Environmental liability

Category: Environmental liability · Reviewed by the Apex broking team · Last reviewed 2026-08-22 · ~6 min read

Three routes to liability

A business can be exposed to environmental cost by three distinct routes, and they behave differently. The first is civil liability to third parties — nuisance, negligence, trespass and the rule in Rylands v Fletcher — where a claimant sues for damage to their land, their health or their business. The second is regulatory and administrative liability, where a public authority requires prevention or remediation and can recover its costs. The third is permit and criminal liability, where operating outside an environmental permit or causing a pollution offence attracts enforcement action, prosecution and fines.

Standard liability insurance was designed around the first of those and responds unevenly to the second and third. That mismatch is the reason environmental liability is a separate topic from public liability at all.

The Environmental Damage Regulations 2015

The Environmental Damage (Prevention and Remediation) (England) Regulations 2015 (SI 2015 No. 810) replaced the 2009 regulations and continue to implement the environmental liability regime derived from Directive 2004/35/EC, with later amendments relating to offshore oil and gas. Equivalent regimes apply in Wales, Scotland and Northern Ireland.

The regulations apply to environmental damage — damage to protected species and natural habitats, to sites of special scientific interest, to water, and to land where contamination presents a significant risk of adverse effects on human health. Liability is placed on the operator of the activity that caused the damage, and is strict for a schedule of listed activities including permitted installations, waste management operations, discharges and abstractions, handling of dangerous substances, transport of such substances, and other regulated operations. For damage to protected species and habitats caused by non-listed activities, fault must generally be shown.

The machinery is preventive as well as remedial. Where there is an imminent threat of environmental damage, the operator must take preventive measures and notify the enforcing authority. Where damage has occurred, the authority may serve a remediation notice specifying what must be done, and can recover its costs. The enforcing authority varies with the activity and the site: often the regulator under the environmental permitting regime, otherwise another designated authority.

The important feature for a commercial buyer is that this is not a claim by anybody. Remediation of habitat or water damage can be required where no third party has suffered any loss at all, which is precisely the situation a conventional public liability policy was not written for.

Contaminated land under Part IIA

Part IIA of the Environmental Protection Act 1990, inserted by the Environment Act 1995, created the contaminated land regime. Land is contaminated land where it appears to the local authority to be in such a condition that significant harm is being caused, or there is a significant possibility of such harm being caused, or significant pollution of controlled waters is being caused or there is a significant possibility of it being caused.

Responsibility falls on the “appropriate person”. The primary category is the person who caused or knowingly permitted the contaminating substances to be in, on or under the land. Where no such person can after reasonable inquiry be found, responsibility can pass to the current owner or occupier — the reason property purchasers, landlords and tenants care about this regime long after the polluting activity has ceased. The enforcing authority is the local authority, or the environment agency for the relevant nation where the site is designated a special site. Remediation notices specify what must be done, and costs are recoverable.

Because liability can attach to a current owner who did nothing wrong, contaminated land risk is routinely dealt with in transactions through survey, contractual indemnity and, where the exposure is material, specific insurance.

Permits, waste and operational compliance

Most industrial, waste and water-discharging activities in England and Wales operate under environmental permits. Breach of a permit condition is an offence and can trigger enforcement notices, suspension, revocation and prosecution. Sentencing for environmental offences is driven by the culpability of the offender and the harm caused, and turnover is relevant to the level of fine for corporate defendants.

Fines and criminal penalties are not insurable as a matter of public policy. What can be insured is the cost of defending the proceedings, and cover for that has to be arranged deliberately — see defence costs.

Where insurance fits, and where it does not

General liability policies typically respond to sudden and accidental pollution incidents causing third-party injury or property damage, and exclude gradual pollution. They are generally not designed to fund statutory remediation of the insured's own land, or remediation of habitat and water damage required by a regulator where no third party has claimed. That is the gap that dedicated environmental cover is written to fill — see environmental impairment liability, gradual pollution insurance and environmental restoration insurance.

Historic contamination raises its own difficulty, because the pollution predates the policy and often predates the insured's occupation. Cover is available but is normally site-specific, underwritten off a survey, and written with a retroactive position that has to be negotiated rather than assumed.

Practical points

Four things are worth doing. Identify which of your activities are listed activities under the 2015 Regulations, because strict liability changes the analysis. Establish, for each site you own or occupy, whether contaminated land risk was investigated at acquisition and what contractual protection exists. Check whether your liability programme covers gradual pollution, on-site clean-up and regulatory remediation, or only third-party claims arising from sudden incidents. And make sure someone knows the notification obligation exists: the duty to notify an imminent threat runs to the authority, not to your insurer, and both need telling.

Where a site changes hands, the environmental position should be settled in the transaction documents. Insurance can support an allocation of risk agreed between the parties; it is a poor substitute for having agreed one.

Frequently asked questions

What is statutory environmental liability?

Liability imposed by legislation rather than by a civil claim. In England the two principal regimes are the Environmental Damage (Prevention and Remediation) (England) Regulations 2015, which require operators to prevent and remediate damage to habitats, species, water and land, and Part IIA of the Environmental Protection Act 1990, which deals with contaminated land.

Who is liable for contaminated land?

The appropriate person under Part IIA of the Environmental Protection Act 1990. That is primarily whoever caused or knowingly permitted the contaminating substances to be in, on or under the land. Where no such person can be found after reasonable inquiry, liability can fall on the current owner or occupier.

Does public liability insurance cover statutory clean-up?

Usually not. General liability wordings are built around third-party injury and property damage from sudden and accidental incidents and commonly exclude gradual pollution and the cost of remediating the insured's own site. Regulatory remediation with no third-party claimant normally needs dedicated environmental cover.

Are environmental fines insurable?

No. Fines and criminal penalties are not insurable as a matter of public policy. The cost of legal representation in the proceedings can be insured, but that cover has to be arranged specifically rather than assumed to be part of a liability policy.

Related entries

• Environmental impairment liability
• Gradual pollution insurance
• Sudden and accidental pollution
• Environmental restoration insurance
• Public liability insurance

This entry is part of the Apex Insurance Wiki. It states the position as at August 2026. Last reviewed 2026-08-22. Next review: 2027-02-22. It is general insurance information, not legal advice, and not regulated advice on a specific policy.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy.