A theme which currently dominates environmental regulation in Canada is for a strengthening of the "polluter pays" approach to environmental regulation. This trend sees those who impair the environment held increasingly financially responsible for their actions through such mechanisms as a new generation of statutory liabilities which include liability for environmental response and cleanup charges, the requirement of security in the event of environmental contamination, and the creation of statutory civil causes of action designed to assist claimants in recovering for losses resulting from environmental contamination. These mechanisms are supplemented by an increasing willingness by the courts to give serious consideration to innovative new approaches by private claimants to hold polluters civilly accountable for toxic tort related claims. As a result, those in Canada with potential exposure to this new generation of environmental liabilities will inevitably turn to the insurance industry for coverage. Ironically, it is these same new liabilities which will make it increasingly difficult for insurers to provide the desired coverage. Further, in the event that such coverage is provided, insurers will be required to be especially diligent in evaluating and delineating those environmental risks which they are prepared to cover. Many industrial and commercial enterprises will require environmental impairment insurance in order to carry out operations subject to environmental risk. Insurers providing environmental insurance in this context will effectively find themselves cast into the somewhat unlikely role of environmental regulators within Canadian society. For more than fifty years the insurance industry in Canada has provided a wide range of insurance products for liability resulting from impairment of the natural environment. In developing and marketing environmental impairment insurance products the insurance industry has primarily relied upon the risk-based analysis which it has historically utilized to provide coverage for more traditional insurance products such as fire, automobile, and marine insurance. However, it is submitted that the attempts by the industry to provide environmental impairment insurance has been fraught with problems, and the success of the products which have been provided has been limited. This in turn raises serious questions as to the ability of the insurance industry to assume responsibility for the regulation of environmental impairment in the future. It is the primary hypothesis of this thesis that the insurance industry has experienced significant difficulties in providing environmental impairment liability insurance in Canada, and that these difficulties are due in large part to the inability of the industry to accurately predict the incidence of loss associated with environmental impairment in Canada. Further, the difficulties with prediction experienced by the insurance industry are primarily the result of its failure to take into account perceptions of environmental risk by the Canadian public and by environmental decision-makers. Finally, this inability to accurately predict has been accompanied by the failure of the insurance industry to recognize the problem, resulting in overconfidence by the industry with respect to its environmental impairment liability products.

A theme which currently dominates environmental regulation in Canada is for a strengthening of the "polluter pays" approach to environmental regulation. This trend sees those who impair the environment held increasingly financially responsible for their actions through such mechanisms as a new generation of statutory liabilities which include liability for environmental response and cleanup charges, the requirement of security in the event of environmental contamination, and the creation of statutory civil causes of action designed to assist claimants in recovering for losses resulting from environmental contamination. These mechanisms are supplemented by an increasing willingness by the courts to give serious consideration to innovative new approaches by private claimants to hold polluters civilly accountable for toxic tort related claims. As a result, those in Canada with potential exposure to this new generation of environmental liabilities will inevitably turn to the insurance industry for coverage. Ironically, it is these same new liabilities which will make it increasingly difficult for insurers to provide the desired coverage. Further, in the event that such coverage is provided, insurers will be required to be especially diligent in evaluating and delineating those environmental risks which they are prepared to cover. Many industrial and commercial enterprises will require environmental impairment insurance in order to carry out operations subject to environmental risk. Insurers providing environmental insurance in this context will effectively find themselves cast into the somewhat unlikely role of environmental regulators within Canadian society. For more than fifty years the insurance industry in Canada has provided a wide range of insurance products for liability resulting from impairment of the natural environment. In developing and marketing environmental impairment insurance products the insurance industry has primarily relied upon the risk-based analysis which it has historically utilized to provide coverage for more traditional insurance products such as fire, automobile, and marine insurance. However, it is submitted that the attempts by the industry to provide environmental impairment insurance has been fraught with problems, and the success of the products which have been provided has been limited. This in turn raises serious questions as to the ability of the insurance industry to assume responsibility for the regulation of environmental impairment in the future. It is the primary hypothesis of this thesis that the insurance industry has experienced significant difficulties in providing environmental impairment liability insurance in Canada, and that these difficulties are due in large part to the inability of the industry to accurately predict the incidence of loss associated with environmental impairment in Canada. Further, the difficulties with prediction experienced by the insurance industry are primarily the result of its failure to take into account perceptions of environmental risk by the Canadian public and by environmental decision-makers. Finally, this inability to accurately predict has been accompanied by the failure of the insurance industry to recognize the problem, resulting in overconfidence by the industry with respect to its environmental impairment liability products. / Law, Peter A. Allard School of / Graduate