NZ Environment Court Prosecutions Increasing - Expert

Kiwi businesses are at increasing risk of prosecution in the New Zealand Environment Court for breaches of the RMA, an industry expert is warning.

Prosecutions of companies for environmental contamination have increased from 39 to 101 per year on average over the last 20 years, according to a Ministry for the Environment report.

The cost to local companies has also risen sharply, with the average total fine going up from $6,500 to $21,600 in the same time period for breaches, with the highest recent fine totalling  over $300,000.

However, many Kiwi companies are at risk of facing prosecution over incidents regardless of intention, and lack the funds to cover clean-up costs, says Delta Insurance General Manager Craig Kirk.

“Most clients think pollution incidents will be fully covered under existing liability policies but that is not the case, and the likelihood of being liable for costs is very high.” says Kirk.

“Currently it is not necessary for the Environment Court to prove an incident was intentional. Over 80% of companies plead guilty and over 90% are convicted.”

Accidental spills and leaks make up the majority (65%) of hazardous substance issues in the most recent reports of 2013/14.

Despite prosecutions for these rising, and serious consequences - including a potential two years’ imprisonment or maximum $300,000 fine for individuals, or maximum corporations fine of $600,000 - many business owners are operating with a false sense of security, says Kirk.

New Zealand companies are typically not covered by standard policies for resulting civil claims, crisis response, or the cost of the actual clean-up.

Nor are they likely to be insured against damage to their own property and the clean-up costs associated, which could equal a huge loss of value.

“Not only can this spell financial disaster for the business, but the taxpayer is often having to foot the bill on clean-up as the sites need to be fixed, and the government or local councils have to take responsibility for that,” says Kirk.

He cites two recent examples: a diesel leak on Mt Ruapehu last year which was estimated to cost the local council $630,000 to clean up; and reports that the Prohibition and Alexander goldmine sites on the West Coast will be cleaned up by government bodies at a cost of $3million.

“Unfortunately much of this is falling back onto the taxpayer, whereas insurance could be a better solution,” says Kirk.

There is also an estimated social cost of $4.3billion dollars due to the health impacts of air pollution, which means it’s not an issue companies can continue to ignore, says Kirk.

The company’s new Environmental Impairment Liability insurance (EIL) has already been sought out by several businesses who are conscious of the gaps in their current insurance packages.

A legal requirement for EIL is being established in some overseas countries, including Indonesia, USA and some parts of Europe, for high-risk industries and activities.

Kirk says companies undertaking insurance to help protect the environment may also provide a partial solution to the social issue of increasing pollution incidents.

“While the pollution events won’t stop happening, if there is more incentive for entities to clean up after themselves that has a benefit for the wider community.”