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.
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Notes
- 1.
Vaté and Dror (October 2002).
- 2.
Broderick et al. (2000).
- 3.
Monti (2003).
- 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.
- 6.
Monti (2003).
- 7.
Monti (2003).
- 8.
- 9.
- 10.
Dybdahl (2000).
- 11.
Davis and Sherman (2010), at 199.
- 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. Richardson (2003), at 1.
- 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. Davis and Sherman (2010), at 199.
- 14.
Richardson (2003), at 271.
- 15.
Richardson (2003), at 271.
- 16.
Monti (2003).
- 17.
Monti (2003).
- 18.
Unless otherwise specified, these two concepts are used as synonymies in this book.
- 19.
Freeman and Kunreuther (2003), at 25.
- 20.
Vaté and Dror (October 2002), at 125.
- 21.
- 22.
Gollier (2006).
- 23.
Vaté and Dror (October 2002), at 125.
- 24.
Vaté and Dror (October 2002), at 127.
- 25.
- 26.
Freeman and Kunreuther (2003), at 159.
- 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 (2003).
- 28.
Mehr and Cammack (1976), at 34-7.
- 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. Mehr and Cammack (1976), at 34-7.
- 30.
Mehr and Cammack (1976), at 34-7.
- 31.
Vaté and Dror (October 2002), at 127.
- 32.
Davis and Sherman (2010), at 189.
- 33.
- 34.
Chen (2010).
- 35.
In the same case, the plaintiff, Shanjiang Hangtian Real property Development Ltd, received a 120 million RMB as compensation. See Yao (2010).
- 36.
Vaté and Dror (October 2002), at 125.
- 37.
Tromans and Turrall-Clarke (2008), at 655.
- 38.
Tromans and Turrall-Clarke (2008), at 655.
- 39.
Lockett (1996), at 79.
- 40.
Davis and Sherman (2010), at 188-89.
- 41.
This Act of 1976 is codified as part of Solid Waste Disposal Act, 42 USC §§6901-6992 k.
- 42.
Davis and Sherman (2010), at 189.
- 43.
- 44.
Monti (2003), at 29.
- 45.
Davis and Sherman (2010), at 198.
- 46.
- 47.
Davis and Sherman (2010), at 30.
- 48.
- 49.
Hannah (2000).
- 50.
Hester and Harrison (2001), at 147.
- 51.
Tromans and Turrall-Clarke (2008), at 654.
- 52.
Davis and Sherman (2010), at 199.
- 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 (2000).
- 54.
Bressler (March 2002).
- 55.
Tromans and Turrall-Clarke (2008), at 655.
- 56.
Monti (2003).
- 57.
Lockett (1996).
- 58.
Lockett (1996), at 14.
- 59.
Davis and Sherman (2010), at 190.
- 60.
Davis and Sherman (2010), at 192.
- 61.
Davis and Sherman (2010), at 192.
- 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.
- 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 Martin and Rodrigo Garcia (2009).
- 65.
Dybdahl (2000).
- 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 (2008), at 656.
- 67.
Tromans and Turrall-Clarke (2008), at 656.
- 68.
Tromans and Turrall-Clarke (2008), at 656.
- 69.
Tromans and Turrall-Clarke (2008), at 657.
- 70.
Dybdahl (2000).
- 71.
For example, the developer of a project with expected remediation costs of US$1000,000 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 (2010), at 192.
- 72.
Tromans and Turrall-Clarke (2008), at 193.
- 73.
Tromans and Turrall-Clarke (2008), at 656.
- 74.
Tromans and Turrall-Clarke (2008), at 658.
- 75.
- 76.
Tromans and Turrall-Clarke (2008), at 659.
- 77.
Tromans and Turrall-Clarke (2008), at 569.
- 78.
Lockett (1996), at 127.
- 79.
Lockett (1996), at 127.
- 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.
Davis and Sherman (2010), at 214.
- 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 Berry and Dennison (2000), at 448; See also Stempel (2004), at 14-86.
- 83.
Occurrence is the time at which the leakage and damage are first discovered.
- 84.
More cases relate to this theory can see, for example, Lockett (1996), at 129.
- 85.
Lockett (1996), at 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.
Sutton (August 1999).
- 87.
The China Banking and Insurance Regulatory Commission (CBIRC) is a newly established cabinet agency in China. It replaced the former China Insurance Regulatory Commission (CIRC) and the former China Banking Regulatory Commission (CBRC) in March 2018. CBIRC is empowered by the State Council to supervise the business activities of banking and insurance institutions across the country.
- 88.
《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.
- 89.
《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.
- 90.
MEE (2008).
- 91.
MEE (2008).
- 92.
More information about Ping’An please refer to its website http://www.pingan.com/investor/en/index.jsp.
- 93.
More information about PICC Property and Casualty Company Ltd can be found at its website: http://www.piccnet.com.cn/index.shtml.
- 94.
More information about HuaTai can be found at its website: http://www.ehuatai.com/index.aspx.
- 95.
More information about CICC can be found at its website: http://eng.chinare.com.cn/AboutUs/CompanyOverview/.
- 96.
- 97.
《关于开展环境污染强制责任保险试点工作的指导意见》[The Guiding Opinions on Pilot Scheme for Compulsory Environmental Pollution Liability Insurance] (People’s Republic of China) former MEP & CIPC, Decree No 2013-10, January 21, 2013.
- 98.
《中共中央、国务院关于加快推进生态文明建设的意见》[Opinions of the CPC Central Committee and the State Council on Accelerating the Ecological Civilization Construction], CPC Central Committee and the State Council, April 25, 2015;《生态文明体制改革总体方案》[Integrated Reform Plan for Promoting Ecological Progress] (People’s Republic of China), State Council, September 21, 2015.
- 99.
《关于构建绿色金融体系的指导意见》[Guidelines for Establishing the Green Financial System] (People’s Republic of China), People's Bank of China et al, Decree No [2016] 228, August 31, 2016.
- 100.
Guidelines for Establishing the Green Financial System, Sect. 1-3.
- 101.
Guidelines for Establishing the Green Financial System, Sect. 5-22.
- 102.
《环境污染强制责任保险管理办法(草案)》[Administrative Rules for Compulsory Environmental Pollution Liability Insurance (Draft)], former MEP and CIRC, June 9, 2016. The Draft has been passed by MEE in May 2018.
- 103.
Administrative Rules for Compulsory Environmental Pollution Liability Insurance (Draft), Art. 6.
- 104.
Administrative Rules for Compulsory Environmental Pollution Liability Insurance (Draft), Art. 7.
- 105.
Administrative Rules for Compulsory Environmental Pollution Liability Insurance (Draft), Art. 19.
- 106.
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. See Liu and Chik (2012).
- 107.
- 108.
Feng et al. (2014a).
- 109.
Li (2018).
- 110.
- 111.
- 112.
See OECD (2009), at 192.
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Zhao, X. (2019). 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/10.1007/978-3-662-59557-2_8
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