Stefan Hackl

Environmental liability: The state as nature's advocate

In general, European environmental liability extends only to personal injury and property damage. However, this is all set to change in 2007 with the introduction of statutory liability for damage to the environment. The insurance industry needs to respond to this change, as traditional liability and property policies do not adequately cover environmental risks.

Environmental damage can have many faces. Catastrophes like the release of toxic gas in Bhopal (central India), the dioxin cloud in Seveso, Italy, or the fire at a tank farm in Hemel Hempstead near London clearly illustrate the enormous risk potential of industrial plants.

But gradual processes can also cause catastrophic long-term damage. This is exactly what happened in a Japanese Prefecture in the mid-1950s when heavy metals were pumped into a nearby river during the course of mining operations. The local residents suffered chronic cadmium poisoning, and the terrible pain this caused led to the disease being known as "itai-itai", literally "ouch ouch".

Ultimately, the use of certain products can lead to severe bodily injury or even physical deformity. Probably the most tragic example of this is the deployment of the defoliant Agent Orange in the Vietnam war.

Dispersed pollutants

But what do all these cases have in common? What links them is that the pollutants were dispersed via an environmental medium, i.e. water, land and/or air. In such cases, it is not just the medium itself that is polluted — flora and fauna, people and property also tend to suffer serious "collateral damage". Seen from this perspective, therefore, even the consequences of explosions or fires may be considered environmental damage.

Contamination through environmental damage can happen suddenly or as part of a gradual process. If damage is confined to an industrial site, one talks of a first-party loss; if adjacent properties are damaged, it is referred to as a thirdparty loss. Historical pollution is the contamination of soil or groundwater that remains undetected for many years.

The question of liability: civil liability and claims by authorities under public law

There are major differences in liability for environmental damage. In civil law, liability for compensation is usually based on fault, i.e. fault of the perpetrator vis-à-vis the third party. By contrast, strict liability is frequently imposed for industrial plants that are potentially dangerous but which society cannot do without. In such cases, it is irrelevant whether the party that caused the damage acted negligently or with intent.

Besides civil liability claims, there are also claims by authorities under public law. These are made to avert risks to the public or to a public good such as drinking water. Although they are primarily directed at the perpetrator of the damage, they can also include other people, such as the owner of the property from where the hazard emanates.

The group of potentially liable parties is particularly farreaching in the USA, where, for example, the remediation costs for a landfill site that has caused environmental damage are not just borne by the owner and operator of the site but also by the parties that create and transport the waste.

Extensive provisions governing waste management and pollution

While civil law claims are usually covered by a few concise liability standards, parties facing public liability claims frequently also have special laws and decrees to contend with. For example, in many countries there are particularly extensive and detailed provisions governing waste management, historical pollution and water pollution control.

Moreover, there has recently been an increased tendency for the state to see itself as nature's advocate. For example, as of May 2007 in the European Community, operators that cause purely ecological damage will be financially liable for the costs of remedying this damage (see "EC environmental liability directive: Questions and answers"). In addition to public law claims, the state (as the owner of property and waters) can also make civil law claims.

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