An avid follower of all insurtech startups and a critical thinker, he has also contributed several papers in organization wide technical paper contests.
- Bank Reconciliation - November 29, 2022
- London Bridge Risk:A Protected Cell Company - January 2, 2022
- Side Pockets in (Re) Insurance investments - July 20, 2021
What is it:
It is an international arbitration proceeding related to air pollution between the US and Canada that started in 1925 and was decided upon in 1941. In this case of trans-border arbitration, the US Federal Government approached the International Court of Justice (ICJ) over the air pollution coming in from a small industrial town of Trail (known as Trail BC) in British Columbia province of Canada. The air with polluted particles, especially of Zinc, Sulphur and Lead were damaging the plants and farm fields of Washington in the United States.
The farmers first approached Cominco, the Canadian mining and smelting company that operated the plant and employed thousands of workers since 1906, for compensation. The Canadian holding company did grant some compensation, but the details of the working structure were shrouded in secrecy. Later, the farmers’ body approached the US Federal Government asking for a solution since the air pollution severely damaged their crops and forests in Washington state resulting in unfavorable farming conditions across Northern Washington.
The United States sued Canada for this violation and the prime question raised was “Does a state, at all times, owe a duty to protect other states against injurious acts by individuals or entities from within its jurisdiction” with the US claiming Canada owed this responsibility so as not to pollute Washington. And the answer was ‘Yes’. Canada was held responsible and was asked to pay damages as well as having a temporary injunction.
Which industry is it relevant to:
All mining operations, manufacturing industries or plants that deal with hazardous elements are responsible to adhere to international law precedent set by the Trail Smelter case and own the disposal of such elements so as not to harm the individuals or society at large. This brings forth the question of whether there is any related case law where the apex courts have decided upon the polluter within the national boundary in India. A distinct case law, that was presented to the apex court in India in 1986, soon after the Bhopal Gas Tragedy of 1984, was that from a lawyer MC Mehta in a PIL against the Union of India. This was related to another gas leak (Oleum gas) in Delhi at Shri Ram Food and Fertilizer complex. There was no compensation mechanism to compensate the affected people in India at that time and this case law was structural in ensuring that a compensation mechanism had to be devised in India.
Relevance to Insurance:
Traditionally P&C General Liability policies have excluded the pollution liability. There are clauses of ‘Act of God’ or ‘Stranger action’ that also allow the exclusion of such liability by insurers. However several states have enacted laws that require Contractors working on a project to buy environmental pollution liability coverage. NJ and California are prime trendsetters in this space. All contractors including those handling non-environmental operations (e.g. HVAC installation contractors) still would buy environmental pollution liability to get indemnified of the defense costs even when they are not liable to pay damages. There are clean-up costs too that could be awarded post the damage compensation the contractors become liable for based on the principle of ‘Polluter Pays’ which was included in the UN Rio declarations on the environment in 1992. The US also has a ‘Superfund’ act requirements for all consequential damages to be borne by the polluter.
Current pricing models seem to be oriented towards industry segments such as Oil companies, Airports, Amusement Parks, Manufacturing facilities, Dry Cleaners, etc. that buy coverages like environmental pollution legal liability, clean-up costs, transporters of hazardous goods, storage tank liability but pricing sophistication is still in development stages more-so because of lack of jurisdictional case law for compensatory and punitive damages. As the law develops, and legislations are improved upon, there is going to be more of a need to adhere to the regulations.
Opinion-
There has been immense talk about environmental pollution both internationally (school girl Greta Thurnburg recently raising international concern) and within India (air pollution levels across country at severe toxicity levels). Action though seems to have been scarce and not seen to be enough. Since in many cases there is no immediate adverse impact observed easily before long and sustained exposure to environmental pollution, there is an even greater need to control it before the catastrophic proportions of damage become visible. Whatever steps that could be undertaken by governments, should be taken without delays since the impact of those remedial steps will also take longer to be realized.
