htm>.

  34. 34.

    Ibid.

  35. 35.

    In the same case, the plaintiff, Shanjiang Hangtian Real property Development Ltd, received a 120 million RMB as compensation. See Yao Haiying, above n 33.

  36. 36.

    Vaté and Dror, above n1, 125.

  37. 37.

    Stephen Tromans and Robert Turrall-Clarke, Contaminated Land (Sweet & Maxwell Ltd, 2nd ed, 2008) 655.

  38. 38.

    Ibid.

  39. 39.

    Nicholas Lockett, Environmental Liability Insurance (Cameron May, 1996) 79.

  40. 40.

    Davis and Sherman, above n 11, 188–89.

  41. 41.

    This Act of 1976 is codified as part of Solid Waste Disposal Act, 42 USC §§6901-6992 k.

  42. 42.

    Davis and Sherman, above n 11, 189.

  43. 43.

    See Chaps. 4 and 5.

  44. 44.

    Monti, above n 3, 29.

  45. 45.

    Davis and Sherman, above n 11, 198.

  46. 46.

    Monti, above n 3, 30; see also Davis and Sherman, ibid.

  47. 47.

    Davis and Sherman, above n 11, 30.

  48. 48.

    John A Hannah, The US Environmental Liability Insurance Market-Reaching New Frontiers (May 2000) International Risk Management Institute Inc <http://www.irmi.com/expert/articles/2000/hannah05.aspx>; see also Jeff Slivka, Financing Environmental Loss with Environmental Insurance (October 2006) International Risk Management Institute Inc <http://www.irmi.com/expert/articles/2006/slivka10.aspx>.

  49. 49.

    Hannah, ibid.

  50. 50.

    R E Hester and Roy M Harrison, Assessment and Reclamation of Contaminated Land (Royal Society of Chemistry, 2001) 147.

  51. 51.

    Tromans and Turrall-Clarke, above n 37, 654.

  52. 52.

    Davis and Sherman, above n 11, 199.

  53. 53.

    For example, Dybdahl listed some major types of environmental policies as follows: (1) site-specific environmental impairment liability insurance; (2) contractors environmental impairment liability insurance; (3) environmental professional errors and omissions liability insurance; (4) asbestos and lead abatement contractors general liability insurance; (5) environmental remediation insurance; (6) Remediation stop-loss insurance; (7) underground and aboveground storage tank insurance; (8) combined CGL/EIL insurance. See Dybdahl, above n 10.

  54. 54.

    Alan Bressler, Navigating the US Environmental Liability Market (Part 1) (March 2002) International Risk Management Institute Inc <http://www.irmi.com/expert/articles/2002/bressler03a.aspx>.

  55. 55.

    Tromans and Turrall-Clarke, above n 37, 655.

  56. 56.

    Monti, above n 3.

  57. 57.

    Lockett, above n 39.

  58. 58.

    Ibid 14.

  59. 59.

    Davis and Sherman, above n 11, 190.

  60. 60.

    Ibid 192.

  61. 61.

    Ibid.

  62. 62.

    Directive 2004/35/EC of the European Parliament and of the Council on environmental liability with regard to the prevention and remedying of environmental damage.

  63. 63.

    Davis and Sherman, above n 11,192; Tromans and Turrall-Clarke, above n 37, 656.

  64. 64.

    Such endorsement included in most policies solidifies the so-called ‘fortuity doctrine’, that is, the policies are to preclude coverage for two categories of losses: known losses and losses in progress. See Nelson Levine de Luca & Horst LLC, ‘Chinese Drywall Claims: A Review of Insurance Coverage and Liability Issues’ (2009) <http://www.nldhlaw.com/CM/EmergingTopics/Chinese-Drywall-White-Paper.pdf>

  65. 65.

    Dybdahl, above n 10.

  66. 66.

    Property transfer policies are triggered by, among other things, a notification that Directive 2004/35/EC of the European Parliament and of the Council on environmental liability with regard to the prevention and remedying of environmental damage. See Tromans and Turrall-Clarke, above n 37, 656.

  67. 67.

    Ibid.

  68. 68.

    Ibid.

  69. 69.

    Ibid 657.

  70. 70.

    Dybdahl, above n 10.

  71. 71.

    For example, the developer of a project with expected remediation costs of US$1,000,000 may carry a US$250,000 buffer (SIR) and purchase a US$2,000,000 cost-cap policy. If actual cleanup costs for the project are US$2,000,000 then when the costs of the project run over the US$1,250,000 anticipated costs plus SIR, the cost-cap policy would respond by paying the unanticipated US$750,000. Davis and Sherman, above n 11, 192.

  72. 72.

    Ibid 193.

  73. 73.

    Tromans and Turrall-Clarke, above n 37, 656.

  74. 74.

    Ibid 658.

  75. 75.

    Ibid 659; see also Davis and Sherman, above n 11, 193.

  76. 76.

    Tromans and Turrall-Clarke, ibid 659.

  77. 77.

    Ibid.

  78. 78.

    Lockett, above n 39, 127.

  79. 79.

    Ibid.

  80. 80.

    Independent Petrochemical Corp v Aetna Cas & Sur Co, 672 F Supp 1 (D DC 1986); Triangle Publications Inc v Liberty Mut Ins Co, 703 F Supp 367 (ED Penn 1989).

  81. 81.

    Davis and Sherman, above n 11, 214.

  82. 82.

    See, for example, in Upjohn Co v New Hampshire Ins Co, the court held that the word ‘sudden’, as used in the pollution exclusion, contains an inherent temporal element, found that the exclusion bars coverage for gradual discharges. Upjohn Co v New Hampshire Ins Co, 178 Mich App 706, 444 NW 2d (Mich Cir Ct, 7 Jan 1987). See James F Berry and Mark S Dennison, The Environmental Law and Compliance Handbook, McGraw-Hill handbooks (McGraw-Hill, 2000) 448; See also Jeffrey W Stempel, Law of Insurance Contract Disputes (Aspen Law & Business, 2nd ed, 2004) 14–86.

  83. 83.

    Occurrence is the time at which the leakage and damage are first discovered.

  84. 84.

    More cases relate to this theory can see, for example, Lockett, above n 39, 129.

  85. 85.

    Lockett, above n 39, 130; relevant cases see, for example, Hof fman-La Roche Inc v The Hartford Group, 87 (NJ Super Ct Law Div, No W-015519-87, 13 Oct 1989); United States Fidelity & Guar Co v Thomas Solvent Co, 683 F Supp 1139 (WD Mich, 1988); New Castle County v Continental Casualty Co,725 Supp 800 (D Del 1989).

  86. 86.

    Rebecca Sutton, ‘The Policy Process: An Overview (Working Paper 118)’ (Overseas Development Institute, August 1999) <http://www.odi.org.uk/resources/download/1868.pdf>.

  87. 87.

    《关于印发 < 关于开展环境污染责任保险调研报告 > 的通知》 [Notice on the Printing of ‘ about the Implementation of ELI Survey’] (People’s Republic of China) SEPA & CIPC, Decree No 2007-10, 26 July, 2007.

  88. 88.

    《关于环境污染责任保险工作的指导意见》 [Directions for ELI works] ] (People’s Republic of China) SEPA & CIPC, Decree No 2007-189, 4 December, 2007.

  89. 89.

    MEP, China Establishes Liability Insurance System for Environmental Pollution (12 March 2008) MEP <http://www.environmental-expert.com/news/china-establishes-liability-insurance-system-for-environmental-pollution-28860/view-comments>.

  90. 90.

    Ibid.

  91. 91.

    More information about Ping’An can be found at its website http://www.pingan.com/investor/en/index.jsp.

  92. 92.

    More information about PICC Property and Casualty Company Ltd can be found at its website: http://www.piccnet.com.cn/index.shtml.

  93. 93.

    More information about HuaTai can be found at its website: http://www.ehuatai.com/index.aspx.

  94. 94.

    More information about CICC can be found at its website: http://eng.chinare.com.cn/AboutUs/CompanyOverview/.

  95. 95.

    Chenming Ma, Environmental Liability Insurance Call for Long-term Operation Machenism (3 December 2008) Financial News <http://env.people.com.cn/GB/8452796.html>; Za xi, The First Environmental Insurance Case Got Compensated (1 December 2008) <http://env.people.com.cn/GB/8439588.html>.

  96. 96.

    Up to January 2011, in China, there are more than 10 insurance companies have developed environmental insurance products. More insurance companies started environmental pollution liability dialogue based on pilot programs with the support of local governments. However, due to low demand, resources allocated to this liability line by insurance companies are much poorer than those devoted to other lines of business such as property insurance, where the risk landscape is clearer and the premium contribution is larger. Swiss Re, Environmental Pollution Liability Insurance in China: A Bumpy Road Leading to A Bright Prospect (2011) <http://www.swissre.com/clients/insurers /property_casualty/Environmental_pollution_liability_insurance_in_China.html >.

  97. 97.

    Such problem has been noted by several Chinese researchers. See, for example, Xiong Ying, Bie Tao and Wang Bin, ‘Suppositions of China’s Environment Pollution Liability Insurance’ (2007) 29(1) Modern Law Science 24; ZhangYingbin and Wang Xiaohui, ‘Study on the Environmental Liability Insurance Legal System in China’ (2010) 23(4) Journal of Beijing University of Aeronautics and Astronautics (Social Science Wdition).

  98. 98.

    Xiya Zhang, Environmental Pollution Liability Insurance in China Advances, Case by Case (12 December 2008) <http://www.greenlawchina.org/2008/12/environmental-pollution-liability-insurance-case-in-china-advances-case-by-case/>.

  99. 99.

    Yang Shisheng and li Yongjun, ‘Environmental Liability Insurance initiated in Hunan Province,Debates Exist for a National Prictice’, China Times 2011 <http://www.chinatimes.cc/yaowen/diqu/2011-10-17/26503.shtml>.

  100. 100.

    See above n 8.

  101. 101.

    In order to ensure the achievement of the environmental targets of the 11th Five-Year Plan, the MEP has developed the 11th Five-Year Plan for the Building of National Capacity in Environmental Supervision, a first self-development plan in the history of environmental protection in China. The Plan, approved and supported by the NRDC and the Ministry of Finance, envisages total investment of almost 15 billion RMB, including 7.8 billion RMB from the Central Government. See OECD, Ensuring Environmental Compliance: Trends and Good Practices (OECD, 2009) 192.

Author information

Authors and Affiliations

  1. School of Law, Shanghai University of Finance and Economics, Shanghai, China

    Xiaobo Zhao

Authors
  1. Xiaobo Zhao
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Xiaobo Zhao .

Rights and permissions

Reprints and permissions

Copyright information

© 2013 Springer-Verlag Berlin Heidelberg

About this chapter

Cite this chapter

Zhao, X. (2013). The Role of Environmental Liability Insurance in Contaminated Land Legislation of China: Theories and Case Study. In: Developing an Appropriate Contaminated Land Regime in China. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-31615-9_7

Download citation

Publish with us

Policies and ethics

Search

Navigation