Mandatory Environmental Insurance Coverage Act

........' TWENTIETH CONGRESS OF THE JUL 10 P6:35 REPUBLIC OF THE PHILIPPINES First Regular Session SENATE S. B. No. 455 Introduced by Senator Rodante D. Marcoleta AN ACT ESTABLISHING A NATIONAL FRAMEWORK FOR THE MAnDATORY ENVIRONMENTAL INSURANCE COVERAGE OF ENVIRONMENTALLY CRITICAL PROJECTS EXPLANATORY NOTE Article II, Section 16 of the 1987 Constitution requires the State to protect and advance the right of the people to a balanced and healthful ecology in accord with the rhythm and harmony of nature. This principle has been mirrored in a number of environmental laws including Republic Act No. 8749 or the Philippine Clean Air Act of 1999 and Republic Act No. 9512 or the Environmental Awareness and Education Act of 2008. It has also been enshrined in landmark cases such as in Oposa v. Factorant, LLDA v. Court of Appeals, and MMDA v. Concerned Residents of Manila Bay. The Court in the case of Oposa v. Factorart even emphasized the primordial nature of this principle as follows: "While the right to a balanced and healthful ecology is to be found under the Declaration of Principles and State Policies and not under the Bill of Rights, it does not follow that it is less important than any of the civil and political rights enumerated in the latter. Such a right belongs to a different category of rights altogether for it concerns nothing less than self- preservation and self-perpetuation-aptly and fittingly stressed by the petitioners-the advancement of which may even be said to predate all * G.R. No. 101083, July 30, 1993 [Per J. Davide, Jr., En Banc]. = G.R. No. 110120, March 16, 1994 [Per J. Romero, Third Division]. 3 G.R. No. 171947-48, December 18, 2008 [Per J. Velasco, Jr., En Banc). * G.R. No. 101083, July 30, 1993 [Per J. Davide, Jr., En Banc).

governments and constitutions. As a matter of fact, these basic rights need not even be written in the Constitution for they are assumed to exist from the inception of humankind." However, despite existing laws and jurisprudence, there are still lapses in implementing our lawful right to a healthy and balanced ecology. Philippine history is replete with cases of severe ecological disasters caused by man-made incidents, including the following: • The 1996 Marcopper mining tragedy in Marinduque which destroyed hectares of farmlands, displaced local families, caused severe illnesses to residents, and led to the biological death of the Boac and Mogpog rivers; • The 2005 massive fish kill in Rapu-Rapu, Albay, caused by cyanide spill from the mining operations of Lafayette, Philippines, Inc., which severely impacted the local community's livelihood; and • The 2012 Padcal mine spill in Benguet which led to over 20 million tons of mine tailings being discharged to local waters. Regrettably, even with these environmental disasters, there is still no policy to ensure sufficient financial coverage for communities affected by man-made ecological disasters. This bill seeks to require mandatory environmental insurance coverage for owners and operators of environmentally-critical projects whose activities destroy or pose risks to the environment, the ecosystems and their constituent elements. The said insurance will be used to guarantee sufficient funding coverage for the needed restoration and compensation for damages caused by their operations. In view of the foregoing, the approval of this bill is highly and earnestly recommended. RODANTE D. MARCOLETA

TWENTIETH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES 23 JUL 10 ?6:35 First Regular Session SENATE S. B. No. Introduced by Senator Rodante D. Marcoleta AN ACT ESTABLISHING A NATIONAL FRAMEWORK FOR THE MANDATORY ENVIRONMENTAL INSURANCE COVERAGE OF ENVIRONMENTALLY CRITICAL PROJECTS Be it enacted by the Senate and the House of Representatives of the Philippines in Congress assembled:

Section 1. Short Title. - This Act shall be known as the "Mandatory

Environmental Insurance Coverage Act".

Sec. 2. Declaration of Policy. - Consistent with the State policy to protect and

4 advance the right of the people to a balanced and healthful ecology in accord with the 5 rhythm and harmony of nature, the State shall promote environmental conservation 6 and its sustainable development at all times, and shall implement, under a system of 7 compensation and compliance mechanisms, proper, effective and immediate environmental rehabilitation, remediation, and protection against pollution and degradation arising from violations of environmental laws and regulations.

Sec. 3. Definition of Terms. - As used in this Act:

a. Environmentally Critical Project - refers to a project that has high potential for significant negative environmental impact and is listed as such under Presidential Proclamation (Proclamation) No. 2146, series of 1981, and Proclamation No. 803, series of 1996, as well as other projects which the President may proclaim as environmentally critical in accordance with Section 4 of Presidential Decree (PD) No. 1586 or the Philippine Environmental Impact Statement System;

b. Heavy Industries - refer to non-ferrous metal industries, iron and steel mills, petroleum, and petrochemical industries, including oil and gas smelting plants; c. Infrastructure Projects - refer to major dams, major power plants, major reclamation projects, and major roads and bridges; and, d. Resource Extractive Industries - refer to major mining and quarrying projects; forestry projects involving logging, major wood processing projects, introduction of fauna or exotic animals in public or private forests, forest occupancy, extraction of mangrove products, and grazing; and fishery projects, specifically fishpond development projects and dikes for such projects.

Sec. 4. Establishment of a National Framework for Mandatory Environmental

11 Insurance Coverage. - Within one (1) year following the effectivity of this Act, a national framework for Mandatory Environmental Insurance Coverage (MEIC) shall be established. The framework shall consider the following: a. Coverage. All owners and operators of environmentally critical projects (ECPs) shall be required to secure MEIC for ECs as prescribed under this Section to compensate for the adverse environmental consequences which include damage to health and property, and costs for environmental rehabilitation, remediation, cleanup, and other environmental impairments arising from their operations. For purposes of this Act, ECs shall include heavy industries, major manufacturing industries, major resource-extractive industries,. major infrastructure projects, and other similar projects that could pose serious risks to people and the environment. b. Forms of MEIC. - The MEIC shall be in the form of: 1. Environmental guarantee cash fund established pursuant to existing environmental laws; or 2. Environmental Insurance Policy (EIP) obtained from bonding or insurance companies, whenever the environmental guarantee cash fund is insufficient to cover the said adverse environmental consequences, upon determination and recommendation of the Inter-Agency Technical Committee created pursuant to Section 6 of this Act. The EIP may take the form of the following:

i. Environment Performance Bond (EPB) - which shall be required for all ongoing activities or projects issued with Environmental Compliance Certificate (ECC) pursuant to PD 1586, to guarantee adequate and timely compliance with the environmental standards and the terms and conditions set forth by the Department of Environment and Natural Resources (DENR) during the pre- development, development, and construction phases of the project. The EPB shall answer for all environmental damages, penalties, and legal obligations, which may arise from the failure of the project proponent to comply with its undertakings during the aforementioned phases; and, ii. Environment Pollution, Impairment, and Cleanup Liability Insurance (EPICLI) - which shall be required for all existing and future activities or projects issued with ECC pursuant to PD 1586, to cover the operational phases. The EPICLI shall answer for all claims arising from damages to the environment; bodily injury and property damage arising from a pollution event; and for the cost of environmental rehabilitation, cleanup, or remediation to address the contamination or impairment of the environment.

Sec. 5. Prerequisite to the Construction or Operational Phase. - Owners and

operators of ECs shall not be allowed to commence construction or commercial operation without initially obtaining the MEIC required under Section 4 of this Act.

Sec. 6. Creation of an Inter-Agency Technical Committee. - Within one (1) year

following the effectivity of this Act, the Secretary of the DENR shall establish and chair an Inter-Agency Technical Committee (IATC), with the Commissioner of the Insurance Commission and representatives of the insurance industry, the mining industry, and other stakeholders that the DENR may deem fit as members. Within the same period, the IATC shall: a. Identify the perils or possible negative environmental impacts, activities, processes or undertakings that need to be mandatorily insured as provided in

Section 4 hereof;

b. Conduct risk assessment to determine the appropriate insurance coverage for different ECs and activities;

c. Formulate guidelines for the identification of primary impact areas and prescription of rehabilitation or remediation measures in cases of environmental damages; d. Formulate cleanup guidelines; e. Formulate guidelines for the identification of beneficiaries of the MEIC; f. Ensure that the premium rates of the EIP are commensurate to the risks covered; g. Formulate guidelines for the determination of veracity of claims; h. Formulate guidelines for the establishment of insurance facilities; and, i. Undertake such activities as may be necessary to fulfill the objectives of this Act. For purposes of paragraph (h) of this Section, the Insurance Commission, in coordination with the DENR, shall formulate guidelines for the establishment of insurance facilities, within one (1) year following the effectivity of this Act.

Sec. 7. Beneficiaries. - The beneficiaries of the MEIC include affected

communities, stakeholders, and local government units within the projects' primary impact areas. Also included as beneficiaries are government departments, bureaus, and agencies which are tasked under the law to undertake the rehabilitation, cleanup, and monitoring of the sites affected by the pollution or insurable event, for which no responsible private or public entity is specified. The beneficiaries shall be represented by the government, particularly the DENR. The IATC shall identify the affected areas and prescribe the rehabilitation or remediation measures pursuant to Sec. 6 of this Act.

Sec. 8. Payment of Claims. - The insurance company shall place all payments

of claims into special escrow accounts in government depository banks, which shall in turn disburse the corresponding payment to beneficiaries, upon advice of the DENR and with proper documentation. The DENR may create an ad-hoc body composed of representatives from business, labor, government, civil society, and other stakeholders to assure that claims are verified and rightful parties are compensated and the environment is properly rehabilitated, cleaned up, remediated, stabilized, and protected.

The DENR shall not receive and handle payment of claims for environmental 2 damages, penalties, and charges, except for the claims component which properly accrues to it as an insurance beneficiary. The government agency tasked with rehabilitation and assigned as the beneficiary 5 of the MEIC as provided under Section 7 of this Act, shall undertake the same utilizing funds coming from the insurance claim upon approval of the DENR.

Sec. 9. Penalties. - The failure of the owner and operator of an ECP to secure

a MEIC as prescribed under Section 4 hereof, or of the insurance company to pay a 9 verified claim in violation of the provisions of this Act within a reasonable time, shall 10 be punished with a fine of Five hundred thousand pesos (Php 500,000.00) but not more than Two million pesos (Php 2,000,000.00) or imprisonment of not less than six 1.2 (6) years but not more than twelve (12) years, or both, at the discretion of the court. In the case of a partnership, association, corporation, or any juridical entity, the fine shall be imposed upon the president, treasurer, or any other officer or person responsible for the violation. If the offender is a foreigner, the offender shall, after the service of sentence, be deported immediately without further proceedings by the Bureau of Immigration. Government officials, employees and agents who approve the operation of ECS without the necessary MEIC, in violation of the provisions of this Act, shall suffer the penalty of suspension of not less than thirty (30) days, but not more than six (6) months after due notice and hearing in the appropriate administrative proceedings.

Sec. 10. Implementing Rules and Regulations. — Within sixty (60) days from

the approval of this Act, the DENR shall, in coordination with the Insurance Commission, promulgate the rules and regulations for the effective implementation of this Act.

Sec. 11. Separability Clause. - If any provision or part of this Act is declared

invalid or unconstitutional, the remainder thereof not otherwise affected shall remain in full force and effect.

Sec. 12. Repealing Clause. - All laws, presidential decrees, executive orders,

letters of instructions, proclamations or administrative regulations that are inconsistent with the provisions of this Act are hereby repealed, amended, or modified accordingly.

Sec. 13. Effectivitv. - This Act shall take effect fifteen (15) days following its

pubiication in the Official Gazette or in a newspaper of general circulation. Approved,