Water Pollution Damage Clause

Purpose

AHB clause 7.10 (b) excludes damage caused by environmental impact arising from installations used to manufacture, process, store or convey water-hazardous substances (so-called WHG installations); this exclusion applies even within an otherwise granted basic environmental liability cover. The water pollution damage clause closes this gap by providing standalone cover for the strict, no-fault liability under section 89 WHG that attaches to operators for changes to water quality.

Effect and limits

Because section 89 WHG establishes pure strict liability independent of any fault on the operator’s part, cover is oriented around the operation of the installation itself rather than classic fault criteria. Water authorities frequently require proof of adequate financial security in the form of minimum insurance sums for certain categories of installation as a condition of the operating permit.

Negotiation and practice

Operators of tank farms, chemical plants or other facilities handling water-hazardous substances should check whether the agreed sum insured meets the financial security amounts required under state water law, and should clearly document the boundary with the general basic environmental liability cover, as the two covers complement each other in practice while addressing different risk sources.