Companies face widening exposure to liability for environmental losses

A London-based business law firm has warned UK companies of their increasing exposure to liability for environmental losses.

The warnings came at a seminar highlighting the changing landscape for environmental liability and environmental insurance, held by LG.

Chairman David Breslin, an insurance and reinsurance partner at LG, said: "The European Environmental Liability Directive, coupled with gaps under existing public liability insurance policies, means that UK companies are becoming increasingly exposed to liability for environmental losses in the UK and Europe."

“The European Environmental Liability Directive, coupled with gaps under existing public liability insurance policies, means that UK companies are becoming increasingly exposed to liability for environmental losses in the UK and Europe.

Chairman David Breslin, an insurance and reinsurance partner at LG

Colin Peck, partner in LG’s Insurance & Reinsurance Group, explained: "The cases of Yorkshire Water v Sun Alliance & London Insurance, and more recently Bartoline v Royal & Sun Alliance, highlight a concern that many companies are leaving themselves badly exposed to environmental liability by failing to appreciate what risks their public liability policies do, and do not, cover.

"This coverage may be limited to a very narrow form of cover for environmental liability arising only from 'sudden, unintended and unexpected' losses – and even then, limited to claims from third parties for damages as a result of a claim brought in tort. There are real concerns as to the recoverability under a PL policy for the cost of preventative action taken by the insured; the insured's own remedial costs; and the insured's liability for statutory clean-up costs."

He added: "Companies need, with the help of their brokers, to be testing their PL policies against different factual scenarios to see if, and how, they will respond. And directors and risk managers need to be aware of, and seriously consider, whether any of the alternatives are more appropriate for their particular organisation".