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Insurance Broker - IFA – Broker Briefing


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									                          IFA – Broker Briefing
                      The Environmental Protection Act 1990 (''the Act'').
About Us

We provide accurate, high-quality data and interpretation reports to owners/occupiers of residential and
commercial property and the professions involved in all property transactions. Our reports are tailored to
provide / consider:

        The past historic use of the site.
        A view of the level of any contamination with standard/non-standard risk ratings.
        A consideration of the legal & financial liability issues that may arise.
        The sensitivity of neighbours’ issues.
        Insurability: could the site be insured within a portfolio or on a stand-alone basis?

Our reports also contain up to date duty of care information and client discharge statements prepared by
leading Counsel. This part of our reporting is designed to assist the advising professionals in the completion
of their duty of care by communicating to their clients the problems that may abound from the Act.

Background to the Act
    In the second report of the House of Commons Select Committee on the Environment, the Committee
        “…urgent attention [must] be given to the question of creating statutory liability for damage caused
        by contamination to land - particularly where this causes damage to neighbouring property or the
        environment. We recognise that this will raise complex questions as to retrospection, insurance
        cover … but we believe that the present lack of clarity in relation to civil liability hampers the
        development of appropriate policies on the issue of contaminated land.”

The ultimate response of the Government was to bring into force on 1st April 2000 Part IIA of the Act.
Contamination & Strict Liability threat
        Reduces the commercial value of land and the property on it.
        Makes it more difficult to raise finance
        Prolongs sale and purchase transactions
        Exposes property owners to avoidable liability.

Property Transactions
Contamination can seriously erode the value of a property. Uncertainty about contaminated land liabilities is
now greater because of remediation responsibilities under Part IIA of the Act. This increases the risks to
property owning companies, organisations, trustees and individuals as well as the professionals acting for
them in the transaction.

Every time land is transacted, there is a risk that the buyer might unwittingly be acquiring unquantifiable
environmental liabilities and associated costs. The risk to every buyer therefore is that its newly acquired
site brings with it environmental liabilities that reduce the value and potential use of the site; indeed, in the
worst cases, there is a risk that because of contamination, the value of the site might be negative.

        All professionals advising on matters involving the purchase, disposal or holding of property, have a
        positive duty of care to their clients to identify potential contamination risks. In addition, opportunities
        to transfer or avoid this risk should be identified.
        All professional bodies give guidance to their members on how they should deal with these issues.
        A failure to accommodate this guidance is likely to be the starting point of litigation should there be
        problems with a site later.

Where does it start, whose problem is it?
In the past, land quality was improved because of the town and country planning process. However, when
the 1995 Environment Act inserted Part IIA into the Environmental Protection Act 1990, this marked the
beginning of a new era of land quality regulation and improvement. Part IIA was intended to work alongside
planning and other regulatory controls such as waste licensing laws.

Part IIA places a statutory duty on Local Authorities to inspect all of the land in their areas in the search for
problem sites that come within the statutory definition of “contaminated land” under Part IIA.
Where such land is identified, the local authority has a duty to serve a “remediation notice” on the
“appropriate person(s)” specifying what is to be done by way of remediation (clean up). The appropriate
person may be:

        Class A - the person or any of the persons who caused or knowingly permitted substances to be in,
        on or under the land; or
        Class B -if no such person has been found after reasonable enquiry, the owner or occupier for the
        time being of the contaminated land.

Independent financial advisers & Insurance Brokers
There are plainly a variety of insurance products with which insurance and financial advisers may be
concerned in connection with (in particular) land acquisition - holding transactions:

    1. Life insurance cover
    2. Mortgage indemnity guarantees
    3. Buildings and contents insurance
From 14th January 2005 the sale, administering and advising upon general insurance products will be
regulated by the Financial Services Authority. This regime will include non-investment insurance products
and will require compliance with the proposed Insurance Conduct of Business Source Book (ICOB). In
advising on a client's requirements, the draft rules which are likely to become made text in due course
require inter alia that the insurance intermediary 'must:

    1. Ask the customer what his requirements are and collect all relevant information; and

    2. Ask the customer about relevant existing insurance.

'' Draft rule 4.3.6 states: '' in assessing whether a non-investment insurance contract is suitable to meet a
customer's demands and needs, an insurance intermediary must take into account at least the following

            a. whether the level of cover is sufficient for the risk the customer wishes to insure; and

            b. the relevance of any exclusions, excesses, limitations or conditions in the contract.''

In the future, these rules will oblige advisers to consider the issue of environmental protection when
addressing a client's general property insurance requirements. Breaches of business conduct rules give rise
to a statutory liability able to be enforced by private investors under s150 of the Financial Services and
Markets Act 2000 which came into force on 1st December 2001.
In the context of environmental liability it would form part and parcel of a proper fulfilment of the above rules
and requirements that an independent financial adviser and/or the insurance broker should give appropriate
consideration to the identification in individual cases of any need for environmental protection policies.

In discharging the duty of care owed to a client the Court will pay regard to the extent to which the financial
adviser had complied with and/or taken into account any relevant regulatory guidance.1 The position in this
regard is little different from relying upon departures from the Statements of Standard Accounting Practice as
indicating negligence on the part of accountants2 and/or departures by solicitors from ''The Guide to the
Professional Conduct of Solicitors'' as indicating negligence3 and/or pointing to breaches of the Statements
of Asset Valuation Practice and Guidance Notes in Surveyors’ negligence cases as (again) defining (in part)
the scope of the valuers duty of care.4

Particular attention should be paid to where advice is given for refinancing projects or prepared to support
clients borrowings, especially when property is to be taken as security. Under the Act, lenders can acquire
significant liabilities. Consequently they are increasingly looking to mitigate their exposure where possible.
This, in some cases, means declining business. Making appropriate environmental enquiries at outset will
avoid unnecessary time wastage and therefore profit leakage on refinancing projects or purchase / sale
deals. Enquiries should be made prior to the usual valuation report. With the availability of:

          Cost effective, high quality, up-to-date, comprehensive environmental data reports that will allow
          purchasers / funders to make rigorous and consistent pre-purchase enquiries into site history; and
          where necessary, risk based insurance solutions that will provide certainty and protect property
          owners in the future;

there is now no need for property owners and funders to have to carry the burden of unknown environmental

A unique resource
ENVIdata and its product partner Certa have experience in over 3500 transactions and environmental
projects involving land and operations exposed to legal and financial liability.

  See Loosemore v Financial Concepts [2001] Lloyds Law Rep PN 235
  see Lloyd Cheyham & Co.Ltd. v Littlejohn & Co 1986 PCC 389
  see Omega Trust Ltd. v Wright Son & Pepper No.2 [1996] PNLR 130 at 137A
  see P K Finnans International (UK) Ltd. v Andrew Downs & Co. Ltd 1992 1 EGLR 172
   Using ENVIdata has significant advantages for both residential and commercial clients. Our reports provide
   an executive summary, so the reader will not need a Chemistry degree to understand any concerns
   identified with the site!
       1. The executive summary delivers clear, unambiguous advice that will enable the reader to make a
            decision; to proceed or not with this purchase / sale on the terms agreed so far?
       2. If a problem is discovered, simply e-mail the report back to ENVIdata and we will begin to consider
            your options with you; thus avoiding an unnecessary delay in the buy / sell - refinance process.
       3. Environmental consultants operate our Client Helpline, so you can actually speak to the professional
            people within the team who in the first instance interpreted the raw data included in your report.

   Property transactions can be fraught with problems at the best of times. Applying a consistent approach to
   the acquisition and disposal protocol is the key to avoiding unnecessary liabilities for the purchaser and/or
   the vendor, and of course their respective professional advisers.

            The ENVIdata approach is structured to provide a quick and much needed assessment of the
            environmental risk involved with a site and to find an appropriate solution to a problem if one arises.
            As well as offering a range of easy to read reports, environmental audits and site investigations,
            ENVIdata also provides a variety of support services that we believe no single other company offers.

   Contact Us

David Thompson.                         0114 2632418           07831 216196     enquiries@envidata.com
Paul Singleton.
                                        0114 2729131
Stephen Sykes. MA ENV.Law (Certa)
                                        020 7903 6526                           stephen.sykes@certa.com

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