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Environmental liability insurance

Environmental liability insurance (ELI) covers the cost of restoring damage caused by environmental accidents, such as pollution of land, water, air, and biodiversity damage.

Do I need it?

As a business, you will face various scenarios in which your business activities may cause environmental damage.  For example, damage caused by:

  • Your property’s current land use or the historical use of the site
  • A malfunction of holding tanks on your property e.g. an oil tank
  • A product your business is transporting e.g. pesticides
  • Fire on your property e.g. of composting green waste
  • Poorly operating drains causing run-off of oil in water supply e.g. in a car park
  • Dust arising from construction work

Moreover, recent UK and EU legislation has significantly increased the potential costs of remediating damage caused.  Environmental issues need to be dealt with rapidly to protect the reputation of your business.

What does it cover?

Environmental liability insurance covers the cost of repairing environmental damage arising from both common law claims, and claims arising from UK and EU legislation. 

In particular, ELI provides cover for:

  • Both sudden pollution and gradual pollution
  • First party (own site) clean up costs imposed by regulatory authorities
  • Third party liability including impact on property value
  • Nuisance claims
  • Legal costs and expenses

Other types of liability insurance only provide limited cover for environmental damage:

  • Public liability insurance covers liabilities arising from tort law such as negligence or nuisance, but only covers limited statutory debts or enforcement orders
  • Directors and officers insurance can provide some cover for defending civil or criminal environmental claims
  • Property insurance can provide some cover for damage to buildings as a result of environmental damage e.g. chemical escape, but does not normally cover contaminated soil
  • Employers’ liability insurance will cover the cost of compensating an employee who has suffered injury or disease as a result of exposure to a dangerous substance, but does not provide any further cover
  • Motor insurance will cover personal and property damage caused by use of a vehicle, but cover is limited on any pollution caused.

Buying environmental liability insurance

You can buy environmental liability insurance directly from an insurer or from a specialist broker through the British Insurance Brokers’ Association (BIBA).

More information can be found in the following guides from the International Underwriting Association: