Pollution liability risk to SA companies and directors on the rise

Pollution liability is can cost your client millions if not imprisonment.

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Pollution liability

Pollution liability is becoming an increasingly intricate issue for businesses in South Africa, as the relevant directors and employees face an increased risk of criminal charges and accountability for damage to the environment.

If found guilty, a company or person can be fined up to R5 million or face imprisonment for up to five years.

Legal advisor at Risk Benefit Solutions (RBS), Johannes du Plessis, says should a business cause pollution, either as a result of its daily activities or due to an accidental spill, the business, the relevant directors and employees may be held responsible for more than just the clean-up costs. “Pollution liability not only applies to the cost of repairing the damages to the environment. It can also be argued in court that the businesses and business owners are liable for the psychological impact of their activities.” For instance, if damage is caused to a site with cultural or spiritual significance to the community.

“In the case of a second or subsequent conviction, the business can be fined up to R10 million or the owner can face imprisonment of up to 10 years.”

He explains that in the case of a second or subsequent conviction, the business can be fined up to R10 million or the owner can face imprisonment of up to 10 years. In a civil lawsuit the business may have to pay significant amounts in compensation to the local community, which includes the expenses charged against the business for reinstating the environment. This could lead to bankruptcy, says Du Plessis.

“Furthermore, individuals or businesses can still be held liable if the effects of their pollution is discovered years after the actual pollution took place, which means that even long after a business has closed its doors, it is possible that the relevant directors and employees could still be held responsible for repairing the damage.”

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Head of Litigation Risk at RBS, Gillian Wolman, says businesses and their relevant directors and employees need a policy to provide cover for the business and third party claims. “Many people incorrectly assume if they have general liability and property insurance, they are also covered for pollution liability. However, these policies exclude liability for pollution or damage to the environment more often than not, specifically because of the fact that it is such a complex issue.”

She says businesses must ensure that gradual pollution is covered for instances where the damage is discovered after the fact. “A client should not just assume that his policy covers him for liability long after the event. Traditional public liability insurance policies usually exclude gradual pollution, and the cover offered under a gradual pollution liability policy may vary from insurer to insurer.”