Chemical world

Living near a factory or business that produces strong odours is increasing in likelihood, as the number of houses being built grows. Tony Lennon explains why litigation is not only likely but how claims could go uncovered

There are many factors that have shaped the development of the UK's towns and cities, such as landscape, rock type, water supply and transport links, but what about wind direction? If the idea that a prevailing breeze has influenced the growth of our urban centres seems fanciful, consider the fact that London's most affluent suburbs are to its south-west, while its heavier industries are to its north-east. Understandably, people do not like living downwind of heavier industries and the UK's prevailing south-westerly wind means the south-western quadrants of most cities tend to have the freshest air.

While industrial odour may not be quite the issue it was in the 19th century, when Victorian factories pumped out noxious fumes, many of our towns and cities developed during this period - so that particular 'fingerprint' of wind direction remains visible. After all, not many of us want to live downwind of a sewage farm or abattoir.

At one time the only people who lived close to odour-producing industries tended to be either poor or the factory's employees, but today a new problem is emerging. There are still a considerable number of industrial and agricultural activities in the UK that produce unsavoury smells and the UK's new house building boom is bringing the country's middle classes into contact with them. The unpleasant side effect for the insurance industry, therefore, is new issues and even litigation.

Compensation claims

In 2003, about 200 residents living around Biffa's Trecatti landfill in South Wales were reported to have received compensation of around £1.5m in an out of court settlement for odour complaints. In the same year, Waste Recycling Group's subsidiary 3C Waste paid compensation to more than 100 residents near its Natygwyddon landfill site in South Wales for alleged nuisance and health effects from odours. And the problem of odour is not just limited to the activities of obvious 'dirty' industries. Earlier this year, Spurway Foods was fined a total of £140 000 for failing to abate emissions of strong odours from its factory in West London after the London Borough of Ealing received complaints from residents and businesses.

Common sense suggests that if you choose to buy a house next to a pig farm, you would have a weak case if you decided to take action against the farm for the smell it produces. Yet, in reality, that is not the case. Part III of the Environmental Protection Act 1990 states that businesses conducting their activities should not do so in a way that interferes with others - even if they were there first. This is why the villages and populations mentioned above were successful in their legal actions.

With significant profits to be made from building and selling new homes in the UK and the government's promise of thousands of new properties in the South-east and other regions, clearly the likelihood of housing and smell-producing activities being brought into proximity is going to increase. And the consequence of this is a clear potential for increased litigation.

At the moment, most businesses believe they are protected against this sort of litigation under their public liability insurance. The argument goes that smell is a nuisance and, therefore, falls under this particular cover. In practice, however, there are major problems with this line of thinking.

Odour is nothing more than the human nose's response to the presence of chemicals. If we accept, therefore, that the smell coming from an industrial process means that chemicals are being released by it, what we are talking about is not actually nuisance but pollution. This then falls under the pollution, contamination and seepage restriction in a PL policy. The upshot is that, where a PL policy is concerned, insurers have a loophole that allows them not to pay a claim. They can avoid paying out, unless the smells can be proven to have resulted from a sudden, unintended event - some type of accident, being the obvious example.

The other key point here is that society is starting to rethink the way in which it views the issue of smell. As mentioned above, we once thought of odour as a nuisance but now we are beginning to think of it more as the olfactory signature of pollution. Chemicals have the potential to affect human beings, animals and bring down property prices - or even render a house unsellable.

Environmental liability

This would seem to indicate that the issue of bad odour and its alleged adverse health effects is best covered by an environmental liability policy rather than a PL one. The problem for UK businesses is that relatively few of them have this type of cover. Many organisations have been lulled into a false sense of security by the knowledge that they have PL cover, when smell is increasingly becoming an environmental issue.

As the UK becomes ever more developed and areas like the South-east look to utilise every spare scrap of land - even those areas once thought to be undesirable - the problem of homes being brought into proximity of smell-producing activities is only going to increase. This means any business or facility that produces unpleasant odours as a by-product of its activity should be reviewing its cover now. The traditional reliance on PL cover may indeed be breaking down leaving businesses exposed to potential litigation. The wind of change is blowing - and it is getting stronger.

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