News & Insights

Food production businesses face rising environmental risk

Published 17 January 2019

As food production businesses look to utilise new practices to create extra efficiency or to use improving technology within their business, they could also be unwittingly increasing their environmental risk exposure.

More businesses in the food production industry are utilising waste water treatment and biogas technology to improve costs and become ‘greener’ and more self-sustaining. However these technologies can raise risks, according to Stephen Elms, National Head – Food Production at Gallagher.

“While these technologies do have many benefits to businesses, they can also bring increased risks,” he says. For example, if a waste water pond leaches into the ground water and remains undetected for a long period of time, once it is discovered the clean-up costs can be significant, not to mention the potential fines or penalties that could be levied by the Environmental Protection Agency (EPA).

The EPA has the power to levy fines and penalties against any business that is found to have damaged the environment. While environmental insurance cover cannot be utilised when a business knowingly damages the environment, it is an important cover to maintain in the event that the business is unaware of any issue  until it’s too late.


Environmental liability policies protect companies if they have been found liable for a breach of environmental law. The production of food and the integrity of the product has never been more in the spotlight and, due to the increased activity of the EPA, the tightening of legislation and public scrutiny - particularly on social media – means that producers need to seriously consider environmental liability as one of their annually purchased suite of products.

Another issue that is becoming a topic of discussion with food production clients, particularly those in the regional areas, is potential loss of produce due to contaminated ground water due to the use of perfluorinated carboxylic acids (PFCAs) . 

PFCAs are typically found in firefighting equipment. The chemical foam or soluble liquid contained in these apparatuses has been used for decades by fire fighters to assist in reducing the spread of fires, however, these foams and liquids have been proved to be carcinogenic.

“These foams are typically used in the practice of back burning but can do lasting damage to soil, groundwater and waterways,” Elms says

“I was driving out in a regional area recently when I could see the remnants of the foam that had been used in a back-burning exercise but the startling fact to me was that this foam was clearly degrading slowly in the sunlight and it was located next to a large water channel that was used as an irrigation source for a fruit producer.”

“If these PFCAs leach into the groundwater and the water is used in the irrigation of food products, it’s not inconceivable that we could certainly being looking at contaminated products potentially being consumed by the general public. This scenario could be catastrophic for farmers and the food and beverage industry as a whole.”

While the Department of Environmental and Science has established an operational policy around the use of PFCAs, this does not factor in the historical use and consequences of this carcinogenic material. This is where clients must protect themselves first and ensure that they are mitigating all their exposures the best way possible. Having an environmental liability policy is a major step in being able to offset future costs in the event that any environmental issues arise, regardless of whether it’s the client's fault or a third party-driven issue.

Elms explains that clients can purchase two types of environmental insurance cover. Clients can opt to purchase first and third party or just third party environmental insurance. The policy covers circumstances such as

  • gradual pollution and any sudden and accidental pollution event
  • historical site specific pollution events and operational exposures
  • clean up costs associated to a pollution event.

First party covers provide for the client's own costs associated with the pollution event, such as clean-up costs and any fines and penalties levied by a governmental agency or body. Third party covers provide for the associated costs and losses by third parties with respect to either bodily injury or property damage.

Talk to our experienced food production insurance experts

Specialised industry knowledge means a food production insurance expert can identify the potential risks presented by the processes involved as well as the roll-on effects, such as the need for product recall, and collateral damage, to reputation, for example, and formulate a risk management and insurance cover program accordingly.


Our team of food production specialists calls on the Gallagher legacy of 75+ years in servicing food production enterprises, which means that whether you are a primary producer, in processing, transit or grocery wholesaling, we have deep understanding of the risks associated with each step of the supply chain and how to manage and mitigate them. 


Connect with an expert


Further reading

Food production insurance and risk management expertise

Insurance market update: food production challenges from farm to table

Gallagher provides insurance, risk management and benefits consulting services for clients in response to both known and unknown risk exposures. When providing analysis and recommendations regarding potential insurance coverage, potential claims and/or operational strategy in response to national emergencies (including health crises), we do so from an insurance and/or risk management perspective, and offer broad information about risk mitigation, loss control strategy and potential claim exposures. We have prepared this commentary and other news alerts for general information purposes only and the material is not intended to be, nor should it be interpreted as, legal or client-specific risk management advice. General insurance descriptions contained herein do not include complete insurance policy definitions, terms and/or conditions, and should not be relied on for coverage interpretation. The information may not include current governmental or insurance developments, is provided without knowledge of the individual recipient’s industry or specific business or coverage circumstances, and in no way reflects or promises to provide insurance coverage outcomes that only insurance carriers’ control.

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