Enterprise risk rises as Queensland widens environmental
When Peter Bond, the former chief executive of Linc Energy, was issued with an Environmental Protection Order (EPO) in May 2016, it signalled the impact Queensland’s legislative changes can have long after an event has taken place and an individual has moved on.
Linc Energy itself was already in voluntary administration by May and Mr Bond had resigned from the company in late 2015. The EPO referred to a problem stemming back to 2014.
The case serves as an important wake up call to all organisations – but particularly manufacturers, miners, utilities and property developers. It reinforces the need for enterprises to properly assess environmental risk over a lengthy period of time, mitigate that risk and secure appropriate insurance coverage in order to safely transfer the risk.
As a result of the legislative changes, Queensland’s Department of Environment, Heritage and Protection is now able to issue an EPO and pursue "any related person(s)" of a company that has conducted or is conducting an activity in question. Under the chain-of-responsibilities provisions of the legislation these people or companies can be held liable for an organisation's clean up responsibilities for years down the track.
The legislation allows for ‘related persons’ to be held liable for a company’s pollution clean-up responsibilities if deemed to have a ‘relevant connection’ with the company.
That relevant connection extends to people who could or have significantly benefitted financially from the activities leading to the issue; to those who have been in a position over the previous two years that would have allowed them to influence how the company complies with EPA regulations; to a holding company of the parent; or, to the landowner involved.
There are some carve-outs so that, for example, “mum and dad” shareholders who might incidentally have benefitted from an environmentally damaging action, don’t get caught up – but the net of who can be held liable is now considerably wider than ever before.
In short, C-suite executives, enterprise directors and officers, and major shareholders of organisations with land, property or assets that could be environmentally hazardous or potentially hazardous could one day be served with an EPO as a result of these changes.
The challenge for organisations and individuals is to assess, mitigate and then transfer the risk associated with environmental actions that may arise years after an event took place.
An independent assessment is an important first step to assess any coverage gaps or environmental exposures that inject risk into an enterprise.
Aon’s Environmental Services Group (ESG) is a specialty group within Aon that is focussed on providing advice around environmental exposures and the placement of insurance in relation to pollution and contamination risks.
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