Imagine that you are environmental, health and safety (EHS) counsel or general counsel for a company dealing with a natural disaster. The company's facilities are only partially functional, employees have lost their homes, and business unit functionality has been severely disrupted. You find yourself managing the myriad demands of the federal, state and local environmental agencies, the company's employees and the public. Amidst all this, the media reports that a criminal investigation is forthcoming due to the company's alleged failure to adequately prepare for the event. What could you have done to better prepare for disaster?

This is not just a hypothetical. Each year, businesses in every sector are impacted by any number of floods, tornadoes, forest fires, hurricanes, earthquakes and other geologic phenomena—frequently resulting in significant civil and criminal litigation. According to the Pennsylvania Emergency Management Agency, flooding is the most frequent and damaging natural disaster impacting the commonwealth. Many of Pennsylvania's communities are located adjacent to waterbodies. This vulnerable placement is due, in part, to the commonwealth's historic reliance on waterways for commerce and as an energy source for industry. Many low-lying areas were also developed prior to the identification of floodplains. As a result, business and industry, private property, and infrastructure such as public utilities, bridges and railways are all at risk of sustaining flood-related damage and loss.

The Atlantic hurricane season officially started on June 1 and runs until Nov. 30, making now an opportune time to consider strategies to address environmental liability exposure caused by natural disasters and extreme weather events. It is a perfect time to consider your company's or clients' emergency preparedness strategies, on-site and off-site environmental risks, and pollution insurance coverage.

Aren't Natural Disasters Rare?

Being affected by a natural disaster is not as improbable as you might think, especially for companies with facilities in multiple geographic locations. Continuing with the hurricane example, terms like “100-year floodplain” or “500-year storm” are often used when quantifying flood risks, but are frequently misinterpreted as events that only happen once every 100 or 500 years. The actual definitions of these phrases, based on statistics developed through the Federal Emergency Management Agency's (FEMA) National Flood Insurance Program, might surprise you. Setting aside concerns about the accuracy of the historical data on which the statistics rely, FEMA defines the “100-year floodplain” as an area of land that has a 1% chance of being inundated by flood waters from a bayou, stream or creek in any given year. Similarly, a “100-year storm” is a rainfall event that has the same 1% chance of occurring. Statistically, there is a 26% chance that a “100-year rainfall” will occur during any given 30-year period. Practically, properties face a relatively high (roughly 1-in-4) chance of experiencing a flood at some point during a standard mortgage term.